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Upswing in the construction of transport infrastructure begins
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We have recently published our Transport Infrastructure report, which is one of five construction sector forecasts included in our Australian Construction Outlook series. Australia’s transport infrastructure construction has trended down in the last three years, from a peak of $32 billion in 2017/18 to around $30 billion in 2020/21 (in constant 2018/19 prices). Much of this slowdown principally reflects a round of completion of major road and rail developments (particularly in NSW and Queensland), and a delayed recovery in the resources sector which usually influences new rail and port projects in Western Australia.
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In this current financial year (2021/22) however, we expect to see the beginning of a strong upturn cycle. Construction work done is set for an extraordinary surge over the three years to 2023/24, rising to a record annual peak of $49 billion. While weaker economic and demographic factors create strong headwinds for residential building, and other restrictions curtail spending on tourism, entertainment, hospitality and retail buildings, the transport sector is set to lead the way for the next few years.
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We will see the start of numerous major transport projects that have been long in gestation, combined with the substantial stimulus spending and fast-tracked projects that featured in the delayed round of 2020 budgets.
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The key drivers of the forecasted surge in overall activity are:
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- A collection of big capital city projects (road and rail),
- A ramping-up of urban renewal, maintenance and improvement programs, (including arterial road upgrades and level crossing removals),
- A general improvement, on a less splashy scale, of regional works (including Inland Rail and ongoing, large scale upgrades on the Bruce, Pacific, and Princes Highways),
- Short-to-medium term stimulus spending by the Federal, state and territory governments directed towards shovel-ready projects, and
- Road and rail projects associated with the next upturn in minerals investment.
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Our current forecasts include a real increase of 32% in total infrastructure construction work done in 2021/22. We then expect the following two years to continue to soar, with 19% and 5% annual growth respectively.
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Notwithstanding some small negative impacts from reduced subdivision road construction and subdued mining access road construction, the road segment of transport construction will lead the upswing cycle. The accumulation of major construction projects, such as the WestConnex and Western Harbour Tunnel (Sydney), Westgate Tunnel and North East Link (Melbourne) will result in a peak in 2023/24. The exact scheduling of the workload for these large projects, and the duration at which construction activity is operating at below normal capacity due to the COVID-19 interruptions could change the timing of the peak.
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Rail construction is already running at a quite a high level. Work done is forecast to rise a further 33% in calendar 2021 and 25% in ca2022 – before stabilising and then declining in 2024.
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In addition to all of the above factors, transport infrastructure construction is likely to receive a further boost from the recovery in minerals-related construction, which began in 2017/18 (excluding oil & gas) and has continued to steadily increase. This will drive another upturn in commodity port and rail construction, as a result of the need to accommodate rising export volumes and the next round of coal and iron ore projects.
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The states that will benefit most from this upturn in construction will be New South Wales, Victoria, Queensland and Western Australia.
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In New South Wales, the next upturn is about to begin, on our forecasts, and will stretch from 2021/22 to 2023/24. It will be characterised by very strong increases in publicly funded road and rail projects. A number of government backed projects have been brought forward to commence earlier than planned, and this will accumulate to an unprecedented peak of $18 billion in 2023/24.
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In Victoria, economic stimulus efforts have been particularly directed towards transport construction, and the cumulating effect of these measures will result in an unprecedented peak of $13 billion in work done in 2023/24.
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In Queensland, the upturn over the next three years will be driven by both strong growth in road construction and a continuing surge in rail construction. Indeed rail construction is set to triple, from $1 billion in 2019/20 to around $3 billion in 2023/24. The $4.6 billion Cross River Rail project is the main driving force behind this surge in activity, combined with Gold Coast light rail, Beerburrum to Nambour, Inland Rail and some resources-related projects.
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We expect a downturn once the current wave of big projects moves to completion, with the budget circumstances of State Governments prohibiting further expansions of capital spending. The downturn period from 2024/25 onwards, however, will still be characterised by high ongoing levels of spending, averaging $40 billion per year over 6 years.
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For more detailed forecasts and analysis, please see our new report - Australian Construction Outlook – Transport Infrastructure – August 2021.
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Our most recent reports:
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Australian Construction Cost Trends
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This report examines the outlook for construction costs, in detail be sector and type of input.
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Australian Construction Projects Database
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This latest list of projects corresponds with our fully revised set of forecasts published in November 2023.
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Australian Regional Construction Outlook
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Our latest regional forecasts for residential building and construction have just been released.
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Australian Construction Materials Forecasts
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Our latest forecasts assess the implications for construction materials demand of the current outlook for building and construction.
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Australian Road and Bridge Works
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This report examines the strength and composition of the current upturn, and determines the likely timing of the peak, and subsequent decline.
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