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| Residential building and transport infrastructure construction, key drivers of strength in the construction industry outlook |
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Despite the events of 2020, our forecasts for total construction activity in the short term are not vastly different to what they were a year ago. But this is not to suggest that the pandemic was of little consequence; indeed, there were some sizeable negative effects in a number of sectors, and the policy responses have had a substantial impact. The total value of work done in the year to September 2020 (latest ABS data available) was about 1% lower than our estimates before the interruption of COVID-19.
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A key reason for the relatively positive performance of construction, in spite of the pandemic, has been the Federal HomeBuilder grant, which, along with other incentives in the various states and record low interest rates, has provided a large, temporary lift to detached house building. This boost will reverse itself over the course of 2021, as the deadline for building under the scheme is reached, and the realities of lower migration and increased rental stock reassert themselves.
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On our estimates, total construction work done will edge slightly lower, by around 2%, in 2020/21. This is due to an ongoing downturn in apartments and other multi-dwelling residential, which have not really benefitted from HomeBuilder, plus a decline in some areas of commercial and industrial building (retail, hotels, offices and warehouses), and short-term declines in resources investment.
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Beyond 2020/21, construction will be impacted by the hangover from the HomeBuilder house boom, but will start to benefit from a major phase of fiscal stimulus spending, centred around roads, rail, telecommunications, water & wastewater, hospitals, education and other public building, plus a surge in road maintenance. Total construction activity will rise in each of the following five years, going from $206 billion in 2020/21, to a $228 billion peak in 2025/26 (both figures in constant 2018/19 prices).
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Looking closely at transport infrastructure, the recent set of delayed State and Federal Budgets, which were handed down during October and November 2020, added considerably to expected capital spending. An unprecedented amount of transport-related construction work is in the pipeline. After dropping below $30 billion of work done in 2020/21, transport construction work is forecast to surge by over 60%, to reach a peak of $48 billion in 2023/24 (again, figures are in constant 2018/19 prices).
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The pipeline of major projects, which is driving this expected surge in transport infrastructure construction, is outlined below.
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Apart from this list of projects, the key drivers of the forecast rise in activity are:
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- A significant shift in government funding back into infrastructure projects, including the recent stimulus spending by the Federal, state and territory governments,
- Funding for infrastructure derived from the privatisations,
- The re-emergence of PPP projects,
- Expansion work on major airports and selected ports (including the Western Sydney Airport), and
- The next upturn in mining investment, with accompanying port and rail projects.
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Detailed discussion and up-to-date data and forecasts (Excel-based) for each building and construction sector are available through our range of reports listed below. If you would like more information, or if you wish to subscribe, please visit the report pages.
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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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