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Large Upswing in Transport Construction Has Begun
Record Peak Of $50 Billion Two Years Away
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The latest forecasts from our new report, Australian Construction Outlook – Transport Infrastructure, show an extraordinary upturn in road, rail and ports construction has now begun in earnest, and will be the key driver of Australia’s construction industry over the next few years. In 2020/21, the value of transport infrastructure construction increased following two years of decline, rising to $32 billion (in 2019/20 prices).
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And much more growth is anticipated. Work done is expected to rise by a further 56%, and reach $50 billion in 2023/24. Not only will this be a record peak, but it will see transport infrastructure construction become the largest segment of the nation’s construction market, eclipsing non-residential building from 2023/24.
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We have anticipated this surge for some time, given the healthy pipeline of major infrastructure projects shown in the chart above. Apart from this list of projects, the key drivers of the surge are:
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- A significant shift in government funding back into infrastructure projects, including targeted stimulus spending by the Federal, state and territory governments in response to COVID-19.
- Additional sources of funding for infrastructure, including a new round of PPP arrangements, some innovative funding models (such as for Westconnex), encouragement of private sector initiated projects (such as the West Gate Tunnel), and the application of the proceeds of privatisations to infrastructure.
- The reaching of capacity limits at major airports and selected ports, leading to new runway and port projects and a new airport in Sydney.
- The next upturn in mining investment, with accompanying port and rail projects and upgrades.
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Looking closer at each segment, roads construction is expected to see the most growth, with an increase of $10 billion in annual spending projected. This is due to accelerated government spending on a range of shovel-ready projects and the fast-tracked approval system put in place in 2020.
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The two key leading indicators, the value of commencements and the value of work yet to be done, both point to this precipitous increase in roads construction. In the six months to September 2021 (latest ABS data available), commencements of government road works rose by over 80% compared to the corresponding six months a year earlier, while work yet to be done climbed by 69%. Total roads construction should see steadily accelerating growth during 2022, rising to a peak of $30 billion in 2023/24.
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Rail construction has been steadily increasing for more than five years now, with a particularly large jump recorded in 2020/21. this has been driven by some big capital city projects and renewal programs, such as Sydney's Metro-West, Melbourne's Metro Rail and level crossing removal programs, Brisbane's Cross River Rail and Perth's Metronet. According to our forecasts, activity is set to increase by a further 51%, from this already high level, over three years, to its $16 billion 2023/24 peak.
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Harbour construction slowed down in 2020/21, but we now expect a substantial upswing cycle in this segment also, rising from $830 million in 2020/21 to a peak of $2.6 billion in 2025/26. This is partly supported by a recovery in minerals-related construction, which began in 2017/18 and has continued steadily. 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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We ultimately expect a downturn once the current wave of big projects moves to completion, and as the budget circumstances of State Governments become less conducive to further expansions of capital spending. The next downturn will be substantially less severe than the previous downturns. In fact our long-term forecasts highlight that high levels of transport construction will continue for some time, averaging $39 billion per year for the five years to 2031.
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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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