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Transport infrastructure construction boom now expected to peak lower and last longer
Projects cancelled and timelines extended amidst cost surge, labour & material shortages
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For a number of years, we have been forecasting a multi-year surge in road and rail infrastructure construction. The upturn began in 2021, and is expected to peak in 2025.
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However, compared with our forecasts of a year ago (mid-2022), our expectation is now for a substantially lower peak level of infrastructure construction activity, with a smaller subsequent decline. The large increase in construction costs caused the total cost of projects to increase, sometimes dramatically, causing stress to government budgets. There have also been problems with resourcing so many large projects at the same time.
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As a result, numerous projects have been scrapped, while the expected completion dates of many others have been extended significantly.
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In our mid-2022 forecasts, the expected annual peak in activity was around $52bn to $53bn (in constant 2020/21 prices), in both 2023/24 and 2024/25. Our forecast now is for a peak of $45bn to $47bn, during a period from 2023/24 through to 2026/27. So the expected peak is now lower and the amount of work spread out over a longer time period. This reduction in peak activity is apparent in both road and rail construction.
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The upward trend in transport infrastructure construction activity gained momentum in 2021/22, recording an annual growth rate of 10.6%. The trend continued to strengthen in the following year, with a 15% increase in the year to March 2023 (according to latest available data). These strong growth years are expected to be followed by another large rise in 2023/24, and then a small further increase in 2024/25, reaching an historically high level, prior to a gradual decline.
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Road construction activity rebounded strongly in 2021/22 with impressive growth of 11%. This positive momentum continued with a 14% increase in the year to March 2023 and it is expected to persist for another year.
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Rail construction has surged from around $4 billion in 2015/16 to $11 billion in 2021/22 (both figures in constant 2020/21 prices) and is expected to further increase to around $17 billion in 2024/25.
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For more information about this report, or if your organisation requires help with demand forecasting, or project cost escalation, please get in touch with us, at info@macromonitor.com.au.
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