Positive growth for construction

The outlook for Australia's construction industry is strong in 2008, according to economic forecaster Access Economics, which says the sector's rising pipeline of work to be done suggests even further growth ahead.

New South Wales's performance continues to be hampered by weak levels of housing construction, but that looks set to swing back into positive territory by late 2008 despite rising interest rates.

Mining and telecommunications are the main drivers behind the solid performance in engineering construction in NSW, however Access Economics predicts a further fall in the state's share of national activity.

In its Business Outlook, December 2007, Access Economics said 2006-07 saw the state's share of national engineering construction commencements dip below 20 per cent for the first time.
"That trend has been exacerbated by the resources boom, though NSW is seeing some investment in coal," the report said.

Future activity should, however, be bolstered by a healthy pipeline of work, which includes projects like the $920 million export terminal on Kooragang Island and the $300 million wind farm project near Lake George.

NSW continues to lag behind other states and territories in non-residential building approvals, despite reporting high levels in 2007.

Office and retail approvals are strong as a result of job gains in the CBD and a recovery in retail.

However, approvals for health and education facilities diminished in mid-2007.

According to Access Economics, Victoria's housing construction sector is better positioned than most, with the state shrugging off a slow start to the year and poised for strengthening outcomes in 2008-09.

Victoria is witnessing a continuing decline in engineering construction as it loses out to the mining states.

Engineering commencements fell to 11 per cent of the national total in 2006-07, down from an average of more than 18 per cent over the first half of the decade.

Access Economics predicts strong gains for Victoria's commercial construction sector in 2008.

Office developments such as the new $620 million ANZ building at Docklands and the $220 million CGU Tower are dominating current works in the state.

Queensland has the highest level of investment projects of any state or territory, according to Access Economics.

The state's economy is set to remain strong and evidence of this can be seen in the housing construction sector.

Building approvals continue to remain strong as a result of Queensland's population growth, which remains comfortably over 2 per cent annually.

The resources boom is a large driver of engineering construction in Queensland. Access Economics said new mines and associated infrastructure projects such as port upgrades helped the state's share of national engineering commencements rise to 33 per cent last year.

Much of Queensland's construction spending is being driven by rising commodity prices, with the state's coal deposits attracting a great deal of interest.

Meanwhile, commercial construction is not quite as strong as engineering construction, although approvals continue to firm.

Further growth in construction activity is expected over the next year.

Housing construction in South Australia looks set to pick up over the next year as a result of births being the highest in a decade and tight rental vacancy rates.

Engineering construction in the state continues its solid performance, with its share of national commencements in 2006-07 lifting to its highest level since 2000-01.

According to Access Economics, there is considerably more potential in the pipeline such as the Olympic Dam uranium and copper project being considered by BHP Billiton.

The project represents $6.3 billion in investment, which could boost South Australia from as early as 2009.

Commercial construction in South Australia is also expected to experience a positive impact in 2008, with non-residential building approvals jumping back up in recent months.

Access Economics is predicting an increase in housing construction in Western Australia, partly as a result of clearing a backlog of houses waiting to be built.

Housing construction is set to remain strong for some time as the state's population continues to grow.

The China boom continues to drive engineering construction in WA – more so than any other state, according to Access Economics.

Mining continues to witness the highest level of activity, although associated infrastructure such as ports, rail, power and water facilities has also seen its fair share of activity.

Engineering construction activity in WA is led by the $11.2 billion Pluto LNG project – one of Australia's largest resource projects.

Commercial construction is also performing strongly, with projects such as a $425 million retail and office development in Perth and a $335 million indoor entertainment centre and sports complex.

Tasmania can expect a reasonable outlook for housing construction, according to Access Economics, which predicts a lift in approvals over the next year or two.

With demand outweighing supply, a pick-up in the level of housing construction is expected.

Unfortunately engineering construction is not so well positioned, with the completion of the Meander Dam reducing the number of major projects underway in the state.

However, future projects such as Gunn's $1.7 billion pulp mill in the Tamar Valley, set to get underway early this year, could possibly relieve the construction drought.

Tasmania's commercial construction sector remains steady as work on Hydro Tasmania's new office complex nears completion and the long-term upgrade to the Royal Hobart Hospital continues.

Despite a rapid narrowing in the pipeline of future work in the Northern Territory, construction activity remains at high levels and approvals of projects have begun to rise again in recent months.

A strong population growth and little or no rental vacancies should see more gains in housing construction over the next couple of years.

The completion of a number of projects has seen engineering construction slip in the Northern Territory recently.

The most significant of the projects still under construction is Compass Resources' $350 million Browns copper, cobalt and nickel project.

Access Economics is predicting a levelling off of housing construction in the Australian Capital Territory.

However, this is not expected to continue for long with population gains expected to boost housing construction sooner rather than later.

Commercial construction has eased as a number of projects reached completion, however office construction in both the public and private sector is ongoing.


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