12-year engineering construction boom over: economists

AUSTRALIA'S 12-year engineering construction boom, the biggest in the nation's history, has peaked and is entering a period of decline, analysis to be released on Monday shows.

Economic forecaster BIS Shrapnel says a decline in mining investment is driving the downturn in construction, predicting there will be a 20% drop in work over the next four years.

The report, Engineering Construction in Australia 2012/13 - 2026/27, found an 11% rise in civil work in 2012/13 to $128 billion would be followed by a fall of 5.4% in 2013/13 - the first decline since 2000/01 - and would continue to fall over each of the subsequent years.

The shelving of several large mining projects, caused in part by a slowdown in the resource-hungry Chinese economy since mid-2012, has driven the decline in resources-related construction.

BIS Shrapnel estimated that resources-related engineering construction activity would fall nearly 30% - from around $78 billion in work done during 2012-13 to around $56 billion by 2016-17.

But this was still well above the $39 billion in resources-related work estimated to have been done in 2010/11.

But it's not doom and gloom for all resource industry sectors - large LNG projects, like those in Central Queensland, will continue to grow in 2013/14 and remain at near record levels mid-decade, the analysis found.

Adrian Hart, senior manager for BIS Shrapnel's infrastructure and mining unit, said civil construction activity was not expected to regain its 2012/13 peak levels until at least the mid-2020s.

Mr Hart said the overall construction downturn could open the door for further interest rate cuts and lead to long-needed investment in other sectors of the economy, primarily housing.

He said it was time for non-resources sectors to "step up", arguing Australia's future economic growth would hinge on their recovery.

New South Wales is tipped to lead this recovery, with $85 billion in non-resources civil construction work to be done over the next five years, compared to $55 billion for Queensland and $46 billion for Victoria.

In fact Queensland will experience the largest decline in civil work over the next four years - with a forecast drop of nearly 40% ($15 billion) by 2016-17.

While affected by declining resources investment, NSW's civil construction market is projected to receive a large boost from new infrastructure projects through the next five years, spearheaded by the $9 billion North West Rail Link, $1.6 billion Sydney Light Rail, several Pacific Hwy upgrades and, later, the $10 billion-plus WestConnex road project.


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