New South Wales, with a range of large public and private sector funded infrastructure projects, is emerging from a deep construction sleep while most of the rest of Australia winds down.
Economic forecasters BIS Shrapnel say New South Wales is expected to see around $82 billion in non-resources civil construction work done over the next five years, compared to $52 billion for Queensland and $48 billion for Victoria.
The state is heading into a period of sustained growth, following a significant decline in work in the current financial year as major projects across coal, ports, roads and rail wound down.
The growth is being driven by a large upswing in non-resources engineering construction work, focused on road and passenger rail infrastructure, and spearheaded by the $9 billion North West Rail Link, the $2.8 billion M1-M2 Link, the $1.6 billion Sydney Light Rail, the $3.6 billion first stage of the WestConnex road project and several Pacific Highway upgrades.
The BIS Shrapnel report, Engineering Construction in Australia, says a second Sydney Airport development would provide even greater upside to New South Wales if it entailed construction work over the next five years.
The largest declines in the volume of civil construction work over the next five years are projected to take place in the mining boom states of Queensland and Western Australia.
Queensland annual work done is forecast to nearly halve from the LNG-inspired peak in 2013-14 by 2016-17, while activity in Western Australia is expected to fall by one-quarter, or about $10 billion, over the same period.
South Australia and the ACT are not expected to fare well either, with falls of around 30% expected for both. Smaller declines are expected for Victoria and Tasmania.
Northern Territory work is expected to experience a volatile boom/bust cycle over the next five years on the back of the $34 billion Ichthys LNG project, with overall activity rising from $3.5 billion in 2012-13 to $10 billion a year through 2014-15 and 2015-16, before dropping back to $3 billion again by 2017-18.
Nationally, civil work done will fall only marginally in the current financial year to $127 billion.
However, aggregate engineering construction work is then expected to slip 11% in 2014/15 and eight per cent in 2015-16 with further falls over each of the subsequent three years.
By 2017-18, total activity will be 25% below the 2012-13 peak.
However, the better than expected outcome for 2013/14 is not necessarily good news for the local construction industry, with the high level of work done only maintained by an unsustainable 37 per cent increase in oil and gas construction work, dominated by the ramp up in construction of LNG production trains and associated upstream and downstream infrastructure.
Excluding the boom in oil and gas construction, engineering construction work will fall around 12 per cent through 2013/14, with another decline of 15% in 2014-15.
Adrian Hart, Senior Manager for BIS Shrapnel’s Infrastructure and Mining Unit, says: “In our view, this is a more realistic approximation of current domestic engineering construction conditions given that up to 70% of the total value of the large LNG projects is tied up in off-shored fabrication and other costs.”
According to the report, the key driver of the downturn in engineering construction work has been the dearth in new private and public sector projects over the past two years as commodity prices fell and Federal and State Governments began to rein in spending on new infrastructure projects.
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