Private sector non-residential construction and public sector infrastructure slows

Posted by Rukan Zaman on Jul 24, 2019 9:59:00 AM

While non-residential construction activity outside the mining sector has been growing solidly since 2016, this has slowed markedly since the second half of last year.

The completion of a number of large scale projects and a clear moderation in the value of non-residential building approvals suggests ongoing moderate growth in non-residential construction over the next 12 to 18 months.

There are a number of risks to this outlook, in particular the possibility of a broader downturn in the economy and a slump in inbound tourism, which would see development of hotels and other resorts scaled back.

This graph from illion’s latest Business Expectations Survey shows how public sector infrastructure spending, particularly at the State Government level on urban transport projects, grew strongly from 2015. Further growth will require new projects to be approved to replace the fall off in activity from mid-2018 as existing projects are completed.

As illion’s economic adviser, Stephen Koukoulas, points out, the outlook for infrastructure spending is something of ‘a moving feast’ and is difficult to pin-point. Stephen notes that while the Commonwealth Government has spoken of higher spending, this is more likely to be spread out over the next decade, rather than occurring in the very near-term. Recent State and Territory budgets have hinted at a range of new projects, but more information will be needed to be confident that the construction sector will benefit from additional projects.

When a supplier, or business partner gets into financial difficulty, this will cause delays, disruptions, financial loss and reputational damage. With the right forward-looking approach, the risk of these negative outcomes will be significantly reduced. 

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Topics: Australian Economy, Construction