Latest figures from the Australian Bureau of Statistics (ABS) indicate a decline in engineering construction for the June quarter but a leading industry analyst believes a change in fortune is not far away.
The ABS figures report the trend estimate for total construction fell 1.9% during the June quarter largely as a result of a 5.1% fall in engineering construction and offset by a 1.4% increase in building construction.
Adrian Hart, Senior Manager of BIS Shrapnel’s Infrastructure and Mining Unit, said earlier this year that total measured work done in the sector will fall 44% from the 2012/13 peak of $130 billion to a trough of $73 billion by 2018/19. However, excluding the import-intensive oil and gas construction segment – where no less than 13 onshore LNG trains worth a combined $211 billion are being completed – the bottom of the engineering construction bust will be brought forward to 2016/17, with engineering construction activity rising 11.5% over the remainder of the decade to 2019/20.
He said it makes sense to separate the outlook for oil and gas construction and the broader engineering construction market, as focusing on the total engineering construction figures can be misleading.
“What is more exciting for the Australian engineering construction market is the imminent recovery in publicly-funded infrastructure investment,” said Hart.
According to the BIS Shrapnel report, publicly-funded engineering construction work fell 27% between 2010/11 (the peak) and 2014/15 as governments tightened expenditure in the face of falling revenues. However, based on a detailed analysis of spending programs, Hart is forecasting public sector-funded engineering construction to rise 36% over the four years to 2018/19.
“The key feature of the outlook is that there will be staggered recoveries across most engineering construction segments right through the next five years, but varying tremendously by sector and state,” he said.
“In this environment, it makes sense for businesses to plan effectively and target growth sectors even before they emerge.”
[ABS construction figures for 2000-2016, showing total construction (blue), engineering construction (red), private sector engineering (green) and public sector (purple). Photo: Sydney Metro]
Infrastructure will be a major topic of discussion at the Australian Engineering Conference 2016 in Brisbane on November 23-25.