Telco, road and rail lead the recovery Wednesday, 27 April 2016

Civil construction is recovering in Australia, according to economic forecaster BIS Shrapnel, but ongoing sharp declines in oil and gas construction are swamping signs of that recovery.

The company predicts total measured work done in the engineering construction sector will fall 44% from the 2012/13 peak of $130 billion to a trough of $73 billion by 2018/19. However, when oil and gas construction is removed from the figures, 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.

“The sheer size of the collapse in oil and gas construction is masking the real outlook for the Australian engineering construction market,” said Adrian Hart, Senior Manager of BIS Shrapnel’s Infrastructure and Mining Unit.

“Oil and gas was the final – and by far the largest – leg of the resources investment boom. Yet with less than 30 per cent of the value of mega-LNG construction projects representing domestic construction activity, and with most of the domestic LNG work ‘front-loaded’ as site and related infrastructure development, the Australian construction industry has already taken a substantial hit from the bust in resources investment.”

Hart says the imminent recovery in publicly-funded infrastructure investment is exciting for the Australian engineering construction market with telecommunications leading the way thanks to the National Broadband Network rollout, roads construction following and railways construction promising “stronger for longer” growth as State and Federal Governments move to address large infrastructure gaps for urban public transport and regional freight.

“We are already seeing positive signs for this sector, with Infrastructure Australia’s recent Infrastructure Audit and Infrastructure Plan highlighting respectively both the size of the problem and endorsing projects and funding mechanisms that form part of the solution,” said Hart. “There has been massive underinvestment in passenger and freight rail networks for decades – it has simply not kept pace with passenger and freight demand. Projects such as the Sydney Metro and CBD and South East Light Rail (CSELR) in New South Wales, the Forrestfield Rail Link in Western Australia, the Melbourne Metro in Victoria, coupled with the federally-funded Inland Rail and ARTC projects are expected to drive a near doubling in rail construction work over the next five years, with even higher levels of work expected in the first half of the 2020s.”


Non-resource civil construction is set to rise according to BIS Shrapnel.