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May 12, 2016

Building industry forecasts released

 

Building and construction industry forecasts released today document the passing of two booms – mining and residential – and the impact of that on this sector of the Australian economy.

The Australian Construction Industry Forum (ACIF) today released the latest ACIF Forecasts, revealing how the sector is coping with another double-digit fall in engineering construction plus the impending peak of residential building.

The May 2016 ACIF Forecasts re-chart the course of building and construction industry as it surfs the downside of tsunami-sized waves of investment,” chief economist for ACIF Kerry Barwise says.

“The building and construction industry is playing a key role in the transition of our economy away from resources towards a more diversified economy.

“The industry has ramped up residential building following the once-in-a-lifetime mining boom, but that too is now coming to an end.”

The May 2016 ACIF Forecasts reveal a second consecutive 5 per cent annual fall in aggregate activity, reducing 2015-16 total construction activity by $12 billion to $212 billion.

These forecasts have also ground $5-10 billion off the level of construction activity that was projected in each year over the next three years, largely reflecting a more stringent downgrade to the outlook in engineering construction following the mining boom and the expected dip in residential building. Residential builders are still working through an enlarged construction pipeline and building work is expected to top $91 billion in real terms in 2016-17 before falling.

However, despite the sweeping changes and challenges, these forecasts also identify areas of construction activity that should help an economy in transition.

Wherever activity is in support of the shift towards the new economy, innovation, creativity and the provision of key services, non-residential building work is growing, especially in the areas of health and aged care, accommodation and retail/wholesale trade.

These conflicting trends are projected to turn around the modest contraction forecast in non-residential building activity for this year into a small uptick next year and more extensive growth – close to 3 per cent per annum – by 2017-18.

These forecasts have also taken into account a fundamental shift in the composition of engineering construction activity. Many of the largest new infrastructure projects are in areas that will enhance the delivery of key services and improve the mobility and liveability in Australia’s cities, enhancing their role as major drivers of economic growth.

The ACIF’s Construction Forecasting Council chair Adrian Harrington says:

“The building and construction sector contributes around 8 per cent to GDP… with technology continuing to emerge at an unprecedented scale, our population growing and aging, and the economy transitioning from the biggest resources boom in over a century, it’s more important now than ever before that the industry has a relevant and credible ‘compass’ for the next 10 years.

“These Forecasts outline the upcoming demand for work across the three key sectors – residential and non-residential building plus engineering construction, and the 20 sub-sectors they include, as well as what’s happening with construction costs and labour requirements.”

Another recent report reveals that Australia’s building sector can deliver up to 28 per cent of Australia’s 2030 emissions reduction target, save $20 billion and create healthier, more productive cities if a suite of targeted policies are introduced, according to the Australian Sustainable Built Environment Council (ASBEC).

ASBEC president Prof Ken Maher says: “Buildings account for almost a quarter of Australia’s emissions. This sector must be a strong focus if Australia is to meet its international obligations under the Paris Climate Change Agreement.

“Over the last decade, market leaders in the building sector have shown that rapid improvements are possible, and this report demonstrates just how much more opportunity exists.”

The report’s modelling found that without further action, buildings would consume almost half of Australia’s total national carbon budget.

“This is not an option,” Maher says.

“The good news is that major improvements are possible with the right public policies.”

Buildings can achieve zero carbon by 2050 using existing technologies

in addition to $20 billion in energy savings. Buildings can deliver one quarter of the national emissions target and over half of the national energy productivity target by 2030.

Property Council of Australia chief executive and chair of the ASBEC’s Energy Efficiency and Emissions Task Group Ken Morrison says the report is a blueprint for government action.

“Major emissions reduction gains can be made with the property industry, but it requires a focused plan that includes regulation, strong incentives, energy market reform and market information to support transformation.

“When we’re talking about the built environment, we’re talking about literally millions of individual home owners as well as thousands of businesses across the property supply chain. That’s a level of complexity which requires a nuanced approach.”

Chief executive officer of the Green Building Council of Australia Romilly Madew adds: “This report makes a clear business case that the residential and commercial building sector can punch well above its weight to help Australia achieve a goal of net zero emissions before 2050.”

 

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