By Michael Bleby
The slump in mining-related engineering work has widened to sectors such as bridges, railways and harbours, causing a peak industry body to lower its predictions for construction industry spend over the next four years.
The Australian Construction Industry Forum has slashed its half-yearly expectations of engineering construction work for every year from the current one to the end of its forecast period in 2020.
While total construction in this financial year will be slightly higher at $212 billion than the November forecast of $209.8 billion, it will reverse next year and the 2020 total is now expected at $191.4 billion, nearly 8 per cent below the November expectation of $207.8 billion.
Engineering construction – which accounts for almost half of total work done – will fall 4.7 per cent this year from ACIF’s last set of forecasts to $87.7 billion and the deterioration will worsen through to 2020, when the expected level of $73.9 billion worth of work will be almost 18 per cent less than the $90 billion it was predicting in November.
“We’d expected to see a drop in mining and heavy industry, but we were surprised to see the extent of the falls coming through in supporting infrastructure,” said Kerry Barwise, ACIF’s consultant economist. “Our revised forecasts indicate that engineering construction is only about a third of the way into a projected 46 per cent fall in activity that will bottom out by 2017-18.”
The worsened outlook for construction engineering, coupled with a predicted slowing in the labour-heavy residential sector, is a grim message for employment – and for politicians jostling to sell messages of jobs and growth ahead of the July 2 election. While there are signs of long-awaited infrastructure projects coming on stream, and separate warnings about wage inflation in the skills-scarce engineering sectors, the report warns of a shedding of jobs in coming years.
While residential construction has only offset part of the loss of mining-related infrastructure work, it has employed a proportionately greater number of workers displaced from resources. The home-building pipeline will peak at $91 billion-worth in 2017 before falling to $84 billion-worth in real terms by 2019, however, and that will mean fewer jobs.
“You’ve got to say the industry is going to employ not so many people,” Mr Barwise said. “That is the consequence of slowing investment in apartments and houses.”
The regional nature of housing construction, however, means the effects will vary greatly. Construction employment has been strongest in NSW, Victoria, Tasmania and Northern Territory, where about 60,000 additional jobs are expected this financial year. Western Australia and Queensland are in for the hardest hit, however, with an expected 30,000 construction jobs to be lost in those two states next year.
“A whole lot of people got a job in construction in Queensland and WA over the mining boom period and now those jobs have come to an end,” he said. “There’s nothing in the pipeline behind them and Queensland and WA are the states that are going to bear the brunt of the adjustment.”
The slowdown in infrastructure projects that were previously supporting mining resources, such as roads and bridges to mine sites, was compounded as commodity prices – particularly oil – had fallen more than expected over the past six months and this had led to a number of projects included in the last forecast round to be cut, Mr Barwise said.
“A significant number of [projects] previously factored in have been finished and now over the last six months, a significant number of them have been deferred,” he said. “That reflects the sustained drop in commodity prices, particularly in energy prices.”