The Construction Industry faces challenging times over the next five years with declining growth from the resources sector and mixed growth from other segments. The industry must also address the imperative to improve productivity.
The Australian Construction Industry has enjoyed solid 3% growth over the past five years buoyed by construction of mineral and energy infrastructure servicing the resources industry. The outlook for the next five years appears more volatile with declining growth from the resources sector beginning to impact overall construction growth and non-residential construction delivering mixed growth post the GFC. This will be partly offset by strong growth in road investment in NSW and Victoria and significant growth in residential construction across capital cities with apartment development in Sydney and Melbourne.
Challenges and trends facing the sector:
- With the financial resources to outbid local developers for sites in Sydney and Melbourne, overseas developers are expected to dominate the proportion of completed apartments over the next five years. This surge in apartment construction presents significant risk of oversupply towards the latter half of this decade.
- Spending on roads and highways is expected to dominate the civil market with major projects in the pipeline in NSW and Victoria. This will present challenges to compete for companies that have traditionally concentrated on the non-road segment such as bridges, harbours and railroads.
- Non-residential construction has returned to growth with the value of work at pre-GFC levels driven by health, education and retail. Over the next five years growth is expected to be flat with spending in commercial office buildings declining and spending in areas such as health care moving from large city projects to smaller regional projects.
- Improving productivity in the industry remains a challenge, given the scale of the industry even a small increase in productivity is worth significant benefits to the economy. The imperative for the industry is to not only address the inflexible industrial relations environment but at the same time introduce new technology and the associated skills to increase productivity to a sustainable and longer term level.