Tuesday, May 28, 2013

Construction after the boom. Builders say it looks okay

Australia’s mining investment boom has probably peaked but the ride down doesn’t look too frightening, according to the Australian Construction Industry Forum.

The Forum’s semi-annual forecasts compiled with the help of ACIL Allen Consulting and Deloitte Access Economics show engineering construction plateauing rather than collapsing, slipping 2.5 per cent this financial year, then 0.8 per cent in 2013-14 and 0.6 per cent in 2014-15.

"New projects are still being commissioned," said Forum executive director Peter Barda. "Just not as many and not as big."

"There is no doubt that in some sectors demand is off and prices are down but there is still ongoing demand for the things we've got to sell."

“We are pretty confident looking out three to five years. Beyond that it is difficult. Firms can and do make sudden decisions to stop what they are doing. But for the moment the world has not stopped, the world continues to need energy and minerals and we continue to be lucky enough to be in a position to provide them at a globally competitive price.”

While engineering construction firms would need to get used to lower or zero growth at a still exceptionally high level of activity, residential and commercial construction was set to climb.

"There has been little investment in shopping centres for some time, since before the global financial crisis. All of sudden the big institutional investors who own the shopping centres are starting to think they look shabby. They are facing competition from online retailers and from big box retailers, and they are starting to spend to smarten them up"...

Things were also picking up in warehousing and logistics.

"The way that supermarkets and others wants products delivered is changing. It's like mining, the name of the game is building facilities that shave factions of a cent per tonne kilometre off the transport cost.”

The Forum expects non-residential construction to climb 7 per cent in 2013-14 and then 1.2 per cent in 2014-15.

Residential construction is expected to climb 7 per cent in 2013-14 followed by a further 7 per cent in 2014-15. NSW will grow much faster than the rest of the nation, and Victoria much more slowly after recent strong growth.

Not all of the construction workers displaced from mining projects would find work in building construction because the skills were different. But building construction was much more labour intensive.

“I doesn't take as many people to bring a mine to market as it does a shopping centre,” he said.

“Generally speaking you don't find too many people who want pretty railway lines, but people do want pretty showrooms, and pretty homes.”

In today's Sydney Morning Herald and Age

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