ACIF: construction industry to ‘keep head above water’

A large pipeline of work will be enough to keep the building and construction industry in positive territory over the next year, according to the latest forecast from the Australian Construction Industry Forum (ACIF).

Despite challenging economic factors, ACIF is projecting activity to rise to $299 billion in 2024-2025, which equates to modest growth of 0.9 per cent.

Builders are very much the meat in the sandwich between falling demand and higher costs. While the sharp spike in inflation for materials has moderated, input prices remain at elevated levels.

Builders are also having to confront the impact of recent industrial relations changes at the same time as they are dealing with sustained labour shortages. Margins have been squeezed, with the increase in construction insolvencies an indicator of rising pressures.

The public sector has been a major contributor to the pipeline of work. However, investment programs in many states and territories peaked in 2023 and are now ramping down – and in some cases projects have been deferred altogether.

Nevertheless, there are still large projects sustaining workflows in the balance of 2024 and into 2025. Structural and policy change driving the transition to clean energy is already boosting construction work and more is on the way.

Meanwhile, the boom in engineering construction has more than offset the decline in residential building. In heavy industry, investment in clean energy supply is boosting activity, supported by ongoing development in traditional mining activities including iron ore, gold and copper. Work volume is expected to continue to rise over the next two years.

Non-residential building activity grew steadily over the last three years, and ACIF is projecting a small decline in 2025-2026 followed by a mild increase in 2025-2026.

“There are many factors that could disrupt the finely balanced outlook,” said Kerry Barwise, the Lead for ACIF Forecasts. “There is a grave risk that fiscal policy and monetary policy settings will continue to pull in opposite directions.

“Interest rates may remain elevated for longer, suppressing residential building activity for longer. The surge in clean energy may not play out as expected. Not all of the risk is on the downside.”