Construction growth outlook buoyant despite challenges

Australia’s construction industry will experience “robust’ growth in 2024 of five per cent, according to an upgraded forecast from the Australian Construction Industry Forum (ACIF).

According to the ACIF, which champions active dialogue between the key players in construction, modelling suggests the positive outlook will raise work in the industry to $298 billion in 2023-2024 despite a tough economic environment caused by high interest rates, stubborn inflation and rising material prices.

Despite the difficulties, the ACIF remains bullish there is sufficient momentum to drive further growth for a few more years, albeit at more subdued pace. This will push work done by the industry to equal or exceed $300 billion over the next three years.

Despite its ebullience, the ACIF stresses the brakes may be put on the construction forecasts due to issues like revised fiscal and monetary policy settings and a more subdued resources sector – but on the flipside government initiatives to combat the housing crisis could mobilise a larger increase in housing supply than expected.

While some segments of the construction industry are still struggling – residential building for one, which has laboured under the weight of higher mortgage rates and the phase out of various subsidies – activity remains buoyant in others thanks to large-scale public infrastructure projects, the transition to green energy, mining and non-residential building.

Peter Downes, Director of Outlook Economics and Lead for the ACIF Forecasts, said: “At the moment the construction industry is a study in contrasts. On the one hand residential construction is slowing, with high levels of bankruptcies and many builders struggling with fixed price contracts and material input costs rising by more than 30 per cent over the last two years.

“On the other hand, profitability in the sector overall is at high levels, with engineering construction booming. Construction will be key both to resolving the housing crisis, and the net zero transition.”

Residential building is forecast to recover from mid-2025 led by affordable housing and high-density developments.

Meanwhile, both engineering construction and non-residential building will continue at high levels, and in non-residential building the pattern of demand is shifting from offices and retail to hospitals, warehouses and logistics.