Residential, infrastructure construction outlook positive despite challenges

As the Australian economy continues to rebound in the aftermath of the pandemic, building and construction work is expected to increase by three per cent to around $250 billion over 2021-22, according to recent forecasts released by the Australian Construction Industry Forum (ACIF).

The organisation expects the uplift to drive an increase in jobs of 35,000, raising the numbers employed in building and construction to 1.2 million.

However, while the pipeline of work is growing, it does not come without challenges.

“Inflationary pressures, increasing interest rates, softening demand and supply chain challenges threaten the reports outlook for growth in our industry,” said Chair of ACIF’s Construction Forecasting Council, Bob Richardson.

“However, generally the outlook gives some room for people in the industry to feel hopeful for the future.”

ACIF Chief Forecaster and Managing Director of FTI Consulting, Kerry Barwise,  said the record low levels of unemployment supports the upgrade to the outlook for building and construction activity in 2021-22 and into 2022-23.

“However, business in these challenging circumstances is like juggling knives. There is growing risk of insolvency for some in this industry.”

ACIF is predicting the uplift in residential building to run for three more years. “Stimulus measures have tapered off, and interest rates are beginning their return to normal levels, but the backlog of unmet housing demand is still very large,” the organisation said.

“Builders will need additional resources in a tightening market to work through the backlog of approvals and work in hand.”

Another bright spot in the industry, ACIF pointed out, is engineering construction, with the sector predicted to grow steadily by 1.6 per cent in 2021-22, as expanded infrastructure development programs pursued by the Commonwealth and State Governments flow through into construction activity on the ground.

“This will carry through to at least 2023-24, with strong growth of nine per cent in 2022-23,” ACIF said.

Work done in Heavy Industry including Mining is also expected to increase markedly, growing by more than 15 per cent cumulatively over the next three years. The forecasts factor in expanded activity in traditional areas including iron ore, coal and LNG, as well as diversification into areas such as development of hydrogen.

However, Non-Residential Building will continue to slide over the next three years, ACIF predicts. The forecasts factor in strong spending increase in Miscellaneous and Other Commercial, as well as some uplift in Industrial building, but this will not be sufficient to offset the falls expected in new Offices, Retail and Wholesale Trade, Accommodation and Entertainment and Recreation. The overall picture for Non Residential Building is a modest decline sustained over the next three years.

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