The Australian Construction Industry Forum’s (ACIF) latest industry forecast foreshadows that building and construction work activity in 2017-18 has grown to $247 billion, a level close to rivalling the peak achieved at the height of the mining boom.
According to the report, building and construction activity now accounts for 14 per cent of Australia’s Gross Domestic Product (GDP), with construction sector jobs accounting for nearly 10 per cent of total employment.
Bob Richardson, Chair of ACIF’s Construction Forecasting Council, which oversees the production of the ACIF Forecasts, said that the outlook for the next few years is ‘finely balanced’.
“We expect the rollout of major infrastructure projects in railways, roads, electricity, water and sewerage to continue,” Mr Richardson explained.
Non-Residential Building Activity
The report states that non-residential building activity is expected to grow again next year, although the rate of growth is expected to moderate from 10 per cent to 3 per cent, driven by an ongoing increase in non-mining business investment.
It is anticipated that growth hotspots will be in accommodation, offices and other commercial developments. Further to this, increased government consumption and public investment in service activity such as in health, community services and education are also expected to support growth in non-residential building next year.
Building and Construction Employment
The ACIF reports that employment grew in the sector by 4.2 per cent last year, while the value of work done (or spending) grew by 9.8 per cent. The divergence in changes in construction employment and spending are likely the result of differences in the labour intensity of building and construction activity.
Most of the increase in work done last year was in ‘Engineering Construction’ which is typically capital intensive (and import-intensive) and increases in this type of spending do not drive similarly sized increases in construction employment.
Unemployment and Wages Growth
Lastly, the report forecasts that moderate economic growth is expected to generate sufficient employment growth to gradually erode the pool of unemployment (and underemployment) and this is expected to provide just enough wages growth to keep inflation within the RBA’s targeted band over the medium term.
The full industry forecast report, including figures on residential building, can be found here.