New data released by construction consultancy Linesight, indicates the overall levelling of prices in key commodities in the first quarter of 2023, apart from some outliers that have experienced upward trends throughout the quarter.
Prices are predicted to remain broadly flat with only slight upward trends in the second quarter. Despite stabilising prices, Australia’s construction industry is expected to contract by 2.6 per cent in 2023.
The long-term outlook is more positive with the sector forecast to grow at a 3.1 per cent annual rate from 2024 to 2027, due to the government’s sustained emphasis on infrastructure development.
Investment in infrastructure will accommodate population growth, while investment by state governments in large-scale projects will stimulate employment following the pandemic.
Australia’s institutional sector is also expected to expand, primarily driven by universities upgrading existing infrastructure to accommodate a significant influx of international students.
The industrial sector is also witnessing efforts from federal and state governments to bring critical healthcare and vaccine manufacturing facilities into Australia, which will greatly reduce the country’s reliance on overseas suppliers.
Brian Coyle, Director at Linesight Australia, said: “Rising interest rates and high inflation continue to impact the growth of Australia’s economy and its construction industry. Many construction firms, mainly at the subcontractor level, are struggling in an environment of rising inflation and labour constraints, with these struggles most often based on legacy projects that were contracted some time ago. To recover this issue, we believe there is a critical need to rethink contracting and tendering frameworks.
“Despite these challenges, it is promising to see bright spots in the infrastructure and institutional sectors, the latter of which is expected to expand by 8.8 per cent in 2023.”
Over time, additional impact from Australia’s growing emphasis on sustainable practices is expected, with many projects seeking Green Star Ratings or aiming to achieve LEED certification. This generally involves using more sustainable and / or alternative materials, which in some cases will have higher upfront costs during the construction phase, but will yield long-term savings over the whole life cycle of the facility.
Other key findings in the report note:
- Lumber prices have risen marginally in the first quarter of this year, increasing by 1.1 per cent. However, with housing demand softening as high interest rates and inflation erode homebuyer demand, declining residential construction is expected to see lumber prices plateau.
- Steel prices have registered growth of more than 10 per cent in the first quarter of 2023. Stronger demand in China and robust demand in the Australian civil engineering sector have been the primary drivers of this price increase.
The full report can be accessed here.
