If the latest data is anything to go by, news headlines crying out about abandoned resource projects may not reflect the entire situation throughout all sectors of the construction industry in Australia.
In dollar terms, the overall value of abandoned building and construction projects throughout the country was up by 57 per cent in the first six months of this year compared to the same period last year, according to the latest Cordell – Housing Industry Association Construction Industry Update and Outlook Report. That figure is no doubt set to worsen, however, following the indefinite postponement of South Australia’s Olympic Dam project and the cancelling of other projects.
Conversely, the actual number of abandoned projects has actually fallen by 12 per cent over the same period, with a decline being recorded in every category except for apartment building, which rose by eight per cent.
Furthermore, the dollar value of deferred projects actually declined by 17 per cent – though the number of such projects remained steady – despite a spike in mining and commercial project deferrals.
The latest report also highlights the two-speed nature of the Australian construction industry.
While the aggregate dollar value of projects reaching the construction stage for the first half of the year rose by 37 per cent, mining projects (up 142 per cent) accounted for the entirety of this rise while all other sectors registered declines in both the dollar value and the overall volume of projects.
As for the drop-off in abandoned projects, HIA senior economist Harley Dale told said that while this figure is welcome, the apparent decline should be read with caution as the previous data had been abnormally high because of the lag effect associated with financing difficulties in a post-GFC environment.
Still, there was some promising news for the outlook going forward as the volume of newly-identified projects increased by 12 per cent to reach 7,429, although most of the dollar value of these new projects was heavily concentrated in mining and the civil sector.
Overall, Dale says the latest reports point to a healthy but narrow-based industry outlook.
“The latest report highlights the disparate conditions in Australia’s construction industry across both sectors and geographical jurisdictions, with mining the unsurprising star of the show,” he says. “What we have is a healthy, but narrowly based, short term construction outlook. Meanwhile the CIUO report finds that the number and value of deferred mining projects was already increasing sharply in the first half of 2012, prior to the recent scrutiny of the mining-inspired investment boom.”
The latest data follows reports that while engineering construction activity continues to grow, the value of building work done in the June quarter fell by two per cent and was down 5.8 per cent compared to the June quarter of 2011.