A doubling in mining activity over the next three years is set to power strong overall growth in the Western Australian construction industry.
In the year to March, ABS statistics indicate that the total value of construction work done in the state amounted to $39.451 billion. By financial year 2013/14, that figure will have reached $54.874 billion, according to forecasts by the Construction Forecasting Council (CFC).
Not surprisingly, the anticipated upsurge is being driven by mining. The CFC expects activity in ‘heavy industry’ to more than double from $16.274 billion in calendar 2010 to $33.618 billion by 2013/14.
The CFC is not alone in its optimism. According to its Engineering Construction in Australia report released last April, industry research firm BIS Shrapnel expects “much stronger growth (in resource sector construction activity) in the 2012 -14 period as activity on LNG and iron ore expansions peak.”
Outside of resources, however, opinions vary about the outlook. Reasonably optimistic is construction information services firm BCI Australia, which sees an “extremely positive” picture as “real growth returns to the state across many different sectors as the mining boom II hits the WA economy in full force”.
In the coming financial year, BCI expects the value of building construction starts to increase from $4.366 billion to $6.628 billion, according to its Australian Construction Market Outlook 2011/12. Civil starts, including infrastructure, utilities and transport (but not mining, oil and gas), will rise from $3.812 billion to $4.334 billion, the report says.
The CFC, however, is not so optimistic. By 2013/14, the forecaster expects the value of building activity to amount to $12.553 billion – barely unchanged from the $12.319 billion recorded in the twelve months to March this year. Moreover, take out the expected growth in mining referred to above and the forecaster actually expects that the value of work done in 2013/14 will be lower than it is now.
In the short term, the CFC expects the value of work done in the twelve months to March to increase 5.78% to $41.374 billion.
Building approval figures are not encouraging. At $2.665 billion, the value of new buildings approved in the state during the first four months this year was well down on the corresponding figure for the first four months of 2010 ($3.622 billion). Moreover, the overall value of approvals in the twelve months to April amounted to just $8.831 billion. Given current activity levels ($12.319 billion), this means that new work is coming in much slower than existing work is being done.
Significant Sector Developments:
As mentioned above, growth in the overall industry will be driven almost entirely by growth in mining construction.
Approvals last month of Chevron Australia’s $25 billion Wheatstone Project and Inpex’s Ichthys Browse Basin Project ($US 20 billion plus) underscore the long term strength of this sector despite ongoing troubles in getting the Oakajee port and rail project off the ground.
In other sectors, the CFC expects that:
• The residential sector will experience respectable levels of growth, with activity reaching $8.613 billion by 2013/14 – up from $7.126 billion last year
• After dropping back almost twenty percent to $1.110 billion this year, the multi-residential sector will reach $1.619 billion by 2013/14 before surging to more than $3 billion by 2016/17.
• Declining vacancy rates will see activity in retail grow respectably from $482.3 million last year to $635.1 million by 2013/14.
• As stimulus measures continue to wind down, construction activity on education facilities will fall from $1.35 billion last year to $831.3 million in 2011 on the way to bottoming out in 2012/13 at $497.4 million.