Building activity relating to public sector works is in decline as the effect of stimulus measures fade.
As a result of the federal government’s $42 billion Nation Building Economic Stimulus Plan, the past couple of years have seen an upsurge in public sector construction work. The main beneficiary was education, has accounted for the vast majority of activity in public sector buildings in recent years (other significant public sector categories, such as buildings relating to healthcare or sport and recreational facilities, will be considered in separate editorials). In June 2009, the value of work done on construction of buildings in education amounted to $969 million, according to the Australian Bureau of Statistics (ABS). By June 2010, this figure has almost quadrupled to $3.731 billion.
Not surprisingly, there are now signs of decline as the stimulus winds down. Construction starts in education fell away in the second half of last year, according to building information services provider BCI Australia, and are expected to fall further in coming months (see chart). The value of approvals, too, has almost halved from $751 million in January 2010 to $388.6 million in January 2011.
All states affected
Just as the benefits of the stimulus were spread across all states, the subsequent decline in activity is being felt nationwide.
According to BCI, the decline in construction starts on a statewide basis is as follows:
• New South Wales/ACT: down by 25% on twelve month long term trend.
• Queensland: down by 27% on twelve month long term
• South Australia: down by 12% on long term trend
• Victoria: up by 2% on long term trend
• Western Australia: down by 39% on long term trend.
The BCI reports do not cover Tasmania, but approval figures from ABS indicate that aside from a small uptick in November, activity regarding new approvals was generally subdued during the second half of last year. Likewise with regard to the Northern Territory.
There has been a general uptick in starts in recent months. That, however, is primarily due seasonal factors associated with the school holidays. Accordingly, BCI expects starts to fall away sharply again in every state over the next three months.