Nowhere else is the two speed nature of the Australian construction industry more evident than in South Australia.
On one hand, thanks to environmental approval of BHP Billiton’s $US20 billion Olympic Dam mine expansion and a proposal by an Indian energy company to build one of the world’s biggest wind farms on the Yorke Peninsula, the outlook for the state’s civil construction sector has received an enormous boost over the past month.
On the other hand, conditions in the state’s residential building sector are awful. New home sales in the state dropped 4.7% in August against a 1.1% increase throughout Australia. Seasonally adjusted building approvals have fallen every month since February, sitting at $241.3 million – which is down 6.3% from July against a national increase of 14.2% – the seasonally adjusted value of buildings approved in August is only just over half its peak in March ($467.4 million) (see chart). Residential building approvals (seasonally adjusted), ticked up a bit in August after a horrible July, but remain at their second lowest point since May 2009. Bottom line – new work is coming in very slowly.
Not surprisingly then, the labour market is also soft. In its latest quarterly detail labour market report (August), the Australian Bureau of Statistics (ABS) puts the number of people employed in the state’s construction industry at 56,100, down from 62,000 in May. Given the small amount of new work coming in, along with the stated intention on the part of builders in the latest Master Builders Australia survey, to reduce the size of their workforce nationally over the next six months, labour market conditions seem set to remain weak for now.
By contrast, things are looking up in civil construction. Whilst a final investment decision on Olympic Dam is still pending, the recent granting of state and federal environmental approvals for the project has given a significant boost to the mining construction outlook (environmental approval has for some time been seen as the biggest area of concern with regard to project go-ahead).
Beyond mining, with separate announcements of two newly proposed wind farms over the past month, prospects for the state’s energy construction sector have also received a boost. One of these, proposed by Indian company Suzlon Energy Australia on the Yorke Peninsula, is to be one of the largest in the world.
Key Moving Sectors
Beyond mining and energy, the industrial sector is the main area where significant activity is occurring at the moment.
MINING
As mentioned above, prospects for the mining and heavy industry sector are extremely promising following environmental approval for BHP’s Olympic Dam expansion.
Key projects:
- Prominent Hill Copper Gold Operations – Ankata Underground – Western Copper (upcoming)
- Kanmantoo Copper & Gold Project (upcoming)
- BHP Olympic Dam Expansion (recent environmental approval)
ENEREGY
As also mentioned above, with two key wind farms proposed last month, developments in the energy sector are looking promising.
Key projects:
- Traction Power System For Rail Revitalisation Electrification Infrastructure (upcoming)
- Suzlon Wind Power Project (recently announced)
- Exmoor Wind Farm (recently announced)
INDUSTRIAL
With a few projects set to get going soon, there is some life in the industrial sector.
Key projects:
- Future Renewable Energy Precinct (REP) (Lonsdale) (Upcoming)
- Torrens Island Power Station (upcoming)
- Cherokee Power Station (upcoming)
