At a time when the construction industry in South Australia is already struggling, one project stood out as a notable bright spot on the horizon.
One project alone was to create around 6,000 jobs during peak construction, 4,000 ongoing jobs and 15,000 indirect jobs in the South Australian economy.
One project alone, according to industry research firm BIS Shrapnel, was set to ‘transform’ the landscape of South Australia, and see the overall dollar value of civil construction activity in the state double between 2011/12 and 2014/15.
One project alone was in economic terms to be South Australia’s version of the Northern Territory’s Ichthys LNG project, with the impact spreading through to the broader economy and construction industry as resource firms set up/expanded their presence in the state.
It was not to be. Yesterday’s announcement from BHP Billiton that it had mothballed its $US30 billion expansion of its Olympic Dam resource may not have been surprising, but was devastating nonetheless.
Not surprisingly, reaction to the decision has been one of disappointment and blame: Tony Abbott says the carbon and mining taxes are responsible; SA Premiere Jay Wetherill is ropeable at the company, saying that this was the second time BHP had disappointed South Australians with regard to this project.
More importantly, questions are now being asked in the South Australian construction industry about where growth will come from. Housing start numbers, consistently above 10,000 over the past decade, are expected to remain well below this level over the next two years. The outlook for commercial property is poor – participants in a recent survey conducted by the Property Council of Australia say they expect negative price growth over the next twelve months in every sector of commercial property except for retirement living. Non-residential construction activity is expected to hold up reasonably well for now, but only because work on the new Royal Adelaide Hospital is masking otherwise weak conditions.
Perhaps the only bright spots on the radar are home renovations, which are holding up at respectable levels, and – believe it or not – engineering construction, whereby the Construction Forecasting Council expects modest growth in spite of Olympic Dam’s cancellation.
Furthermore, the latest decision, along with persistent fears about other projects, underscores the important point that the mining boom is coming to an end and a recovery in other areas, such as housing, is desperately needed to pick up the slack if the nation’s property and construction industry is to enjoy decent operating conditions going forward.
All in all, sentiments expressed by Australian Industry Group South Australian Director Stephen Myatt pretty much sum up the mood following yesterday’s decision.
“Ai Group member companies (and indeed, companies throughout the economy) had been looking to the economic promise of the Olympic Dam expansion project in the near term to boost the state’s economy” Myatt says.
“While a commercial decision, today’s (Wednesday’s) announcement is a great disappointment to many of them”.
“There are implications both in South Australia and nationally including for suppliers in the construction phase, fabricators, logistics suppliers and contractors – to name a few”.