Construction activity in the Tasmanian construction sector is set for a big fall, with the state facing a decline of more than fifteen per cent over the next twelve months.
As the only state in the country to record an increase in activity in the March quarter, Tasmania’s recent performance has been impressive. According to the Australian Bureau of Statistics, the value of construction work done in the quarter increased from $637.9 million to $698.5 million.
Moreover, in the twelve months to March, the total value of work done ($2.617 billion) was up 11.75%.
Nevertheless, dark times lie ahead as stimulus from the federal government’s Building Education Revolution program (BER) subsides. In the twelve months to April, the value of building approvals amounted to just $1.039 billion. Compared with current levels of building activity ($1.595 billion in the year to March), this means that new building work is not coming in anywhere near as fast as existing work is being done.
Not surprisingly then, the Construction Forecasting Council (CFC) expects the value of work done this year to plummet by 15.53% to $2.211 billion (see chart).
Beyond that, the CFC expects long term growth to be modest, with activity not reaching $2.6 billion again until 2014/15.
Much depends on the fete of the Gunns Pulp Mill (not included in the above forecast). That, in turn, is still dependant on finance. The company is now selling other assets in an effort to raise money for the project.
Should the pulp mill go ahead, these forecasts will almost certainly prove to be too conservative (the pulp mill has not been included in the forecast numbers).
• With a number of projects set for 2012/13, the biggest of which being the Savage River Tin Project in Mount Lindsey ($255 million – June 2013), activity in mining and heavy industry is set to more than double from $72 million in calendar 2010 to $162 million in 2014/15.
• Activity in health and aged care is set to nearly double from $47.8 million last year to $89.6 million in 2013/14 as work kicks off on the redevelopment of the Royal Hobart Hospital later this year.
• The value of engineering work done on road construction is set to climb from $229.6 million in calendar 2010 to $335.4 million in 2013/14; that on other forms of transport is expected to more than double from $37.5 million to $91.5 million over the same period.
• After spiking to $389.5 million in 2010, activity on education facilities is expected to come back down to earth as the BER winds down.
• If the pulp mill goes ahead, activity in the industrial sector will experience a considerable boost; if not, subdued conditions are expected to persist in this sector.