Following the federal government’s decision last month to grant environmental approval to the proposed $2.3 billion Bell Bay Pulp Mill, the long term outlook for the Tasmanian construction industry is positive.
Consistent with national trends, Tasmania experienced buoyant conditions in 2010 as a result of the Nation Building Economic Stimulus Plan. The total value of all construction work done in the state throughout the year amounted to $2.529 billion, according to preliminary estimates from the Australian Bureau of Statistics (ABS). This represents an in increase of 12.95% when compared with 2009 (see chart).
Prior to the approval of Bell Bay, there had been concerns about the outlook going forward as the effect of the stimulus faded and work on major projects such as BOC’s new LNG plant wound down. Indeed, without the stimulus induced surge in construction on educational buildings, there would have been very little if any growth last year.
Nevertheless, now that Bell Bay seems likely to go ahead (subject to securing appropriate financial backing), prospects look much brighter.
Sector by Sector
Over the long term, work on Bell Bay is set to underpin strong levels of activity in the industrial sector.
Indeed, even in the short term, a surge in the value of warehouse approvals in January ($59.9 billion) indicates the likelihood of moderate pickup in this sector.
The outlook also looks positive in healthcare and water. In the healthcare sector, the value of work done surged more than fourfold in the September quarter last year as work on redevelopments of the Launceston General Hospital and North Western Regional Hospital kicked into gear. Going forward, work on the $565 million Royal Hobart Hospital redevelopment should underpin strong activity.
In water, activity dropped back in 2010 after a strong year in 2009. Nevertheless, a solid pipeline of outstanding work resulting from large scale irrigation projects under the SMART Farming Water Irrigation project bodes well for prospects in 2011. As at September 30 last year, the total value of work yet to be done stood at a whopping $253.5 million, more than six times its value one year earlier in September 2009 ($41.6 million).
The residential sector looks set for subdued conditions in 2011 following a number of interest rate rises over the past eighteen months and a tapering off of activity after the end of the boost to the first home owners grant in 2009. For now, activity seems to be holding up reasonably well: at $28.291 billion, the total value of work yet to be done as at December 31 was higher than at any other time during the past six quarters. However, at $317.6 million, the value of dwelling approvals in the six months to February is 14.94% lower than that recorded for the preceding six months ($373.4 million). Moreover, the value of approvals over the three months to February 2011 ($132.1 million) is down by 16.34% when compared to the $157.9 million for the corresponding period in the year to February 2010.
The outlook also looks subdued in mining and the public sector. Activity in the mining sector has been strong throughout the past two years. The value of work done in each of the 2008/09 and 2009/10 financial years ($2.450 billion and $2.574 billion respectively) was almost double the $1.386 billion recorded in 2007/08. Following completion of BOC’s LNG plant earlier this year, however, activity is likely to subside for now.
Likewise activity in the public sector is expected to wane as the effect of stimulus spending subsides.
Elsewhere, with approvals having shown negligible movement in recent months, activity is likely to be flat to steady in each of the commercial, retail, sport and landscape sectors.
Finally, activity in the transport sector has been strong in recent times. In the nine months to September 2010, the value of work done in the this sector amounted to $193.2 million, well up on the $147.8 million recorded in the preceding nine months to December 2009 ($147.8 million). With the value of work yet to be done in this sector standing at a respectable $113.1 million – more than double the value one year earlier – activity levels are likely to remain solid in the near future.