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  • 23 May 2016

Doom and Gloom Predictions May Be Unfounded

Doom and gloom predictions over the state of Australia's building and construction sector may not be accurate, and could be doing more harm than good.

Industry forecasts released last November suggested that anticipated work demand for the building and construction sector in Australia over the next three years could fall $2-$4 billion per year.

The effect of those forecasts on residential building, non-residential building and engineering construction will be updated when the Australian Construction Industry Forum’s (ACIF’s) updated forecasts are released in May.

But early indications suggest the situation may not be as dire as first suggested.

“We are still analysing the data for the next ACIF Forecasts however, what preliminary data and analysis is showing, is that the building and construction industry still plays a significant role in the economy. In particular, residential building work is one of the few areas of steady and strong growth in the economy,” said Kerry Barwise, head forecaster of the ACIF Forecasts.

“Doom and gloom sentiments sometimes seen in the media are out of step with the preliminary numbers, and in some areas are spooking the industry and its clients. For example, engineering construction is not facing an unexpected free fall. Some 3,000 new projects in engineering construction have been added to the ACIF major projects list since late last year, offsetting those that have recently been completed, put on hold or terminated.

“There is a notable increase in the number of active road and rail transport projects in the major projects data base and much of the spending on the NBN is now coming into the construction sector work pipeline.

“Our national sector chart from November 2015 clearly shows the peak and then also the dip we are forecasting. We are seeing some big shifts in the numbers for May 2016 in the composition and location of construction work. Activity in the dip is lower than in the peak of the mining boom - pretty well as expected - but engineering construction will not disappear altogether.

“Residential housing is the focus of industry and general media comment at the moment, as it is clear that the frenzy for homes, both detached and attached, is running out of puff. However, commentators spruiking a crash today or tomorrow are out of touch with what is actually happening, as there is a lot of work yet to come and buyers lining up to buy given still low interest rates."