State-by-state rundown: Prospects for Australia’s construction industry
Predicting how Australia’s construction industry will shape up, based on possible scenarios likely to play out in each state and territory, is fraught with doubt. Here's an expert's opinion on the regions that could best withstand the pandemic.
Trying to speculate what a post-COVID-19 world will look like is difficult enough. Predicting how Australia’s construction industry will shape up, based on possible scenarios likely to play out in each state and territory, is fraught with danger.
What we need is an expert’s guide to the regions that will best withstand the pandemic – and industry specialist Kerry Barwise is up for the challenge. The Managing Director of FTI Consulting is Head Forecaster at the Australian Construction Industry Forum (ACIF) and has provided economic and policy advice to business and government for decades.
Barwise says the pandemic has just accelerated the weakness experienced by most construction and building sectors in 2019. “This downturn started before the virus hit,” he says. “We now see that it’s going to be deeper and longer than initially thought.”
Barwise says while the downturn in residential building activity isn’t a surprise, what hasn’t been as obvious is the decline in infrastructure spending. “Spending in many infrastructure categories fell in most states last year, and we think there is a risk that with sustained disruption from the virus that some projects will be subject to further delays in 2020,” he says.
Although the building and construction industry across the country will face challenging market conditions this year and beyond, Barwise says the largest states will likely face the most significant falls.
“NSW and Victoria are expected to see the largest losses in work done in 2020,” he says. “They will lose a combined $15 billion over the year if we are subject to continued disruption from the virus and social distancing requirements. This accounts for more than 90 per cent of the total loss in building and construction activity expected this year.”
With the recent announcements of further restrictions to construction sites across Victoria, it looks likely there will be a further impact on loss figures.
Barwise believes the best performer will be Western Australia, which will once again ride on the resilience of its mining sector. “Western Australia is expected to see the best overall performance, as it’s the only state which is forecast to see growth over 2020.”
As well as boosting WA’s economy, mining will assist a return to growth in the medium term in engineering construction in Queensland and the Northern Territory.
Another region well placed to withstand the COVID storm is the ACT after its residential building activity defied national trends by growing 10 per cent in 2019. “The virus has put a halt to the growth experienced last year, but it probably won’t lead to the downturn expected in NSW and Victoria,” says Barwise.
Government stimulus needed
The ACIF says governments need to do more to stimulate building and construction activity to build a bigger, longer and stronger bridge to economic recovery. The organisation is calling for stimulus measures worth more than $60 billion, which includes a nationwide program of building more social and affordable housing, more health and aged care facilities and a more significant investment in engineering construction – particularly road, rail, telecommunications, electricity and water and sewerage projects.
Barwise believes the Commonwealth should extend the concept of the National Cabinet to include a voice for local government to help create a momentum for change as we emerge from the worst of the pandemic.
“Cooperation is a good idea, especially as we need to get things moving again quickly,” he says. “A key wrinkle in the case of COVID-19 is that some regions are more at risk than others. The big cities have very special needs and they are also the places where building projects could play the biggest role in restarting the economy.
“Perhaps we need to see a seat for local government at the National Cabinet table.”
He believes creating a coordinated national approach to building and construction will ensure no state or territory is left behind, and encourage greater industry stability into the future.