Australia

Fragmented outlook for construction industry: ACIF

THE construction industry's peak consultative body, the Australian Construction Industry Forum (ACIF), has released the updated ACIF Forecasts, outlining a fragmented outlook for the industry.

The forecasts show improving prospects for one sector and a bleak time ahead for another, while a third sector is set to peak soon before softening over the next decade.

According to ACIF, the next twelve months will be 'make or break times' for many businesses, from architecture and design, to building and concreting.

ACIF said the stagnant forecasts are the cumulative effect of international concerns, such as the economic woes of the Eurozone plus slowing growth in China, India and Brazil, moderating the growth expectations for Australia.

Also affecting the industry is a changing Australian economy and demographic and the demand for building and construction is undergoing a sizable and structural shift.

"Depending upon work type and location, there is significant variability in how businesses are faring across the country," said Mr Peter Barda, Executive Director of ACIF.

"The ACIF Forecasts show that many of the cycles of the past are gone. There is a new 'normal', and for many, it will be poor in comparison to previous buoyant times. Businesses need to plan carefully using good quality information to find their new playing field," Mr Barda said.

Pressures of a growing population with changing demographics are behind a revival for flagging residential building in most states, according to the forecasts.

ACIF said significant housing shortages, estimated by the National Housing Supply Council at more than 210,000 dwellings, will gain some relief over the next five years; however this will not be spread evenly.

The forecasts contain positive news for Western Australia, Queensland and New South Wales, with the latter state, which has had a weak residential building sector over the past 10 years, expected to enjoy some relief in 2012-13 with an expected $17 billion in residential work.

This new work is expected to comprise mainly units and townhouses as higher density living continues to grow in popularity.

However, the forecasts reveal a lowering of demand in other states, with the boom in Victoria at an end and overall demand retreating.

The forecasts also do not contain much positive news for businesses focussed on non-residential building, with demand for building and refurbishment of offices, schools, retail, health and industrial building expected to remain flat as clients delay and cancel projects, in part due to credit pressures.

ACIF said the Federal Government's Building the Education Revolution (BER) provided a much needed uplift to the sector, however as this ends in 2013-14, the sector will experience a decline in real terms unless work can be found to overcome the GFC-inspired slump.

The forecasts indicate that engineering construction will reach a peak in 2014 at $120 billion per year as construction for the resources sector tapers off.

While the forecasts for the engineering construction sector reveal that global uncertainties over demand for minerals has resulted in some major projects to be put on hold, there is a high level of work remaining in water and sewerage.

Due to initiatives such as the Carbon Price Mechanism, National Broadband Network and the Renewable Energy Target scheme, ACIF said the engineering construction sector will continue to be the most productive industry sector for the next seven years.

The forecasts also predict that changing demand patterns and work types within the industry will have a large effect on construction industry employment, with declining requirements for high skilled workers over the forecast period and growing needs for tradespeople and low skilled workers.

ACIF said a major concern is that due to the majority of available work consisting of regional engineering construction rather than urban residential and non-residential building, there has been a reduction in the number of apprenticeships available, which will have long term impacts on the skills of the industry.

More information on the Australian Construction Industry Forum (ACIF) Forecasts is available from the ACIF website at <http://www.acif.com.au/>.

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