Non-residential construction to buck mining slowdown

By Francesca Krakue

22 December 2016

Share this article

Activity in the non-residential building and construction work sector is likely to improve next year and play a “bigger role in rebalancing the economy”, marking the end of the mining investment dominated slowdown.

According to Australian Construction Insights (ACI), the current financial year could be the last in which falls in mining-related construction work affects all other developments in the non-residential building and construction industry.

ACI economist Geordan Murray stated that the forecast decline in non-residential building and construction work in 2016/17 should see activity in the industry drop to around $127 billion, “marking the bottom of the mining investment dominated slowdown”.

“Mining related activity may still decline further beyond 2016/17, however the prospects for other parts of the construction industry are improving and growth in these sectors is expected to outweigh any further contraction in mining-related work by that stage,” he elaborated.

Mr Murray also pointed out that although the aggregate value of non-construction work declined by 10 per cent in the last financial year, there were “green shoots” of a recovery emerging from some non-mining parts of the industry as 11 of the 22 subsectors of the construction industry expanded in 2015/16.

“Progress on the NBN rollout has meant that the construction of telecommunications infrastructure was a big positive during the year, and so too was work on construction of road infrastructure. A large share of this work relates to the major transport infrastructure projects underway in NSW and Victoria, while work on infrastructure supporting residential subdivisions in the east coast housing markets also played a role,” he said.

He explained that the pipeline of infrastructure projects in the public sector has benefited from resource royalties in the country’s larger states, and while investment in the sector will never “fully fill the void” as mining construction continues to recede, he believes it is set to play a bigger role in rebalancing the economy over the coming years.

“With lacklustre growth in non-mining business investment and the residential building cycle having reached a peak, the improved level of public sector investment could prove timely,” Mr Murray concluded.