Ongoing sharp declines in oil and gas construction will mask a staggered recovery in Australian civil construction work over the next four years, according to leading construction industry analyst and economic forecaster BIS Shrapnel.
In findings released today from its civil construction report, Engineering Construction in Australia 2016 – 2030, BIS Shrapnel said total measured work done in the sector will fall 44 per cent from the 2012/13 peak of $130 billion to a trough of $73 billion by 2018/19.
However, excluding the import-intensive oil and gas construction segment – where no less than 13 onshore LNG trains worth a combined $211 billion are being completed – the bottom of the engineering construction bust will be brought forward to 2016/17, with engineering construction activity rising 11.5 per cent over the remainder of the decade to 2019/20.
“The sheer size of the collapse in oil and gas construction is masking the real outlook for the Australian engineering construction market,” said Adrian Hart, Senior Manager of BIS Shrapnel’s Infrastructure and Mining Unit.
“Oil and gas was the final – and by far the largest – leg of the resources investment boom.
"Yet with less than 30 per cent of the value of mega-LNG construction projects representing domestic construction activity, and with most of the domestic LNG work ‘front-loaded’ as site and related infrastructure development, the Australian construction industry has already taken a substantial hit from the bust in resources investment,” he said.
According to Hart, it makes sense to separate the outlook for oil and gas construction and the broader engineering construction market, as focusing on the total engineering construction figures can be misleading.
Engineering construction market normalising towards pre-boom size and structure
As the mining investment boom subsides and public investment in civil infrastructure recovers, both the size (relative to GDP) and structure of the engineering construction market will more closely resemble the pre-mining boom market of the early to mid-2000s.
During the resources boom (which also helped underwrite higher levels of public infrastructure investment compared to the 1990s), the value of engineering construction, both as a share of the economy (i.e. the value of work done divided by Gross Domestic Product or GDP) and per capita (i.e. the value of work done divided by the total population) grew substantially. Looking ahead, BIS Shrapnel expects these ratios to revert closer to the pre-boom days.