BUILDING & CONSTRUCTION

INDUSTRY FORECASTS
AUSTRALIA
THE ROARING 2020s?
MBA BUILDING & CONSTRUCTION
FORECASTS TO 2023/24
AUGUST 2019
 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

AUSTRALIA 2019
AUGUST
COMMENTARY

The Roaring 2020s?

MBA Building & Construction Forecasts to 2023/24
Overall, the performance of construction in Australia over the period to 2023/24 is expected
to be rather flat – but there will be considerable variation within the different sectors and
geographic markets. The fundamentals of the market – population, employment and interest
rates – are sound, but several microeconomic obstacles are holding things back. The volume
of construction actually peaked back in 2012/13, and fell by 14.3% until its 2016/17 low point.
Some, but by no means all, of the lost ground has since been recovered. Over the medium
term, our forecasts see total construction activity gliding lower and the size of the market in
2023/24 is anticipated to be 2.6% smaller than in 2018/19. Government-led projects mean that
transport infrastructure will be one of the strongest performers but prospects for new home
building are more mixed and some areas of commercial building will be doing it fairly tough.

MBA Forecasts of Total Construction Activity in Australia (Billions of Dollars)

and Change on Previous Year (%)
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
$234.78 $218.50 $207.95 $201.30 $224.68 $212.85 $208.37 $208.41 $209.06 $207.81 $206.88
0.0% -6.9% -4.8% -3.2% 11.6% -5.3% -2.1% 0.0% 0.3% -0.6% -0.4%

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RESIDENTIAL COMMERCIAL ENGINEERING

BUILDING BUILDING CONSTRUCTION

New home building Commercial building has Engineering and civil

reached its highest level been something of a star construction never fully
on record during 2015/16. performer over the last recovered from the slump
The cyclical nature of home couple of years and post-mining investment
building means that some has recently touched boom. The good news
reversal in activity was record highs. We is that a heavy pipeline
inevitable. However, the
anticipate that activity of Government-led
market has also been hit by
here will break another infrastructure work is
the combination of tougher
new high during 2019/20 chugging into operation,
credit conditions, barriers
to foreign buyers and falling before reverting to and is set to benefit road
house prices. We forecast levels more consistent and rail construction in
that new dwelling starts with previous norms. particular. Our forecasts
will bottom out at about By 2023/24, we project envisage that engineering
168,000 during 2020/21 that commercial building and civil construction
– 28% down on its peak. activity will have fallen will peak during 2020/21,
By the end of the forecast by 9% compared with representing a 12.5%
horizon in 2023/24, we 2018/19. Office and expansion on 2018/19.
anticipate that new home accommodation building Thereafter, the amount
building will have recovered are expected to see the of activity is likely to ease
to 187,660 – a gain of 12% most pain over the next lower. While things are
on its low point, and still
few years while retail, looking up for transport
a strong performance by
health and transport work, prospects are
historic standards. Home
buildings will buck the likely to be tougher for
renovations activity is
expected to grow slowly trend and return telecommunications as
but steadily over the decent gains. the NBN comes to
forecast horizon. a conclusion.

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ECONOMIC BACKDROP
Growth Slows as Interest Rates Plumb New Lows

The headline economic figures

for Australia’s economy present
an almost contradictory
picture. On the one hand, latest
GDP figures indicate that the
pace of economic growth
dipped to a decade low of
1.8% over the year to March
2019. The other hand tells us
that employment creation
and generation are still very
strong: over the year to June
2019, a total of 296,300 new
jobs were created, equivalent
to a very brisk growth rate of
2.9%. Encouragingly, the vast
majority of the economy’s new
jobs were full time rather than
part-time roles.

One of the most distinctive features of the Australian economy is the way in which population
and employment growth almost move in tandem. This is no coincidence: a healthy labour market
here makes Australia a more attractive destination for overseas migrants and the inflow responds
accordingly. At the same time, Aussies will be less tempted to go overseas to work should the jobs
market here be a lucrative one. The employment-population axis continues to hold good: latest figures
show that Australia’s national headcount increased by 405,000 over the course of 2018 – breaking
the 25 million barrier on its way. Curiously, the robust state of labour market demand has not been
matched by any acceleration in wage growth at all. This pattern has been replicated across the globe
and is something of a puzzle to economists. At the same time, the 1.3% inflation rate in the economy is
beneath the lower band of the RBA target.
With household consumption being the largest component of economic demand, population growth is
the most fundamental building block of economic expansion and in this way, the number of consumers in
Australia grew by 1.6% during 2018. In this context, the fact that the volume of household spending grew
by only 1.8% over the year to March 2019 is underwhelming. The sluggish pace of consumer demand is
one of the central reasons why growth in the economy has become subpar.

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At present, the ‘hero’ in terms of economic news. May’s federal election produced a clear
demand is government consumption which and conclusive outcome, allowing for a package
bolstered the growth rate over the past year, of income tax reductions to be passed in early
registering an increase of some 5.1% over July; the RBA reduced its official cash rate
the past 12 months. In terms of government twice in recent months, bringing the cost of
infrastructure, there is little evidence on the borrowing to a new all-time low of 1.00%; and
ground that the package of commitments and the First Home Owner Deposit Scheme will
announcements has yet translated into real kick off in January. All the while, the international
and visible activity. When it eventually does, the backdrop is broadly supportive with the
subsequent boost to economic activity will be biggest risks currently relating to geopolitical
welcome – and significant. tensions in the Persian Gulf and the escalating
trade dispute between China and the US. The
The downturn in the housing market which
increasing likelihood of a disorderly Brexit at
began in 2017 has spread to the wider economy.
the end of October also represents a risk. The
Over the past two years, house prices have
value of the Australian dollar is currently low
reversed sharply in most major cities while
on currency markets and this is actually helpful
new home building activity has retreated from
from the point of view of making this economy
very high levels. The financial confidence of more price competitive from the point of view
consumers and small business owners is closely of people, investors and businesses based
linked to house prices and with a relatively overseas. The federal budget is expected to
heavy household debt burden, the effect on return to surplus soon: its ability to remain
spending and investment has not been good. there will rest on economic growth regaining
Despite the presence of these challenges, momentum and sticking to its trend rate over
recent months have seen a few bits of positive the medium term.

296,300 new Household

$
Aussie dollar RBA Cash Rate
jobs over year to spending up by at 10-year low at just 1.00%
June 2019 1.8%

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RESIDENTIAL AUGUST

2019
BUILDING SUMMARY

New home building is currently undergoing a cyclical downturn and we forecast that
a trough will be reached during 2020/21 when work on about 168,000 new homes is
expected to begin. This would still represent a strong volume of new home building
activity by historic standards: solid population growth and very low interest rates mean
that underlying demand for new housing remains elevated. We anticipate that new home
building output will recover towards 190,000 by the end of our forecast horizon in 2023/24.

233,872 This was the biggest

By 2023/24, MBA
New Homes were year for new home
built in 2015/16 building on record... projects that New
Home Building will
have grown by 12.1%.

...but home
building is
falling...
188,255
New Homes
in 2023/24
...especially
apartments...

MBA forecasts 2020/21

a 28.2% drop 168,000 New
from the peak... Dwelling Starts ...with activity
bottoming out
in 2020/21...

MBA Projections for New Home Building Starts and Change on Previous Year

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
184,911 219,245 233,872 221,408 229,494 195,307 173,907 167,962 171,163 179,640 188,255
11.4% 18.6% 6.7% -5.3% 3.7% -74.9% -11.0% -3.4% 1.9% 5.0% 4.8%

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RESIDENTIAL BUILDING
In Retreat, but Recovery on the Horizon

Residential building continues to retreat from the all-time record high of 234,500 reached during the 2016
calendar year. Latest figures for the year to March 2019 indicate that at 209,664, the number of new starts
has fallen back by a pretty modest 10.6% so far. Current housing output is still very elevated by historic
standards – up until 2014, new home building activity had never breached the key 200,000 threshold in a
year, so latest results should be seen as very favourable in that context.
The record level of home building in recent years owes its origin to a remarkable constellation of positive
macroeconomic stimuli: interest rates at all-time lows, unprecedented population growth, a solid jobs
market and the largely supportive policy environment.
Many of the factors that propelled new home building to such high levels are still in place. During 2018,
Australia’s headcount increased by 405,000, equivalent to a 1.6% rate of population growth. Of the gain
in population, 250,000 was accounted for by overseas migration. This is an important feature because
migrants tend to be concentrated in the 20-40 age group, a cohort which has a strong and immediate
impact on housing demand. The creation of 206,300 new jobs in the Australian economy over the year to
June 2019 has also had very positive ramifications for housing demand, by simply increasing the number
of people eligible for mortgages. Interest rates, already comfortably at record lows, have been cut twice
by the RBA in the past couple of months. From the standpoint of residential building, the macroeconomic
environment is largely on the favourable side of the ledger.

MBA Forecasts of New Dwelling Starts by Type, 2013/14 to 2023/24

250,000

200,000

150,000

100,000

50,000

0
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

Detached Houses Apartments and Units

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The disruption to home building activity over the past three years has been more the product of
microeconomic rather than macroeconomic issues. First came the APRA-imposed ‘speed limit’ on
investor lending which came into effect in early 2015. This was followed by the spread of whopping stamp
duty supertaxes on foreign buyers across most states and territories, which effectively shut an important
buyer segment out of the market for new homes.
The prospects for residential building in Australia will be determined by the combined interplay between
macroeconomic conditions, microeconomic considerations as well as local issues in each of the different
geographic markets around the country.
A raft of mostly good news over recent months means that the short-term outlook for residential
building has become a bit more positive. The Government’s First Home Loan Deposit Scheme is set
to kick off in January 2020, while those employed are already benefitting from the package of medium
term income tax cuts passed by Parliament in early July. While house prices are still falling in most
markets, the pace of decline looks to have eased over recent months. The RBA’s key interest rate has
been cut by 50 basis points since the start of June while APRA has relaxed the rules around mortgage
eligibility for home buyers. Enhancements to the Cities Deals are also favourable to prospects for new
home building. Less welcome are the recent issues surrounding some highrise buildings and insurance
for certifiers – in the absence of a timely and adequate policy response, the decline in high density
dwelling starts could deteriorate further.

Annual Change in Number of New Home Building Starts, 2018/19 to 2023/24

10.0%

5.0% 4.8%
5.0%
1.9%

0.0%
2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

-3.4%
-5.0%

-10.0%

-11.0%

-15.0%
-14.9%

-20.0%

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In the end, two factors will dictate the short-term direction of new home building: house prices and
confidence. House prices across Australia fell by another 6.8% over the year to June, with the magnitude
of decline in double-digit territory in the two biggest markets of Sydney and Melbourne. As long as price
declines remain reasonably sizeable, would-be home buyers are inclined to sit out of the market and delay
a recovery in activity. Similarly, developers and home builders are reluctant to advance new projects when
there is a risk of their finished product landing in an environment of soft prices and weak demand. Short-
term prospects for new home building are also held back by the fragile state of confidence across the
Australian economy.
Latest indicators around new home building approvals as well as lending indicate that the short-term
outlook is quite weak. The number of new dwelling starts is forecast to fall by 11.0% during 2019/20, driven
by a much sharper drop in apartment/unit commencements (-16.8%) compared with detached houses
(-6.5%). The 2020/21 financial year is expected to represent the bottoming out point for new home
building with a further decline of 3.4% in commencements.
Just as the home building downturn started on the high-density side, there too will the recovery first kick off.
During 2021/22, apartment/unit starts are forecast to increase by 5.9% while new detached house starts
are projected to ease by another 0.8% during the year. We expect that 2022/23 will be a year of growth
on both sides of the market with detached house starts anticipated to grow by 3.4% and apartment/unit
commencements expanding by 7.1%. The recovery will be built upon during 2023/24 with growth of 3.8%
and 6.2% in detached house and high density starts respectively.
The 2020/21 trough for new home building activity is expected to involve a total of 167,962 commence-
ments, an outturn which would represent a 28.2% reduction on the 2016 peak. In terms of magnitude,
this is fairly consistent with the typical pattern of previous downturns in new home building. Compared

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with most sectors of the economy, the fluctuations in building activity tend to be very large as it
moves through the cycle. Despite the sizeable reduction in activity, it is worth pointing out that low
point for new home building of about 168,000 would represent the highest trough that a housing cycle
has ever seen. In fact, a number of previous home building peaks have been lower than the trough
forecast for 2020/21.
In contrast to new home building which we expect will fall further before recovering, the outlook for
home renovations activity is a little bit brighter. Growth in renovations activity is expected to be modest
but steady over the forecast horizon to 2023/24. Overall, renovations activity is anticipated to expand
by 4.6% over this period – equivalent to about 0.9% per year. Renovations will be helped along by
the environment of ultra-low interest rates. Interestingly, the historic pattern of new home building in
Australia will work in favour of demand for home renovations work: more new detached houses were
built in Australia in the late 1980s than at any other time – either before or since. A disproportionately
large portion of home renovations demand tends to be concentrated in detached houses of this vintage.
Cue an improved pipeline of renovations work over the next few years. The forecast increase in home
renovations work would be larger but for the weakness of consumer demand as well as the depletion of
home equity reserves caused by the house price reversal of recent years.

Major Home Renovations Work:

Change compared with Previous Year, 2018/19 to 2023/24
4.5%
4.2%
4.0%

3.5%

3.0%

2.5%

1.9%
2.0%

1.5%

0.9%
1.0% 0.8%
0.6%
0.5% 0.3%

0.0%
2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

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COMMERCIAL AUGUST

2019
BUILDING SUMMARY

Commercial building activity has been growing strongly and we anticipate that this
will continue over the short term thanks to the healthy pace of job creation and
exceptionally low financing costs. We forecast that commercial building activity will
peak at $48.47 billion in 2019/20 before undergoing quite a sizeable reversal involving a
15% reduction in activity by the time the trough is reached in 2022/23. Accommodation,
education and office building will face the most pain but health, transport building and
retail building are all projected to expand.

...and MBA forecasts

that the peak will be $48.77 bn
27.7% higher than in 2019/20
the trough...

...before activity
...but it has dips again...
since grown...

$41.36 bn
in 2022/23

$38.00 bn This is when

in 2016/17 Commercial Building
bottomed out...
MBA projects
that Commercial
Building will reach
its trough here.

MBA Forecasts of Commercial Building Activity (Billions of Dollars)

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
$38.19 $38.15 $38.36 $38.00 $42.34 $45.60 $48.47 $46.42 $43.55 $41.34 $41.63
5.3% -0.1% 0.6% -0.9% 11.4% 7.7% 6.3% -4.2% -6.2% -5.1% 0.7%

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COMMERCIAL BUILDING
Climbing to the Top

Australia’s commercial building sector has recently sparked to life following an extended number of
years involving a flatlining of activity. Latest data indicate that over the year to March 2019, the volume of
commercial building work done surged to an all-time high of $43.15 billion. This represents an increase of
3.2% on a year earlier. Compared with the trough in commercial building activity during 2013, the volume
of work has risen by a total of 19.3%.

MBA Forecasts of Commercial Building Activity by Category to 2023/24

($bn, inflation adjusted)
60

50

40

30

20

10

0
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

Industrial Building Retail, Trade & Transport Building Accommodation, Community & Recreation Building

The recent upturn in commercial building activity owes its origin to a number of factors. Employment
and population growth have both been strong, and this has boosted the need for all kinds of new
buildings like shops, hospitals, schools, offices, cafes, bars, restaurants in addition to ‘back end’ work like
warehouses, factories and wholesale distribution facilities. The long term ageing of Australia’s population
means that the number of aged care facilities we need is growing all of the time, supporting work in
this part of the building sector. Building work related to tourism, such as hotels, is also experiencing
a favourable backdrop thanks to continued growth in the global economy and the weakness of the
Australian dollar on currency markets – something which makes trips to Australia much more affordable
for those visiting from overseas. For all segments of commercial building, the move to even lower interest
rates is a clear plus, allowing finance to be sourced at lower cost and expanding the pool of projects
which now ‘pass the test’ in terms of commercial viability.

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Within commercial building, there are ‘five pillars’ of activity. In order of size and based on the estimated
value of work done during 2017/18, these are: Offices ($7.23 billion), Education ($6.53 billion), Retail/
Wholesale ($6.28 billion), Accommodation ($3.43 billion) and Entertainment/Recreation ($3.36 billion).
Since the beginning of the decade when commercial building bottomed out, each of these pillars has
seen strong gains. Accommodation is the far and away leader here, with the volume of building activity
almost trebling since 2012/13. Over the same period, growth was less pronounced but still sizeable in
Entertainment/Recreation (+43.2%) as well as Education (+30.4%). Growth was more measured when it
came to Retail/Wholesale (+12.5%) and Office building (+10.8%).
We project that commercial building activity will expand by a further 6.3% during the 2019/20 financial
year to reach a new record peak. The cyclical nature of commercial building means that the subsequent
downturn – triggered by a smaller volume of new job creation and weaker population growth – will be
sizeable. We anticipate a 4.2% decline in commercial building activity during 2020/21 with a further fall of
6.2% during 2021/22. The 2022/23 financial year will probably mark the trough for commercial building
with activity projected to suffer a reduction of 5.1%. A small expansion of 0.7% during 2023/24 is expected
to mark the early stages of a recovery. Altogether, this means that the size of the commercial building
market in 2023/24 is anticipated to be 8.7% smaller than in 2018/19.

Projected Change in Volume of Commercial Building, 2018/19 to 2023/24

10.0%

7.7%
8.0%
6.3%
6.0%

4.0%

2.0%
0.7%

0.0%
2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
-2.0%

-4.0%
-4.2%
-6.0% -5.1%
-6.2%
-8.0%

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The slowdown in employment growth means that a 21.1% drop in office building activity over the period
to 2023/24 is anticipated to make the largest contribution to the overall decline in commercial building
with the 17.3% hit to education building work also expected to take a big bite out of the market. With such
a large amount of new accommodation having come on stream over recent years, the amount of building
activity in this part of the market is anticipated to revert to volumes more consistent with long term trends.
This is forecast to involve a 30.8% reduction in accommodation building work by 2023/24 compared with
2018/19 levels.
Even though commercial building overall is facing a contraction over the medium term, a number of
important segments of the market are still expected to see growth. Building work on health facilities is
anticipated to expand by 11.4% on 2018/19 levels while work on transport buildings is expected to gain
13.6% by the 2023/24 financial year.

Ten Largest Commercial Building Projects either Committed or Under Construction

Cost Likely End

Project Company State Start Date
($ million) Date
1 Barangaroo development Barangaroo Delivery Authority / NSW 6,000 2011 2024
Lend Lease / Grocon / Scentre
Group / Aqualand
2 Western Sydney Airport - Western Sydney Airport Alliance NSW 5,300 2018 2026
Badgerys Creek / Australian Federal Government
3 Crown Sydney Hotel Resorts, Crown Ltd NSW 2,200 2017 Early 2021
Barangaroo
4 Wynyard Place Development Brookfield Property Partners / NSW 1,900 2017 Sep 2020
AMP Capital / UniSuper
5 Melbourne Quarter mixed-use Lend Lease VIC 1,500 2017 2022
development
6 Merrifield Development MAB Corporation Pty Ltd / VIC 1,200 2015 This Year
Gibson Property
7 Castle Towers Shopping Centre Queensland Investment NSW 1,083 2019 End 2022
expansion Corporation
8 ICON Ipswich - Ipswich CBD Ipswich City Properties / QLD 1,000 2011 2020
renewal Leighton Properties
9 Perth Airport Terminal Upgrade Perth Airport Pty Ltd WA 1,000 July 2011 2020
10 Nexus Industrial - intermodal Salta Properties VIC 1,000 2013 This Year
hubs in Dandenong South and
Altona

Source: Deloitte Access Economics [Investment Monitor]

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At present there are just over a dozen commercial building projects valued at more than $1 billion
each including the new Western Sydney Airport terminals, the Crown Resort in Sydney, WA’s Bunbury
Waterfront project and the Ipswich CBD renewal project in Queensland. The full details of these are
included in the table above.
The table below summarises the largest commercial building projects across Australia that are either
possible or under consideration. The largest of these is the $7 billion Koo Wee Rup Airport in Victoria,
with three major projects in Queensland including the $5 billion Airlie Beach Resort Development and
the Aquis Great Barrier Reef project valued at $2 billion, similar in value to the proposed Brisbane Live
Entertainment Precinct.

Ten Largest Commercial Building Projects either Possible or Under Consideration

Cost Likely End

Project Company State Start Date
($ million) Date
1 Koo Wee Rup Airport Paragon Premier VIC 7,000 Proposed Not
Investment Fund currently
known
2 Airlie beach resort China-Australia QLD 5,000 Plans announced Not
development Entrepreneurs Association currently
Incorporated known
3 Aquis Great Barrier Reef Aquis Resort at the Great QLD 2,000 EIS Approved 2020
Project Barrier Reef Pty Ltd
4 Brisbane Live - new AEG Ogden QLD 2,000 Plans announced Not
entertainment precinct currently
known
5 New Women's and SA Dept of Health SA 1,800 Planning underway 2024
Children's Hospital (WCH) at
the Royal Adelaide Hospital
6 HumeX business park and JTX International VIC 1,700 In planning Not
homemaker centre currently
known
7 Mixed-use project at the Newmark Capital VIC 1,250 Pending investment 2023
Jam Factory site on Chapel decision
Street, South Yarra
8 ANZ Stadium redevelopment NSW Office of Sport NSW 810 Late 2019 2021
9 Galleria Shopping Centre Vicinity Centres WA 800 Approved by City of Not
redevelopment Bayswater currently
known
10 Office tower at 80 Ann Mirvac QLD 800 Planning underway Not
Street, Brisbane with Suncorp currently
announced as known
anchor tenant

Source: Deloitte Access Economics [Investment Monitor]

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ENGINEERING AND AUGUST

2019
CIVIL CONSTRUCTION SUMMARY

We expect this to be the biggest winner over the next few years, largely thanks to
the ramping up of government-led transport infrastructure projects. The volume of
work is anticipated to rise from $92.42 billion in 2018/19 to $103.94 billion in 2021/22,
a gain of 12.5% with construction relating to road, rail and gas pipelines providing the
biggest boost. On the flip side, the volume of work is likely to shrink in a few places
like telecommunications and electricity.

MBA forecast Change in Activity: 2023/24 v 2018/19

+65.1% +47.2% +10.0%

OIL & GAS RAILWAY ROADS

PROJECT CONSTRUCTION CONSTRUCTION

RECREATION
ELECTRICITY CONSTRUCTION TELECOMMUNICATION

-24.7% -26.0% -46.5%

MBA Forecasts of Engineering & Civil Construction (Billions of Dollars)

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
$137.31 $114.64 $96.22 $87.62 $105.98 $92.42 $94.68 $100.47 $103.94 $102.36 $97.77
-3.8% -16.5% -16.1% -8.9% 21.0% -12.8% 2.4% 6.1% 3.5% -1.5% -4.5%

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ENGINEERING & CIVIL CONSTRUCTION

Prepare for Take Off

Civil and engineering construction activity is a very broad church and includes everything from new road
building, the NBN, mining project work, electricity networks, railways and harbours. Collectively, it is still
a far cry from the dizzy heights reached earlier in the decade. Latest official data indicate that the volume
of engineering construction activity totalled $89.21 billion over the year to March 2019, a 17.3% reduction
on a year earlier. Engineering construction activity had peaked at $144.1 billion at the height of the mining/
natural resources project boom. The current workload is 38% below this high point and what looked like
the beginnings of a spirited recovery during 2017 and 2018 has petered out.
Engineering construction can be grouped into three broad categories. Based on the volume of work
done during 2017/18, the largest is Resources construction ($40.1 billion) with Utilities ($30.3 billion) and
Transport ($30.0 billion) pretty much neck and neck as regards size. Not surprisingly, resources-related
construction has lost the most ground over the past five years. The reversals in both transport and utilities
work over the same period have not received as much notice despite being quite significant in size.

MBA Forecasts of Engineering & Civil Constuction Work to 2023/24

($bn, inflation adjusted)
140

120

100

80

60

40

20

0
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

Transport Infrastructure Utilities Construction Resources Projects

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

The specific areas which have taken the biggest bites out of engineering construction activity over the
last few years include coal projects, where the volume of work declined by 67.4% between 2012/13 and
2017/18, a reduction equivalent to $9.96 billion worth of activity. Harbour construction work fell by 89.7%
over this period, with Oil, Gas & Hydrocarbon plant work declining by 17.7%. Projects related to other
minerals suffered a reduction of 70.6% over this timeframe.
Not all segments of engineering construction have lost ground since 2012/13. The rollout of the NBN
caused telecommunications construction work to expand by 68.7% over this period, adding some $4.2
billion to construction activity. Road building work has also taken a bigger slice of the pie and its 8.2%
gain produced $1.59 billion worth of additional work.
Looking to the future, the outlook for engineering construction is a reasonably positive one. This will
largely be thanks to the roll out of government infrastructure projects over the next few years. Overall,
engineering construction activity is projected to expand by 2.4% during 2019/20 followed by an increase
of 6.1% in 2020/21. The phasing out of government infrastructure projects will cause activity to dip
towards the end of the forecast horizon. Nonetheless, the volume of engineering construction activity
done during 2023/24 is anticipated to be 5.8% higher than in 2018/19.

Projected Change in Civil & Engineering Construction Work, 2018/19 to 2023/24

10.0%

6.1%

5.0%
3.5%
2.4%

0.0%
2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
-1.5%

-5.0%
-4.5%

-10.0%

-12.8%
-15.0%

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

Over the period to 2023/24, transport infrastructure work is forecast to rise by 32.3%, or $9.68 billion in
terms of work. Railway construction will almost double in terms of activity (+84.6%), with an increase
in activity valued at $5.90 billion. Road construction is anticipated to increase by 12.4%, adding $2.23
billion to the size of the engineering construction market. Other winners over the forecast horizon
are expected to include harbours (+146.6%), coal/coal handling (+23.7%) and work on pipelines for
transporting gas (+46.9%).
While the next few years look very promising for transport infrastructure projects, some areas of
the resources and utilities sectors are looking at a rough few years. By 2023/24, the volume of Oil,
Gas & Hydrocarbon plant construction work is forecast to drop by 45.3%, equivalent to a reduction
of $13.10 billion in work done. The ending of work on the NBN scheduled for next year means that
telecommunications is set for a 48.2% decline. Both water (-33.4%) and electricity (-9.4%) are also facing
substantial reductions in their respective pipelines.
Summarised in the table below are the ten largest engineering construction projects which are either
committed or currently under construction. The $49 billion NBN is by far the largest, although this is
nearing completion. Transport projects in the larger cities dominate the current workload and include the
WestConnex project in Sydney ($16.8 billion) and the respective metro projects in Sydney and Melbourne.

Ten Largest Engineering Construction Projects either Committed or Under Construction

Cost Likely End

Project Company State Start Date
($ million) Date
1 National Broadband Network NBN Co Unallocated 49,000 2011 2020
2 WestConnex project NSW Roads and Maritime NSW 16,800 Q2 2015 2023
Services
3 Sydney Metro City and NSW State Rail Authority NSW 12,000 2018 2024
Southwest Project
4 Melbourne Metro Rail Project Victorian Rail Track VIC 10,900 Early 2018 End 2025

5 Inland Rail - Melbourne to Australian Rail Track Corporation Unallocated 10,000 2018 2025
Brisbane rail link Ltd
6 Sydney Metro Northwest NSW State Rail Authority NSW 8,279 2014 This Year
7 West Gate Tunnel Project Transurban VIC 6,700 2018 Q4 2022
8 Cross River Rail Qld Dept of Transport and Main QLD 5,409 2017 2023
Roads
9 Pacific Highway Upgrade NSW Roads and Maritime NSW 4,945 2016 2020
Services
10 South Flank Iron Ore BHP WA 4,600 2018 2021
Development

Source: Deloitte Access Economics [Investment Monitor]

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

A number of significant engineering construction projects are listed as possible or under consideration.
While the largest of these – the $16.5 billion North East Link in Victoria – is in the transport space, there
is a heavy resources focus here which involves WA’s Scarborough FLNG project ($15.0 billion), Greater
Sunrise Gas in the NT ($13.0 billion) and Alpha Coal Project ($10.8 billion).

Ten Largest Engineering Construction Projects either Possible or Under Consideration

Cost Likely End

Project Company State Start Date
($ million) Date
1 North East Link VicRoads VIC 16,500 2020 2027
2 Scarborough FLNG BHP Petroleum / ExxonMobil / WA 15,000 FID expected by 2033
project Woodside Energy 2020
3 Greater Sunrise gas Woodside (33.44%) / Conoco NT 13,000 Not currently Not
development Phillips (30%) / Shell (26.56%) / known currently
Osaka Gas (10%) known
4 Alpha Coal Project Hancock Prospecting (21%) / QLD 10,800 In planning 2022
GVK (79%)
5 Rail tunnel under Sydney NSW State Rail Authority NSW 10,400 2020 2028
Harbour and CBD
6 Gorgon LNG project Gorgon joint venture (Chevron WA 10,000 Waiting on final Not
Australia (47%) / Shell (25%) / decision from currently
Mobil (25%) / Osaka Gas (1.25%) Chevron known
/ Tokyo Gas (1%) Chubu Electric
Power (0.417%))
7 Melbourne Tullamarine Commonwealth Government VIC 10,000 2022 Not
Airport Rail link Dept of Infrastructure and currently
Regional Development known
8 West Pilbara iron ore Aurizon / Baosteel WA 7,400 Pending DFS Not
project decision currently
known
9 New multi-user deep WA Dept of Planning WA 7,000 Commonwealth Not
water iron ore port, approval granted, currently
Anketell start pending JV known
partner
10 China Stone Coal Macmines AustAsia QLD 6,700 EIS in progress 2023
Project - 270km south of
Townsville

Source: Deloitte Access Economics [Investment Monitor]

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

AUSTRALIA GRAPHS &

2019
TABLES
RESIDENTIAL BUILDING
RESIDENTIAL BUILDING WORK DONE BY SECTOR
$M, chain volume measures, constant 2016/17 prices - Year Ended June
%ch 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Residential Building 55,470 57,495 53,807 55,685 59,271 65,714 73,371 75,679 76,351 74,829 65,217 61,524 61,570 64,115 67,476
3.6% 3.6% -6.4% 3.5% 6.4% 10.9% 11.7% 3.1% 0.9% -2.0% -12.8% -5.7% 0.1% 4.1% 5.2%

Houses 34,479 33,543 30,308 30,708 31,546 34,539 35,566 35,360 35,766 35,329 32,568 31,085 30,731 31,609 33,042

6.1% -2.7% -9.6% 1.3% 2.7% 9.5% 3.0% -0.6% 1.1% -1.2% -7.8% -4.6% -1.1% 2.9% 4.5%

Other Dwellings 12,780 15,045 14,815 16,867 19,500 22,739 29,076 31,309 31,977 30,535 23,634 21,348 21,663 23,307 25,059
0.3% 17.7% -1.5% 13.8% 15.6% 16.6% 27.9% 7.7% 2.1% -4.5% -22.6% -9.7% 1.5% 7.6% 7.5%

Alterations & Additions 8,685 9,239 8,933 8,250 8,285 8,467 8,729 9,009 8,608 8,965 9,015 9,091 9,175 9,199 9,375

-0.2% 6.4% -3.3% -7.6% 0.4% 2.2% 3.1% 3.2% -4.5% 4.2% 0.6% 0.8% 0.9% 0.3% 1.9%

Residential Building Houses Other Dwellings Alterations & Additions

NUMBER OF DWELLING COMMENCEMENTS BY SECTOR

Year Ended June
%ch 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Residential Building 170,271 162,499 145,350 166,027 184,911 219,245 233,872 221,408 229,494 195,307 173,907 167,962 171,163 179,640 188,255
28.3% -4.6% -10.6% 14.2% 11.4% 18.6% 6.7% -5.3% 3.7% -14.9% -11.0% -3.4% 1.9% 5.0% 4.8%

Houses 115,586 100,549 89,837 95,633 107,618 117,124 116,354 115,505 121,206 111,015 103,792 99,930 99,116 102,445 106,297

24.1% -13.0% -10.7% 6.5% 12.5% 8.8% -0.7% -0.7% 4.9% -8.4% -6.5% -3.7% -0.8% 3.4% 3.8%

Other Dwellings 54,685 61,950 55,513 70,394 77,293 102,121 117,518 105,903 108,288 84,292 70,115 68,032 72,047 77,195 81,958
38.0% 13.3% -10.4% 26.8% 9.8% 32.1% 15.1% -9.9% 2.3% -22.2% -16.8% -3.0% 5.9% 7.1% 6.2%

Residential Building Houses Other Dwellings

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

NON-RESIDENTIAL BUILDING
Australia Non-Residential Building Work Done 2017/18 Non-Residential Building ($M)

NON-RESIDENTIAL BUILDING WORK DONE BY SECTOR

$M, chain volume measures, constant 2016/17 prices - Year Ended June
%ch 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Non-Residential 39,449 39,612 36,920 36,283 38,192 38,146 38,361 38,003 42,344 45,599 48,471 46,415 43,548 41,338 41,634
Building 8.9% 0.4% -6.8% -1.7% 5.3% -0.1% 0.6% -0.9% 11.4% 7.7% 6.3% -4.2% -6.2% -5.1% 0.7%

Retail & 5,012 5,683 5,946 5,584 6,684 6,538 7,178 6,685 6,282 6,437 6,760 7,178 7,156 7,315 7,359
wholesale trade -20.6% 13.4% 4.6% -6.1% 19.7% -2.2% 9.8% -6.9% -6.0% 2.5% 5.0% 6.2% -0.3% 2.2% 0.6%

867 709 855 978 1,119 1,407 903 771 1,196 1,198 1,646 1,331 1,166 1,252 1,361
Transport buildings
-17.8% -18.3% 20.6% 14.4% 14.4% 25.7% -35.8% -14.6% 55.1% 0.1% 37.5% -19.2% -12.4% 7.4% 8.7%

6,428 5,981 6,360 6,523 6,275 6,819 6,766 5,379 7,225 8,040 8,574 8,325 7,362 6,541 6,345
Offices
-28.6% -6.9% 6.3% 2.6% -3.8% 8.7% -0.8% -20.5% 34.3% 11.3% 6.7% -2.9% -11.6% -11.1% -3.0%

293 300 210 280 397 340 447 332 652 862 750 486 484 552 610
Other commercial
6.6% 2.2% -30.0% 33.5% 41.8% -14.4% 31.5% -25.8% 96.4% 32.1% -12.9% -35.2% -0.5% 14.2% 10.4%

1,102 1,059 1,240 1,019 888 838 955 1,119 911 1,422 1,441 1,010 1,012 998 974
Factories
-30.0% -3.9% 17.1% -17.8% -12.8% -5.7% 13.9% 17.2% -18.5% 56.0% 1.3% -29.9% 0.2% -1.3% -2.4%

2,003 2,317 2,612 2,478 2,886 3,119 2,779 3,341 3,253 3,456 3,643 3,190 3,176 3,347 3,499
Warehouses
-31.4% 15.6% 12.8% -5.1% 16.5% 8.1% -10.9% 20.2% -2.7% 6.3% 5.4% -12.4% -0.4% 5.4% 4.5%

Agriculture & 232 342 253 191 209 378 472 421 422 333 361 331 253 251 271
aquaculture -18.2% 47.8% -26.2% -24.4% 9.5% 80.8% 24.8% -10.8% 0.1% -21.1% 8.4% -8.4% -23.3% -1.0% 7.8%

926 1,180 1,782 2,584 1,445 870 697 689 727 871 903 918 895 899 993
Other industrial
-20.2% 27.4% 51.0% 45.0% -44.1% -39.8% -19.9% -1.1% 5.5% 19.8% 3.7% 1.7% -2.6% 0.5% 10.5%

12,143 11,594 5,867 5,005 5,228 4,840 4,494 5,169 6,528 6,901 7,420 6,718 6,253 5,720 5,709
Education
201.9% -4.5% -49.4% -14.7% 4.4% -7.4% -7.1% 15.0% 26.3% 5.7% 7.5% -9.5% -6.9% -8.5% -0.2%

184 247 232 209 264 225 206 198 275 213 224 236 216 227 291
Religion
22.1% 34.6% -6.3% -9.5% 26.2% -14.7% -8.4% -3.9% 38.7% -22.7% 5.5% 5.0% -8.2% 4.8% 28.1%

1,034 813 859 857 1,164 1,412 1,970 2,180 2,457 2,138 1,946 1,850 1,843 1,879 1,994
Aged care facilities
-27.4% -21.4% 5.7% -0.3% 35.9% 21.3% 39.5% 10.6% 12.7% -13.0% -9.0% -4.9% -0.4% 2.0% 6.1%

Health facilities 3,223 3,778 4,550 4,786 5,679 5,180 4,222 3,393 2,760 3,366 4,318 4,439 4,420 3,932 3,750
(non-aged care) 41.2% 17.2% 20.4% 5.2% 18.6% -8.8% -18.5% -19.6% -18.6% 21.9% 28.3% 2.8% -0.4% -11.1% -4.6%

Entertainment & 2,219 2,318 2,281 2,350 2,344 2,236 3,199 3,195 3,364 3,256 3,323 3,951 3,954 3,460 3,170
Recreation -7.5% 4.4% -1.6% 3.0% -0.3% -4.6% 43.0% -0.1% 5.3% -3.2% 2.1% 18.9% 0.1% -12.5% -8.4%

1,098 951 1,304 1,179 1,136 1,871 2,139 2,613 3,429 3,670 3,986 3,401 2,600 2,360 2,539
Accommodation
-26.1% -13.4% 37.2% -9.6% -3.6% 64.6% 14.4% 22.1% 31.2% 7.0% 8.6% -14.7% -23.5% -9.2% 7.6%

2,684 2,340 2,571 2,259 2,473 2,072 1,932 2,517 2,861 3,437 3,175 3,052 2,757 2,604 2,770
Other non-residential
44.0% -12.8% 9.8% -12.1% 9.5% -16.2% -6.7% 30.3% 13.7% 20.1% -7.6% -3.9% -9.7% -5.5% 6.4%

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

NON-RESIDENTIAL BUILDING CONT.

Retail & Wholesale Trade Transport Buildings Offices Other Commercial

Factories Warehouses Agriculture & Aquaculture Other Industrial

Education Religion Aged Care Facilities Health Facilities (non aged care)

Entertainment & Recreation Accommodation Other Non-Residential

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

ENGINEERING CONSTRUCTION
Australia Engineering Construction Work Done 2017/18 Engineering Construction ($M)

ENGINEERING CONSTRUCTION WORK DONE BY SECTOR

$M, chain volume measures, constant 2016/17 prices - Year Ended June
%ch 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Engineering 87,803 97,020 132,127 142,810 137,312 114,645 96,215 87,617 105,983 92,423 94,677 100,472 103,939 102,360 97,770
Construction 0.1% 10.5% 36.2% 8.1% -3.8% -16.5% -16.1% -8.9% 21.0% -12.8% 2.4% 6.1% 3.5% -1.5% -4.5%

26,026 30,540 35,880 36,433 29,557 23,790 21,267 24,301 29,993 32,415 36,185 39,752 40,943 40,975 39,669
Transport
-1.8% 17.3% 17.5% 1.5% -18.9% -19.5% -10.6% 14.3% 23.4% 8.1% 11.6% 9.9% 3.0% 0.1% -3.2%

28,398 28,764 29,547 32,538 31,423 27,374 24,823 24,959 30,285 31,520 30,011 26,876 25,256 24,603 23,659
Utilities
3.1% 1.3% 2.7% 10.1% -3.4% -12.9% -9.3% 0.5% 21.3% 4.1% -4.8% -10.4% -6.0% -2.6% -3.8%

28,625 33,497 61,789 66,758 70,028 58,447 45,256 33,406 40,051 22,661 23,954 29,448 33,275 32,296 29,908
Resources
-2.9% 17.0% 84.5% 8.0% 4.9% -16.5% -22.6% -26.2% 19.9% -43.4% 5.7% 22.9% 13.0% -2.9% -7.4%

4,754 4,219 4,911 7,081 6,303 5,034 4,868 4,951 5,654 5,826 4,527 4,396 4,463 4,486 4,534
Other
13.2% -11.2% 16.4% 44.2% -11.0% -20.1% -3.3% 1.7% 14.2% 3.0% -22.3% -2.9% 1.5% 0.5% 1.1%

Transport Utilities Resources Other

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 AUSTRALIA
BUILDING & CONSTRUCTION INDUSTRY FORECAST

BUILDING & CONSTRUCTION WORK DONE

Residential Building Non-Residential Building Engineering Construction
Value of Work Done, 2016/17 Prices, $B Value of Work Done, 2016/17 Prices, $B Value of Work Done, 2016/17 Prices, $B

Australia - Building and Construction Work Done

2016/17 Prices, %change

Residential Building Work done Non-Residential Building Work Done Engineering Construction Work Done
2017/18 2017/18 2017/18

BUILDING AND CONSTRUCTION WORK DONE

$M, chain volume measures, constant 2016/17 prices - Year Ended June
%ch 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Total Building & 222,855 234,777 234,775 218,504 207,947 201,300 224,678 212,851 208,366 208,411 209,057 207,813 206,880
Construction 14.8% 5.3% 0.0% -6.9% -4.8% -3.2% 11.6% -5.3% -2.1% 0.0% 0.3% -0.6% -0.4%

53,807 55,685 59,271 65,714 73,371 75,679 76,351 74,829 65,217 61,524 61,570 64,115 67,476
Residential Building
-6.4% 3.5% 6.4% 10.9% 11.7% 3.1% 0.9% -2.0% -12.8% -5.7% 0.1% 4.1% 5.2%

Non-Residential 36,920 36,283 38,192 38,146 38,361 38,003 42,344 45,599 48,471 46,415 43,548 41,338 41,634
Building -6.8% -1.7% 5.3% -0.1% 0.6% -0.9% 11.4% 7.7% 6.3% -4.2% -6.2% -5.1% 0.7%

Engineering 132,127 142,810 137,312 114,645 96,215 87,617 105,983 92,423 94,677 100,472 103,939 102,360 97,770
Construction 36.2% 8.1% -3.8% -16.5% -16.1% -8.9% 21.0% -12.8% 2.4% 6.1% 3.5% -1.5% -4.5%

Source: Master Builders Australia, Macromonitor, ABS data.

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Separate forecast reports available for all
states and territories. All report Data, Tables
and Charts are available to order in Excel.
Contact: [email protected]

MASTER BUILDERS AUSTRALIA

PO Box 7170 Yarralumla ACT 2600
T 02 6202 8888 | F 02 6202 8877
[email protected]