Long Term Construction Outlook Up 21pc

Construction output will increase by 21 per cent in the next 10 years despite a softening in new building orders due to Covid.

A new report by Oxford Economics shows output in the US, UK, Canada, New Zealand and Australia will total $1.3 trillion by 2030, driven by strong population growth.

In the meantime, Australia’s construction output is expected to be down -10.4 per cent in 2020 and up 7.1 per cent in 2021.

There was also a -11 per cent drop in output between the end of 2019 and halfway through 2020.

This compares to the worst-affected country, France, down -26 per cent; and the relative best performer India, where the outbreak took off in the second part of the year, at -6.9 per cent.

Globally, construction is expected to increase nearly 35 per cent, reaching $5.8 trillion with just four countries—China, the US, India and Indonesia—driving two thirds of the growth.

“India is set to overtake Japan as the world’s third-largest construction market, doubling its current size by the end of the decade, illustrating the impact of rapid urbanisation and strong demographics that can be seen across many other emerging economies,” Oxford Economics director of global industry services Jeremy Leonard said.

Construction index falls again

Meanwhile, the construction industry continues to face difficulties in Australia as the country rides out the economic recession.

New orders are down sharply across the board and regulatory processes, safety requirements and disrupted supplies are slowing work on site, even in locations with no local activity restrictions for construction, according to the latest Performance of Construction Index.

August marked two years of consecutive contraction, down 4.8 points to 37.9 after a slight pause in July, according to AI Group and Housing Industry Association, however, the index is starting to trend upwards.

A PCI result over 50 shows the construction sector expanding, while under 50 indicates contraction and the distance from 50 indicates how severe the change is.

Construction industry output

Ai Group head of policy Peter Burn said for the construction sector as a whole, activity and employment had fallen.

“Businesses in the industry have been watching their order books closely for some time and the further decline in orders in August will be a major concern both for their businesses and for their employees and suppliers,” Burn said.

“The sharp fall in activity in Victoria was a major factor in the downturn while border restrictions in other states have hampered builders and constructors who are reliant on interstate supplies and the availability of tradies from across borders.”

HIA economist Angela Lillicrap said the PCI continues to show that the contraction in residential building activity is ongoing.

“The index tracking new orders for houses dropped sharply after posting two stronger months following the announcement of the Australian government’s HomeBuilder program.

“Demand for apartments is likely to be constrained until population growth returns,” Lillicrap said.

“The Home Builder program will bolster activity in the detached house segment, but the broader softening in new orders highlights the risks facing the residential building sector.”