Mar 24, 2017

Major project work ‘trough’ tipped this year

Major project work ‘trough’ tipped this year

A new report has highlighted a decline in infrastructure investment in Queensland and flagged a trough in major project work in 2016/17.

The 2017 Major Projects Pipeline Report was developed by BIS Oxford Economics in coordination with Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ).

Since 2013/14 total investment in Queensland has fallen 25 per cent and total construction work done has slumped by just under 40 per cent, the report shows.

The total value of major project work captured in the report data over the five year period from 2016/17 to 2020/21 inclusive is $39.1 billion, of which roughly half is projected to be funded by the public sector.

This compares to $65 billion in major project work over the past five years.

“The recent decline in infrastructure investment, albeit from high levels during the 2000s, as well as the relatively mild profile projected for coming years, is a cause for concern,” the report executive summary warned.

“While quantification of existing infrastructure adequacy and measurements or an infrastructure deficit is fraught with difficulties, there is still enough evidence to suggest that higher levels of infrastructure investment will be required into the future – given expected economic and population growth – to avoid high economic costs from infrastructure bottlenecks and congestion.”

The report found Queensland engineering construction for major projects fell to $5.2 billion in 2015/16, down 75 per cent from the 2012/13 peak of $18.7 billion.

Falling mining investment was the key driver of the decline.

Major project work is expected to trough in 2016/17, but rise in subsequent years.

“In many respects, major project activity in Queensland has almost completed its transition from the mining boom inspired peak,” the report states.

“Currently, major project activity is the lowest it has been since 2009/10. Excluding mining and heavy industry construction, major project work is the lowest it has been for over a decade.

“On the positive side, current activity levels are still higher than they used to be pre-mining boom. There is also positive upside risks to the outlook if commodity prices, particularly for coal, remain elevated. “

The report forecast that non-mining engineering construction sectors would drive growth in major project work in Queensland over the next few years.

Roads, electricity and telecommunications sectors are all expected to benefit from rising levels of non-mining investment.

The report found that this would more than offset a further significant decline in mining-related major project work expected in 2016/17.

However, mining-related major project work is expected to pick up in subsequent years, and could further increase if commodity prices remain high.

Check out the full report here: http://www.qmca.com.au/files/documents/QMCA_MPR2017_FINAL_LR.PDF