Construction activity to soften Australia’s economic slowdown

The survey, which analysed 64 markets around the globe, considered Sydney and Melbourne to be hot at ranks 13 and 31, respectively, Brisbane to be lukewarm at rank 34, and Perth to be cold at rank 38 but has signs of it beginning to heat up.

Construction costs are expected to rise in each of these markets, with Sydney’s costs growing by 3.5 per cent in 2018 and is expected to rise by the same amount again in 2019, Melbourne’s costs growing by 4 per cent and an expected 5 per cent in 2019, Brisbane’s cost growing by 2 per cent and an expected 2.5 per cent in 2019, and Perth’s costs growing by 1 per cent in 2018 and an expected 1.5 per cent in 2019.

In comparison, global construction costs rose by 4.2 per cent in 2018 and are expected to rise 4.1 per cent in 2019.

While the growth overall is not as strong as the global figures, Garry Emmett, economist for Turner & Townsend, said the local construction sector is still strong despite the market softening, global trade barriers and the tightening of finance.

“As the nation approaches a federal election and possible change of government, the strength in the construction sector is expected to continue and will help prevent a slowdown,” Mr Emmett said.

“The federal government’s $100 billion investment in infrastructure over the next decade, in addition to the state government investments, will help cushion the economy and keep jobs growth strong.”

Road and rail infrastructure projects in particular are expected to offset the softening housing market.

“Sydney Metro, Melbourne Metro, Cross River Rail in Brisbane and Perth’s METRONET will help counterbalance downturns elsewhere,” Mr Emmett said.

“The announcement of the Inland Rail project for freight adds to the high levels of infrastructure investment.

“An already busy construction sector in Sydney and Melbourne in 2018 was boosted by a pledge of around $50.4 billion of public funding for road and rail projects in these states alone.”

Also contributing to the Australian economy is strong mining and energy exports along with commercial, health, defence, retail, hotel and natural resources construction, Mr Emmett added.

Looking at the states, Mr Emmett said construction activity in Sydney and Melbourne has seen increased costs, which has led to skills shortages and bottlenecks in supply.

Meanwhile, Brisbane’s $4.3 billion Queen’s Wharf and $5.4 billion Cross River Rail projects are expected to dominate construction, while Perth’s Ritz Carlton, Chevron HQ tower and METRONET projects are set to contribute to construction jobs in the city area.