News
Rail: the “sleeper” sector with the "X factor”
26 Oct 2016
BIS Shrapnel’s Engineering Construction in Australia 2016 – 2030 September 2016 update highlighted two significant events in the Australian Engineering Construction sector: Transition of the mining and resources segment from Capex to Opex and a move by state and federal governments to invest in road and rail transport infrastructure following the 2011 to 2015 trough in public sector investment.
The extent of the downturn in mining and heavy industry construction through the next four years masks an upswing taking shape in other sectors, particularly in transport infrastructure – roads and non-mining railways – as well as telecommunications (NBN). Projects here are predominantly being funded by Federal and State Government initiatives, and endorsed by Infrastructure Australia’s recently released Infrastructure Plan. However, it is a very different work profile by state and territory given different funding positions, policies and constraints.
Overall, publicly funded engineering construction is expected to climb 36% over the next four years.
Rail is the “sleeper” sector with the biggest “X factor” in BIS Shrapnel’s five year forecasts.
While railways construction in 2015/16 is forecast to be only half that which occurred in 2012/13 (mostly driven by the mining investment bust), BIS Shrapnel see strong growth in this sector in subsequent years, particularly from 2017/18 as several large passenger and freight rail construction projects get underway. The key risk for this sector will be industry capacity to deliver all the rail projects on the planning agenda, particularly late this decade when Sydney, Melbourne and Brisbane are all aiming to have very large passenger rail projects underway at the same time, as well as the $10 billion+ Inland Rail initiative from the Federal Government. While BIS Shrapnel has assumed some slippage in the railways construction pipeline, the outlook remains highly positive but risky, with the peak years for railways construction expected in the early to mid- 2020s, supported by “high priority” recommendations from the Infrastructure Plan released by Infrastructure Australia in early 2016.
