News

Roads Lead NSW Infrastructure Rebound

27 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.

Overall, large city (transport) and nation-building (telecoms) infrastructure projects are key drivers of new engineering construction activity through the next five years, with the epicentre of works shifting regionally from the former resources hotpots in the Pilbara and Gladstone to Sydney.

New South Wales stands out as the state with the best prospects over the next five years, with an impressive pipeline of infrastructure projects driving growth. The state has already taken some of the biggest hits from the downturn in coal investment and public infrastructure work following the completion of major projects over the past few years. Overall, engineering construction work is expected to rise 27% in real terms between 2014/15 (trough) to 2018/19. By contrast, activity in Queensland is expected to fall 54% by 2018/19 compared to 2013/14, Western Australia will be 46% lower and the Northern Territory will also be coming off a substantial cycle of investment relating to the Inpex LNG project.

Road construction is expected to recover slowly in 2015/16, but really ramping up strongly in subsequent years to a new record peak in 2018/19. Federal funding is assisting the roads sector now as the roads-heavy $50 billion Infrastructure Investment Program (2015/16 to 2018/19) rolls out, as well as the Western Sydney Infrastructure Program to support the development of Sydney’s second airport at Badgerys Creek. While Federal funds are helping to arrest sharp declines in road construction activity in states badly affected by resources bust such as Western Australia, Queensland and South Australia, BIS Shrapnel notes that there is also a large Federal contribution to road construction in New South Wales which, when combined with the state’s own substantial road construction program (financed by asset recycling initiatives such as the expected $20 billion in Rebuilding New South Wales funding) is expected to drive a boom in road construction in that state.