Downturn In Australian Construction Despite Steady Prices

As per a new insight from the construction landscape in Australia, the entire levelling of prices in key commodities within the first quarter of this year, apart from a few outliers, has gone on to experience an upward trend.

It is estimated that the prices are going to remain mostly flat with just a slight upward trend within the second quarter. In spite of price stability, the Australian construction sector is anticipated to contract by 2.6% this year. The long-term outlook, however, looks more positive, as the construction industry is estimated to grow at 3.1% annually from 2024 to 2027 because of the government’s sustained emphasis when it comes to infrastructure development.

Notably, the investment when it comes to infrastructure will lead to population growth, and the investments made by the state governments within the large-scale projects will help push up employment following the pandemic.

It is well to be noted that the institutional sector of Australia is also anticipated to expand, mainly due to the universities upgrading their present infrastructure so as to accommodate the influx of international students.

In addition to this, the industrial sector is also experiencing efforts from state as well as federal governments so as to bring in critical healthcare and vaccine manufacturing facilities in Australia, which will go on to reduce the nation’s reliance on suppliers from overseas. The rise in the interest rates as well as high inflation continue to have an impact on the growth of Australia’s economy as well as its construction sector. There are numerous construction firms which happen to be at a subcontractor level that are struggling in a scenario of rising inflation as well as labour dearth. These challenges are most often based out of legacy projects that contracted a while ago. In order to recover this issue, there is indeed a critical requirement to rethink the contracting part and also tendering frameworks.

In spite of such issues, it is indeed promising to witness bright spots, both in the infrastructure as well as institutional sectors.

With time, more impact from the country’s enlarging emphasis when it comes to sustainable practices is anticipated with most of the projects looking for Green Star Ratings or even progressing to get the LEED certification.

This mostly goes on to have more sustainable as well as alternative materials which will in some cases will not only go on to have high upfront costs in the construction phase but will also go on to give out long-term savings throughout the entire life cycle of the facility.

Some of the other major findings of the insight include-

  • The prices of lumber have gone up slightly in the first quarter of 2023, surging by 1.1%. That said, with the softening of housing demand since high interest rates as well as inflation erode the demand of the homebuyer, residential construction which happens to be dipping is anticipated to witness the lumber prices plateau.
  • The prices of steel have also gone on to register a growth of higher than 10% in Q1 of this year. A robust demand coming from China and even in the Australian civil engineering sector are the primary drivers of the increase in prices.