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2010-11: The calm before civil storm

This decrease is expected to drive a decline in total construction activity through the year, despite a pick-up in residential building.“While civil construction will remain at very high levels, a setback in work done will be hard to avoid in 2010-11,” BIS Shrapnel infrastructure and mining unit manager Adrian Hart said. “Even given a ramping up of work on various projects, there will still be negative growth for the sector.“The decline can be attributed to a double-whammy of a general decline in commencements which occurred through much of 2009, with the notable exception of the Gorgon LNG project, and a likely easing in public sector infrastructure stimulus projects.”Despite the impact of the global financial crisis from late 2008, civil construction, as measured by the Australia Bureau of Statistics Engineering Construction series, still grew 15% in real terms (or $10 billion in 2007-08 prices) through calendar year 2009.However, growth in civil work was weaker during the second half of calendar year 2009, with recent data released by the ABS showing that real engineering construction actually declined 4% in the December quarter in seasonally adjusted terms, albeit from very high levels.“Through 2009, the momentum and drivers of engineering construction activity shifted substantially,” Hart said.“Very strong growth in private sector funded work has given way to uneven growth as existing projects move to completion while new projects have been delayed.“However, growth in public sector funded work has remained strong as state and federal governments have more or less remained committed to their pre-GFC infrastructure plans. Until now, this has helped keep overall infrastructure construction on an upward path.”BIS Shrapnel expects real growth in civil construction activity will slow to around 9% through financial year 2009-2010, with activity declining over 2010-11, before the next upswing gets underway.The company said the next cycle in engineering construction work was likely to be strong, lasting for several years and peaking in the second half of the decade.Private investment in energy and resources projects will be the key drivers, along with new public investment in freight and passenger rail, and telecommunications.However, Hart cautions against calling the next cycle a new engineering construction boom.“It is unlikely that growth in engineering construction activity over the next decade will be anywhere near as strong as the last five years, which saw work done more than double,” he said.“The 2000s boom absorbed a lot of excess capacity and, despite the GFC, the constraints created by this boom have not really left.“Skills shortages are likely to affect plans for major expansions in mining, rail and marine work, where specialist skills are required.“Rising construction costs through the middle of the decade are also expected to have a dampening impact on activity.”

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