The Australian Construction Industry Forum’s CFC has forecast a $12 billion contraction in the construction sector’s cash flow over the next two years, despite recovery signs in the residential building industry.“Spending on residential building is forecast to turn around in 2009-10 [financial year], following a 4 per cent fall in the 2008-09 financial year,” CFC chair Peter Verwer said.He said the first home owners grant and government stimulus packages have put the brakes on declining residential building activity.“The CFC predicts a very strong recovery in standalone housing and in the alterations and additions market, driven by pent-up demand, low interest rates and net population growth.However he said private spending on commercial property will stall, with the sector not expected to recover for three years.“2011-12 will see a sharp improvement in private and commercial property spending following a contraction of nearly 40 per cent on current construction expenditure.”A boost in government investment in schools and hospitals is expected to ease the overall picture for the non residential building industry, he said.According to the CFC, infrastructure investment will dip 1% in 2009-10, and plunge 22% in 2010-11.“Infrastructure spending is slated for a cyclical downturn following unprecedented levels of activity, particularly mining-related construction, which is expected to fall by 60 per cent in 2010-11,” the CFC noted.Despite a solid 12-month outlook for mining-related construction spending, Verwer said weakening commodity prices will result in the postponement of major projects leading to sharp declines in construction activity in 2010-11.Verwer said the current economic downturn has different market fundamentals to the early 1990s recession.“There is little evidence of the oversupply that delayed the recovery of construction spending following the last recession,” he said.“Indeed, demand for residential property is strong and spending on commercial buildings is slightly below the historical average.“The flow of new capital will directly determine the shape of the construction industry recovery – which means debt markets will need to recover quickly if job losses are to be contained, given the government’s limited capacity to continue with pump-priming programs.”
