Western Australia
Thu 9 November 2017

Cause for optimism in 2018 WA Infrastructure Report

Infrastructure investment will play an important role in driving WA’s economy as it continues to transition from the resources boom to sustainable growth, according to the 2018 Western Australian Infrastructure Report, launched by the Civil Contractors Federation WA in conjunction with BIS Oxford Economics.

BIS Oxford Economics Associate Director – Construction, Mining and Maintenance Adrian Hart said the positive news for contractors and suppliers to the civil construction industry in WA was that the worst was now behind us.

Mr Hart said growth was rebalancing, and the construction industry had taken steps to reduce excess capacity.

“But growth in demand and construction activity is not expected to rise spectacularly either,” he said. “Rather, investment, construction activity and economic growth are likely to remain soft for the next two years in WA as the excess supply of housing and commercial space is gradually absorbed and the State Government takes steps to improve budget finances.”

“Public infrastructure investment can play an important role here to support economic growth in the short term, but it can also play a more vital strategic economic role in the long term by building on WA’s core strengths – affordable housing, low energy costs, and close proximity to Asian markets – which can stimulate business investment, employment and population growth.

“The challenge will be to sustain WA public infrastructure investment beyond the current wave of projects across transport and telecommunications.”

CCF WA CEO Jeff Miller said the 2018 Western Australian Infrastructure Report was the third in what was now an annual series.

“We’re thrilled with the way our members and the broader construction industry have embraced the concept of this report,” Mr Miller said. “Clearly there was a thirst for more information on the outlook for civil construction.

“The first report, released in 2015, painted a fairly gloomy picture as the industry struggled to adjust in the aftermath of the boom, and last year’s report also warned of a continuing decline, so it’s pleasing this year to have some relatively good news to report.”

“We have noticed a general sense of renewed optimism in the industry over the past few months, and it’s great to see the data confirming this.

“As Adrian said, Government infrastructure spending will be crucial in the coming years as a key driver of  economic diversity and growth.

“The State Government, with Federal Government support, has stepped up to the challenge with Metronet and other initiatives. If the State is to continue to reverse the post-boom decline, it’s vital that investment in productivity-boosting economic infrastructure is maintained at the current level or higher.”

The report takes a detailed look at the outlook for WA’s infrastructure sectors.

Total civil infrastructure work done in WA was $6.8 billion in 2016/17 – down from a peak of $19.2 billion during the resources boom. The worst is over, however, with activity expected to be more or less sustained at around $6.5 billion in work done per annum, although significant differences are expected by segment.

BIS Oxford Economics expects that 2016/17 was the weakest year for transport construction, but growth in work done will not be spectacular from here either, with activity generally being between $3.1-3.3 billion per annum.

Growth in electricity construction is forecast to be relatively flat, with some renewables generation projects offsetting further falls in networks activity.

In the water sector, the State Government’s program of network renewals and extensions will continue to provide steady opportunities for contractors, while sewerage construction activity is expected to be relatively buoyant.

Telecommunications construction work done surged 38 per cent to $1.3 billion during 2016/17 but is expected to decline sharply over the next few years as the NBN rollout moves past peak phases.

Mining and heavy industry construction fell 37 per cent in 2016/17 as work officially concluded on the Gorgon LNG project and other mining construction settled at a 12-year trough. Oil and gas construction is expected to fall a further $10 billion over the next two years as Wheatstone and Prelude, amongst other large projects, are completed. Much of this decline, however, is driven by the conclusion of a phase of imports of overseas fabricated, multi-billion dollar LNG modules which contain little domestic construction work.

Excluding oil and gas construction, WA engineering construction is expected to rise through the next five years. Initially this growth will be focused in key publicly-funded civil construction markets such as telecommunications, roads and railways construction – where Commonwealth funding support is significant –  but will eventually extend into rising non-LNG mining and heavy industry construction as commodity prices and depletions at existing mines underwrite the next round of resources projects.

The 2018 Western Australian Infrastructure Report is available for download here