Nation’s Building Work Value Stays Stuck in 2016

A backlog of work and lack of trades is continuing to hold back Australia’s construction activity despite recent gains for engineering.

The latest data from the Australian Bureau of Statistics shows total value was up 8.5 per cent compared to last year, but this was largely driven by engineering construction, which was up 14.9 per cent. 

Building work sat around $34 billion and has been close to that level since 2016. Meanwhile, engineering jumped to $30 billion from $24 billion a year previous.

Western Australia and NSW drove growth across the country, according to the data set for September from the ABS.

Oxford Economics Australia economist Michael Dyer said the lead from non-residential approvals has softened somewhat from the recent record highs but commencements were lagging behind.

“This is contributing to the challenges being faced in terms of housing supply, despite a significant backlog of homes waiting to be delivered,” Dyer said.

“The number of houses under construction remains north of 100,000 nationally, well above the historical average near 60,000, and we expect the normalisation process will extend through 2024.

Construction activity, seasonally adjusted

“Trade labour shortages are slowing the rollover onto new projects and this is contributing to the negative profile for home approvals, which were down 4.6 per cent in September. 

“We anticipate this will begin to materially impact on work done as the backlog clears in 2024.”

Dyer expected activity would hold up over the final quarter of this year supported by a sizeable pipeline of public works particularly in transport. 

However private investment softened particularly for office and retail projects as economic and structural headwinds bite.

Value of construction work done, seasonally adjusted

^{^Source: Australian Bureau of Statistics} 

Construction is almost complete on Sydney Metro’s newest stop,  Barangaroo Station, while the NSW pipeline continues to grow.

Meanwhile in Queensland, work on the Cross River Rail is expected to ramp up over the end-of-year break. 

Victoria was falling behind the other states with total value down 2.5 per cent in the month and 0.7 per cent for the year.