Big infrastructure projects support economy as property construction slows, report says
Growth in public building investment has trumped construction in the private sector, as federal and state governments ramp up spending on infrastructure, research shows.
Building in the public sector ballooned by about 14 per cent in the 2016-17 financial year and is projected to rise by 5.4 per cent this financial year, the latest report from BIS Oxford Economics indicates.
The report puts the value of building activity in the public sector in the last financial year at $8.6 billion, up from $7.6 billion the previous year.
That growth far outperformed private building activity, which slid 7.1 per cent, but is expected to pick up again in the next two years.
Sarah Hunter, BIS Oxford Economics’ head of Australia macroeconomics, said public sector investment is “definitely” going to hold up the economy against the slowdown in residential construction and the end of the mining boom.
“If you’re in Sydney or Melbourne, you can’t help but notice they’re picking up half the city, relaying roads and expanding the road networks,” she said.
Projects such as the Westconnex will support the economy over the next few years. Photo: Nick Moir
“Public sector investment as a group is definitely going to be a support for the economy for the next couple of years, as big infrastructure projects are rolled out, like NBN and WestConnex in Sydney.”
Ms Hunter attributed the upswing to a lack of government spending on infrastructure in the past decade.
“The need for these projects has built up over time, so now there’s quite a few different projects getting off the ground.”
While there was a fall in private building activity, the hotel construction cycle was still strong and is expected to prop up non-residential building growth, thanks to the falling Australian dollar, which has attracted more overseas tourists down under and more Aussies to travel within the country for a holiday.
“That’s a real positive story for the economy… and a real boost for the tourist sector,” Ms Hunter said.
Richard Robinson, senior economist at BIS Oxford Economics, said office building in Sydney and Melbourne would pick up as new projects kicked off this year.
But in Brisbane and Perth, it will take a while before momentum gathers.
“There’s a very mixed bag among the offices, office (building) fell a lot last year, a lot of that falling activity was in Sydney as Barangaroo finished up,” Mr Robinson said.
“Brisbane and Perth are still oversupplied from after the mining boom collapse, so they’ve ended up with a whole lot of empty offices.”
