The Australian Institute of Quantity Surveyors (AIQS) has released its 2024 report on the state of Australia’s construction industry.
The report finds that while the Australian economy still faces challenges, the outlook is one of overall optimism.
A downward trend in inflation is expected to continue due to eased supply constraints and reduced domestic activity pressures.
Sustained public and business investments, alongside ongoing recovery in international student and tourism sectors, are offsetting household sector weaknesses. This, coupled with a robust labour market, has resulted in a modest improvement in GDP growth compared to projections from the 2023-24 Budget.
Construction industry
The report finds the outlook for the Australian construction industry to be positive, with the following factors expected to support growth in the coming years:
- The economy is expected to grow at a moderate pace, which will provide support for the construction industry
- The Federal Government has committed to significant infrastructure spending in the coming years, particularly in areas like transportation, renewable energy, and social infrastructure
- The Federal Government is also implementing policies to address the housing affordability crisis, which will lead to increased demand for new housing construction
- State Governments are reviewing their planning and approvals processes to streamline the development process and generally reduce delays
- The residential construction sectors will benefit from Australia’s expected population growth as this will create demand for new housing, infrastructure, and commercial space
- The construction industry is increasingly adopting technology to improve efficiency and productivity, leading to the use of prefabrication, modular construction, and digital twins. This will likely drive growth in specific segments of the industry
The construction industry also faces several industry specific challenges. The report states that addressing the following challenges will be essential for the industry to continue to grow and prosper:
- Labour costs are expected to continue to add pricing pressure in regions where the capacity exceeds demand, which will put pressure on project budgets and profitability
- The cost of complying with complex differing national and state regulations is a significant burden for construction companies, particularly small businesses
- The risk to projects in regions where the capacity exceeds demand, such as in Queensland. Such a disparity may lead to budget overruns, especially in the lead-up to the Olympics
- Government and private project viability issues (i.e. increased costs and elevated interest rates) are causing delays
- The need to adapt to climate change by building more resilient infrastructure. This will require additional investments and changes in construction practices
- Meeting the growing requirements to reduce embodied carbon and other sustainability imperatives
- A significant shortage of skilled workers, particularly in areas like carpentry, plumbing, and electrical trades, is driving up wages and making it difficult for companies to find and retain talent. This is due to factors such as an ageing workforce, inadequate training programs and competition from other industries
- Infrastructure projects limiting the availability of key trades
- The private sector is still waiting to re-enter the market
- The Australian construction market is not experiencing uniform outcomes across regions. Different areas are facing distinct challenges and opportunities
- Subcontractors are generally keen to bid work but there is caution with risk being priced in
- Interior trades (e.g. partitions/ceilings) maintain high pricing without signs of easing
- Stabilisation of AUD to help ease pricing pressure
While there are still challenges that must be adequately addressed, 2024 is forecast to bring a cautious growth and optimism around a more robust future.
