Construction set to buckle under Qld boom

A new report reveals civil construction activity is expected to soar by 25% over the next three years, putting a strain on the entire industry as skills shortages escalate and wage pressures increase.

The Engineering Construction in Australia report, released by industry research provider BIS Shrapnel, predicts civil construction activity to exceed $100 billion for the first time, driven by a surge in mining and LNG-related works and flood reconstruction efforts.

Adrian Hart, BIS Shrapnel senior manager for infrastructure and mining, says growth in civil work through 2010-11 has remained subdued due to the completion of existing projects and delays in ramping up the next round of mining-related works.

“However, the outlook for civil construction is now broadly positive, with large mining and energy projects spanning LNG, coal and iron ore now approved and starting to build momentum,” Hart says.

BIS Shrapnel estimates annual mining-related civil construction will nearly double between 2010 and 2014 to around $57 billion.

However, annual work done on non-mining civil infrastructure is expected to fall to around $46 billion through the next four years, as Federal and state governments rein in infrastructure spending.

Hart points out that as the Federal Government honours its promise to help fund the reconstruction effort in Queensland, it will delay – and reduce funding for – other projects around the country.

Hart says the entire industry will be affected by the outlook, expecting strong wages pressure as the country looks down the barrel of a major skills shortage, particularly as workers start pouring into Queensland at the expense of other states.

“Employers are in a position where they’re not only competing on wages; they must also be looking at non-financial benefits just to retain their workforce through the next few years,” he says.

A breakdown of the states reveals engineering construction in NSW will see reasonable growth in the next few years, but it is being affected by the completion of several large projects.

Total activity in Victoria is expected to decline significantly before picking up again from 2013 onwards, led by further projects in rail, electricity, mining and heavy industry, harbours and telecommunications.

Not surprisingly, Queensland will have the largest rise in engineering construction activity through the next five years, driven by flood reconstruction efforts.

Activity in South Australia is moving slower given the completion, or near completion, of major projects, while WA is also expected to see flat growth in engineering construction as projects are completed.

Hart says companies will face an increasingly competitive market, which means employers must make staff retention a high priority.

“You’d want to keep the best staff that you have; do what you can in your budget to do that… But don’t overextend yourself trying to compete on those terms alone,” he says.

“As a small business, focus on the fact that you can offer a better working environment and better non-salary benefits.”