CONSTRUCTION INDUSTRY
UPDATE AND OUTLOOK
SEPTEMBER 2012
THE EDITORS
Harley Dale
Chief Economist - HIA
Harley Dale has spent over 20 years in the economics field covering a
wide range of roles in New Zealand, Australia, Hong Kong, and the United
Kingdom.
Harley has worked in the public and private sector and cemented a long
standing link with the HIA when he joined the organisation in 2003. Harley
manages the HIA Economics Group, a five member team which strives to
continually enhance its reputation for prompt and reliable member service
in addition to pursuing a wide-ranging housing policy research agenda.
Harley maintains close communication links with a range of public and
private industry stakeholders and is a regular media commentator on issues
related to the housing industry. Harley is also a member of the Construction
Forecasting Council within the Australian Construction Industry Forum. Outside of work commitments
Harley sits on the board of PIYE Incorporated, a charity organisation founded in Sydney which funds
community development projects in Kenya.
Report prepared by Cordell Information Pty Ltd. Copyright 2012.
For further details please contact Nicholas Lim (Marketing Information Analyst - Cordell Information).
Chris Evans
National Marketing Manager - Cordell Information
Chris has been involved in Marketing for over 17 years, working across a
wide range of industries including travel, events management, automotive,
and consumer direct marketing. For the last five years as National
Marketing Manager of Cordell Information, Chris has been responsible for
all the marketing activity across the three divisions of Cordell Information
including the production of the wide array of Cordell industry reports
such as the Cordell - Housing Industry Association Construction Industry
Outlook.
Chris maintains close links with a wide range of construction industry
bodies including the Housing Industry Association and a number of Master
Builders Associations, and he is a media commentator on the levels of Australian construction activity. He has significant international experience having worked not only in
Australia, but also in the United Kingdom, New Zealand and Japan. Outside of work, Chris's interests
include sports, reading history books, horse racing and spending time with his family.
Additional materials supplied by Chris Evans (National Marketing Manager - Cordell Information) and Harley Dale
(Chief Economist - HIA).
Designed and produced by Haley Rennie (Marketing Campaigns and Events Specialist - Cordell Information).
FOREWORD
Welcome to the latest edition of the Construction Industry Outlook Report.
This report is designed to give a comprehensive snapshot of the current state of all sectors of the
Australian construction industry as well as providing informed opinions on the medium term direction of
our industry. Both contributors to this report bring unique skills and insights.
Cordell Information is Australia’s leading provider and respected industry authority on construction
project information. Founded in 1969 Cordell Information has been reporting on the Australian
construction industry for over 43 years.
The Housing Industry Association is the voice of Australia’s home building industry. Members include
builders, trade contractors, design professionals, kitchen and bathroom specialists, manufacturers and
suppliers.
This report will endeavour to navigate the landscape of the Australian construction industry taking an indepth look into all sectors and geographic locations providing detailed analysis and outlooks.
Compared to other developed economies, the Australian economy is the envy of the world, but some
sectors of the economy are patchy, construction being one of these. This report will look into the details
of where the construction industry has been and where it is going to.
We hope that you find this report informative and useful during these challenging times for our industry.
Rob WildShane Goodwin
Chief Executive Officer
Managing Director
Cordell Information
Housing Industry Association Ltd
4
CONTENTS PAGE
Subject
Page
Economic Outlook6
Construction Sentiment8
Construction Projects - Industry Outlook 10
New Projects 12
Projects Deferred 18
Projects Abandoned 24
Projects at Construction 30
Conclusion 36
Cordell Information and HIA Offices
5
38
Economic OUTLOOK
Aggregate growth, disparate fortunes
When we consider the aggregate Australian
economy we are greeted with a picture of
strength. The March 2012 quarter Gross Domestic
Product (GDP) results surprised strongly on the
upside - and upwards revisions to GDP in earlier
quarters strengthened the picture further.
The Australian economy grew by 1.3 per cent in
the March 2012 quarter for growth over the year
of 4.3 per cent.
It is fair to say that based on the latest GDP
update, the economy appears much stronger
than the vast majority of Australians (and the
bulk of economists) realised. Indeed, in just one
statistical release the economy went from subtrend economic growth to above-trend economic
growth. On the face of it this is an excellent result
– but there are a few points we need to keep in
mind.
Firstly, it is very much a multi-speed economy
story, with Western Australia’s final demand
surging by 7.8 per cent in the March 2012
quarter while New South Wales’ final demand
shrank by 0.3 per cent. Secondly, if we leave
aside engineering construction the quarterly
growth rate was a much more sombre 0.2 per
cent. Thirdly, there are questions over the strong
growth in consumption within the GDP measure,
a result in stark contrast to most other data and
consumer confidence surveys. Finally, given the
recent sizeable revisions to GDP in the September
and December 2011 quarters, let’s just give it
another quarter before we “lock it in Eddie”.
In other words, there is considerable scepticism
over the March quarter GDP figures. Often when a
result doesn’t fit with the other available evidence
it turns out to be incorrect. However, even if we
do get a downwards revision to the March quarter
GDP figure, the aggregate economy will still
be considerably healthier than earlier data was
showing – and that’s an altogether good thing.
6
ECONOMIC OUTLOOK
Aggregate growth, disparate fortunes [Cont.]
However, stronger economic growth won’t see
the challenges posed by the multi-speed nature
of the economy dissipate. Mining, resources
and related investment are expected to remain
strong. Manufacturing, new housing, some nonresidential construction, tourism, and some parts
of retailing will likely continue to face challenging
business conditions. Against this backdrop there
remains the general expectation that interest
rates will move lower before they move higher
– although, for now, it’s likely the RBA is in a “waitand-see” holding pattern.
The response to the 125 basis points of interest
rate cuts since November 2011 to date has been
muted, and while this could reflect changed
household and business behaviour, we do need to
remember that it takes time for monetary policy
to work. Indeed, it can take up to 18 months to
feel the full effects.
Nevertheless, the rate cuts are fighting against
the negative confidence impacts flowing from
the shaky global economy and from structural
changes in the Australian economy. We also need
to bear in mind that the magnitude of positive
impact that interest rate cuts have will likely
be smaller relative to previous cycles because
lenders are not passing on the full reductions the
Reserve Bank of Australia (RBA) is undertaking
with the Official Cash Rate (OCR). In other words,
the full impact of lower official interest rates is not
being felt in an equivalent decline in interest rate
payments households make to their total debt.
Some commonality can unfortunately be found
across residential construction and large parts of
non-residential building, where weakness is quite
pervasive in 2012.
Wrap all this up and the key point is that
the aggregate economy may look good, but
underneath conditions are all over the place.
7
Construction Sentiment
The gap between resources and 'the rest' appears as wide as ever
In the previous edition of the Construction
Industry Update and Outlook report, released
mid-2011, we noted that: the nation’s economic
recovery would see some sectors recovering
much faster than others; any rebound in nonresidential building sectors would largely be
a slow burn; and housing construction would
almost certainly fall back in 2011.
decline of 8.8 per cent is forecast for 2012/13
followed by a return to growth of 7.5 per cent
in 2013/14. This would take the total value of
residential investment to $68.3 billion.
We can drill down into more detail in these
forecasts, specifically, the outlook for flats and
units. ACIF are forecasting this segment of
the market to have grown by 2.0 per cent in
2011/12 reaching a total value of 11.8 billion. The
following year is forecast to post a non-trivial
decline of 9.0 per cent, which would take the total
value of investments in flats and units to $10.8
billion.
In mid-2012, it looks like we got most of this
right, which is a good (bad!) starting point. The
Australian economy is beating at no pulse, an
okay pulse, and a racing pulse, depending on
which sector (or which state or territory) we
look at, as noted above. The 'recovery' in nonresidential construction is not broad-based, and
housing construction fell throughout 2011 (and
into 2012) to sit at a level broadly on par with that
of the global financial crisis (GFC).
On the non-residential building front, the profile
is yet another reflection of the multi-speed
economy. If we examine the various construction
sectors over the twelve months to June 2012,
all have declined with the exception of mining.
Furthermore, the strength of mining was enough
to see aggregate construction increase in value
terms, although not in volume terms.
In terms of residential building, new housing
and alterations and additions investment fell
in the March 2012 quarter, with total dwelling
investment detracting 0.1 percentage points
from GDP growth. New housing investment has
now detracted from economic growth over four
consecutive quarters, while renovations activity
has detracted from growth for three consecutive
quarters.
The deterioration in all non-residential categories
besides mining is not particularly surprising given
the extent to which the global economy has
deteriorated since the time of the previous report.
Add to this an over-arching environment here at
home of weak business sentiment, an elevated
exchange rate, a confidence-sapping carbon
tax, tight credit conditions, and seemingly more
unproductive turmoil than usual in the Federal
Parliament, and it’s astounding that the sector has
performed as well as it has.
From an already weak starting point, HIA has a
less-than-stirring outlook for housing starts. It is
the expectation of HIA Economics that we started
around 135,284 dwellings in 2011/12, and our
forecast for 2012/13 is 141,867 starts. This view
represents a decline of 14.1 per cent in 2011/12
before a modest 4.9 per cent improvement in
2012/13. We are also forecasting growth of 4.4 per
cent in 2013/14 to a level of 148,064 dwellings.
In 2011/12, construction in the education and
health sector posted a modest decline, which
follows a sizeable retreat from elevated levels the
previous year due, in the main, to the waning of
stimulus-driven investment. Office and industrial
construction, and civil engineering construction,
also retreated over the past financial year.
Meanwhile, in a slightly disappointing update,
engineering construction posted a modest
decline in 2011/12.
In terms of residential investment values, the
Construction Forecasting Council (CFC) of the
Australian Construction Industry Forum’s (ACIF)
latest forecasts anticipate the total value of
residential investment to have reached $69.7
billion in 2011/12 (nominal values), which
represents a decline of 4.7 per cent. A further
8
Construction Sentiment
The gap between resources and 'the rest' appears as wide as ever [Cont.]
So it’s the same old tune that is being sung by
the labour market, by state final demand, by the
construction industry, and by so many other
economic statistics – it’s all about resources.
are currently looking very strong, and though
the outlook isn’t for gang-busters growth, levels
remains very healthy. However, if you are in one
of the non-resources sectors then the chances
are in 2012 you’re operating in very challenging
conditions.
Those sectors tapped into the resources sector
Construction Activity
($bn)
Nominal value
160
140
120
100
80
60
40
20
0
Engineering Construction Activity
Non-residential Building Construction Activity
Residential Building Construction Activity
The cross over point when residential building takes over from engineering construction as our major sector is not before 2020. For
non-residential building, the activity levels remain much as it is today, rising only slightly within this forecasting period.
The CFC anticipate the value of investment in the
non-residential construction sector to have fallen
for a second consecutive year by a non-trivial
10.5 per cent in 2011/12. A rebound of 24.5 per
cent growth is forecast for 2012/13 followed by
an easing of 2.3 per cent in 2013/14. In contrast,
the CFC forecast mining and hard infrastructure
investment to have grown by a very strong 33.8
per cent in 2011/12. Moderate growth of 0.8 per
cent and 3.0 per cent is forecast for 2012/13 and
2013/14, respectively.
drift modestly upwards. This is the Bank’s core
view which reflects an assumption that Europe
“muddles” through and there is no major fall-out
in global financial markets.
Notwithstanding the major downside risk posed
by the global economy, at this time we think that
the RBA’s current view is about right. However,
this doesn’t overcome the fact that Australian
consumers and businesses lack confidence and
are acting with a high degree of caution. Nor does
it overcome the major credit constraint facing
many construction sectors, perhaps most notably
residential and commercial building. It’s possible
that going forward we could see even less
planned construction activity flowing through to
reality.
The RBA remains of the view that the Australian
economy will be growing at around trend over
the coming year, that inflation will remain within
its target band, and that unemployment will
Source: Australian Construction Industry Council, April 2012 (www.acif.com.au)
9
Construction projects
PERSPECTIVE: CONSTRUCTION INDUSTRY OUTLOOK
In the last edition of the CIUO Report we noted
that there remains a considerable degree of
uncertainty regarding the precise trajectory of
construction activity over the next year or so.
Economists always like to start with a statement
along these lines – but in the current volatile
environment it’s truer than ever.
QLD. Meanwhile the value of abandoned projects
increased strongly over the past year, although
the number of abandoned projects fell.
That’s not to say it’s all negative news in this
latest update. Even though the total value of new
projects has declined, the number of new projects
is up in every jurisdiction. Furthermore, while
deferred projects remain at elevated levels post
the GFC, both the number and value of deferred
projects are down on the figures of one year ago.
Meanwhile in terms of projects in construction,
although the volume of projects has fallen, the
value has risen.
In aggregate, the value of new projects was
decidedly lower over the 2011/12 financial year.
Predictably it is the resources powerhouses of
WA and the NT that continued to post strong
growth, but it wasn’t enough to offset the marked
decline in the value of new projects in NSW and
NATIONAL PROJECTS VOLUME
Under Construction
New
Deferred
Abandoned
12000
10000
6000
4000
Half Years
10
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
0
Dec-2008
2000
Jun-2008
Number of Projects
8000
Construction projects
PERSPECTIVE: CONSTRUCTION INDUSTRY OUTLOOK
In the year to June 2012 mining grew to account
for an astounding 61.9 per cent of the value of
projects in construction. This share has grown
from 40 per cent one year ago.
there looks to be little evidence of better times on
the near horizon.
If we summarise the values of the entire pipeline
of construction projects we see a large value
of projects currently under construction, but a
greater value of deferrals and a lower value of
new projects. In short, this perspective poses
the downside risks to a potential recovery in
construction activity in the near future.
Mining remains the cash cow of the construction
industry. Construction indicators related to
the mining sector will stay strong in coming
updates. However, outside of those projects and
geographical areas related to natural resources,
NATIONAL PROJECTS VALUE
Under Construction
New
Deferred
Abandoned
$160.0 b
$140.0 b
$120.0 b
$80.0 b
$60.0 b
$40.0 b
Half Years
11
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
$0.0 b
Dec-2008
$20.0 b
Jun-2008
Value of Projects ($b)
$100.0 b
NEW PROJECTS: HINTS OF FUTURE GROWTH
New projects are construction projects that have
been reported on for the first time. This is the
starting point of a construction project’s life cycle.
As the project tracks through its life cycle, it flows
through to other stages as defined in this report.
That is, following the inception of a project,
the subsequent stages may see the project be
deferred, abandoned, but hopefully culminate
into actual construction.
projects. If more new projects are observed,
then it is expected that the available pool of
construction work will increase as well.
Below, the chart shows both the volume and
value of new projects. This latest update shows
a sign of encouraging improvement – the
aggregate number of new projects in the six
months to June 2012 is 11.6 per cent higher than
in the same period in 2011. The same comparison
for the value of new projects, however, reveals a
30.2 per cent decline.
The number of new projects is a good leading
indicator for the size of the overall pipeline of
new projects AUST (VOLUME & VALUE)
Number of New Projects
Value
$300.0 b
10,000
$250.0 b
8,000
$200.0 b
6,000
$150.0 b
4,000
$100.0 b
2,000
$50.0 b
0
Jun-2008
Dec-2008
Jun-2009
Dec-2009
Jun-2010
Half Years
12
Dec-2010
Jun-2011
Dec-2011
Jun-2012
$0.0 b
Total value ($b)
Volume
12,000
NEW PROJECTS: STATE COMPARISON
This section of the report focusses on the number
of new projects, split by individual States. The
graph shows movements in the number of
projects in each State.
compared with the same period in 2011. QLD’s
broader performance is worth noting - it is the
only state to have recorded three consecutive sixmonthly increases.
The GFC and its wake saw a high degree of
uniformity in changes to the number of new
projects across the states; Government stimulus
saw new projects increase across all states in the
six months to June 2009, which was then followed
by a uniform decline.
Key movements, six months to June 2012
compared with the six months to June 2011:
• The NT recorded a 70.6 per cent increase in new projects, the highest of all jurisdictions.
•
Since mid-2010, there have been different
patterns of growth, however in this latest update
each state has posted an increase in the number
of projects in the six months to June 2012
Growth in the southeastern states has been the smallest; new projects were higher by 3.8per cent in TAS, 7.6 per cent in VIC and 8.5 per cent in the combined jurisdictions of NSW and ACT.
# NEW PROJECTS BY STATE – TIMESERIES
3,000
Number of New Projects
2,500
NSW & ACT
NT
2,000
QLD
SA
TAS
1,500
VIC
WA
1,000
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
500
Half Years
# new projects by STATE - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
1,425
158
1,176
427
156
1,435
1,537
6,314
Jun-2011
1,558
109
1,218
347
131
1,794
1,503
6,660
Dec-2011
1,451
148
1,251
341
194
2,313
1,919
7,617
Growth
Jun-2012
1,691
186
1,372
407
136
1,931
1,707
7,430
13
1/2yr
16.5%
25.7%
9.7%
19.4%
-29.9%
-16.5%
-11.0%
-2.5%
1yr
8.5%
70.6%
12.6%
17.3%
3.8%
7.6%
13.6%
11.6%
Jun-2011
23.4%
1.6%
18.3%
5.2%
2.0%
26.9%
22.6%
Share
Jun-2012
22.8%
2.5%
18.5%
5.5%
1.8%
26.0%
23.0%
Chng
-0.63%
0.87%
0.18%
0.27%
-0.14%
-0.95%
0.41%
NEW PROJECTS: STATE COMPARISON [Cont.]
Inspection of the value of new projects across
the states in this latest six month period reveals
widespread decline with some exceptions.
across these periods of 44.1 per cent and 30.1 per
cent, respectively.
High value new projects registered in the six
months to June 2012:
Looking at the six months to June 2012 compared
with the six months to June 2011, the largest
declines were experienced by the southeastern
states – values were down by 45.9 per cent in the
combined jurisdictions of NSW and ACT, and by a
similar 43.4 per cent in VIC.
• Port Hastings infrastructure development in VIC
- $9.4 billion
• Western Sydney light rail in NSW - $3.0 billion
• South Middleback Ranges iron ore in SA – $1.0 billion
Meanwhile, the NT and WA were the notable
exceptions that saw healthy, double-digit growth
• Yarwun coal terminal in QLD - $2.2 billion
$ new projects by STATE
$45.0 b
Jun-2011
Jun-2012
Total Value of New Projects ($b)
$40.0 b
$35.0 b
$30.0 b
$25.0 b
$20.0 b
$15.0 b
$10.0 b
$5.0 b
$0.0 b
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
$ new projects by STATE (billions) - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
$11.3
$1.4
$21.4
$4.1
$0.5
$4.7
$13.3
$56.8
Jun-2011
$39.7
$0.7
$37.4
$6.3
$0.9
$33.6
$15.2
$133.9
Dec-2011
$14.9
$1.2
$16.9
$3.7
$0.4
$7.2
$13.7
$58.0
Growth
Jun-2012
$21.5
$1.1
$25.2
$6.0
$1.0
$19.0
$19.8
$93.5
14
1/2yr
44.3%
-15.8%
49.4%
63.1%
116.8%
165.8%
44.2%
61.2%
1yr
-45.9%
44.1%
-32.7%
-5.6%
4.2%
-43.4%
30.1%
-30.2%
Share
Jun-2011
29.6%
0.5%
27.9%
4.7%
0.7%
25.1%
11.4%
Jun-2012
23.0%
1.1%
26.9%
6.4%
1.0%
20.4%
21.2%
Chng
-6.64%
0.58%
-1.00%
1.66%
0.34%
-4.76%
9.83%
NEW PROJECTS: INDUSTRY COMPARISON
This section of the report focusses on the number
of projects split by sectors. This is then plotted
against a time series to show how the different
sectors have progressed over time.
saw increases of 0.3 per cent and 3.1 per cent
respectively, or modest – Civil Engineering saw
an increase of 6.4 per cent.
Key movements in the six months to June 2012
compared with the six months to June 2011:
Comparing new projects across different
industries in this latest update shows mostly
modest results. The Mining and Commercial
sectors have recorded the strongest increases in
the six months to June 2012 compared with the
same period in 2011.
• The Mining sector recorded a 61.5 per cent increase.
• Flats and Units was the only sector that registered a decline in new projects – down by 0.2 per cent.
Elsewhere increases across these periods were
either marginal – Community and Industrial
# new projects by SECTOR - timeseries
6,000
Number of New Projects
5,000
Civil Engineering
Commercial
4,000
Community
Flats & Units
3,000
Industrial
Mining
2,000
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
1,000
Half Years
# new projects by SECTOR - Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
2,154
552
735
1,414
804
655
6,314
Jun-2011
2,320
499
923
1,606
642
670
6,660
Dec-2011
2,634
610
885
1,570
633
1,285
7,617
Growth
Jun-2012
2,469
689
926
1,602
662
1,082
7,430
15
1/2yr
-6.3%
13.0%
4.6%
2.0%
4.6%
-15.8%
-2.5%
1yr
6.4%
38.1%
0.3%
-0.2%
3.1%
61.5%
11.6%
Share
Jun-2011
34.8%
7.5%
13.9%
24.1%
9.6%
10.1%
Jun-2012
33.2%
9.3%
12.5%
21.6%
8.9%
14.6%
Chng
-1.60%
1.78%
-1.40%
-2.55%
-0.73%
4.50%
NEW PROJECTS: INDUSTRY COMPARISON [Cont.]
A comparison between the June 2012 and June
2011 half year periods can be seen in the bar
chart below.
The largest decline across these periods was
experienced in Civil Engineering projects (down
by 58.9 per cent).
The declining value of new projects in the first
half of 2012 compared with the same period in
2011 pervaded all sectors, bar Mining, which saw
an increase of 58.4 per cent.
The Industrial and Commercial sectors also
recorded non-trivial declines across these periods
of 39.6 per cent and 34.5 per cent, respectively.
$ new projects BY SECTOR
Jun-2011
$90.0 b
Jun-2012
Total Value of New Projects ($b)
$80.0 b
$70.0 b
$60.0 b
$50.0 b
$40.0 b
$30.0 b
$20.0 b
$10.0 b
$0.0 b
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
$ new projects BY SECTOR (billions) - Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
$12.0
$4.4
$7.4
$6.9
$2.4
$23.6
$56.8
Jun-2011
$81.9
$9.7
$6.2
$9.1
$4.3
$22.7
$133.9
Dec-2011
$20.3
$5.0
$6.2
$9.3
$1.7
$15.6
$58.0
Growth
Jun-2012
$33.7
$6.4
$5.9
$9.0
$2.6
$36.0
$93.5
16
1/2yr
66.2%
28.1%
-4.4%
-3.5%
53.3%
130.8%
61.2%
1yr
-58.9%
-34.5%
-5.4%
-1.3%
-39.6%
58.4%
-30.2%
Share
Jun-2011
61.1%
7.2%
4.7%
6.8%
3.2%
17.0%
Jun-2012
36.0%
6.8%
6.3%
9.6%
2.7%
38.5%
Chng
-25.14%
-0.45%
1.65%
2.82%
-0.43%
21.54%
NEW PROJECTS WRAP:
The picture of new projects in this latest update is
at best hinting to improvements, but overall, it’s
giving mixed signals. Indeed, in this update we’re
encouraged to see that the number of new projects is picking up since a trough in the six months
to June 2010 – the number of new projects in the
first half of 2012 reached 7,430 – an 11.6 per cent
increase compared with the same period in 2011.
Furthermore, it is encouraging to see that this improvement was broad-based, as each jurisdiction
registered increases in new project numbers.
QLD’s resource cousins, WA and the NT, have
posted decent results in both new project values
and numbers in this update. Looking at values in
particular, the six months to June 2012 compared
with the same period in 2011 saw an increase of
30.1 per cent in WA and an increase of 44.1 per
cent in the NT. Across these two periods, SA and
TAS posted moderate results - the value of new
projects fell by 5.6 per cent in SA and increased by
4.2 per cent in TAS.
Looking at the different sectors’ performances
in the first half of 2012, Mining was the clear
standout, leaping ahead of the other sectors in
terms of growth in both number and value of new
projects. Compared with the same period in 2011
the number of new Mining projects in the six
months to June 2012 increased by 61.5 per cent,
while the value increased by 58.4 per cent.
However, when we look at the cold-hard cash
behind these new projects, values are down. The
six months to June 2012 saw the value of new
projects down by a non-trivial 30.2 per cent to
$93.5 billion compared with the $133.9 billion of
new projects for the same period in 2011.
Aggregate performance appears to have been
dragged down by the nation’s two biggest, yet
lumbering, economies, NSW and VIC. The value of
new projects in the six months to June 2012 compared with the same period in 2011 was down by
45.9 per cent in the combined NSW & ACT and
down by 43.4 per cent in VIC.
Elsewhere, results are at best mixed. Some sectors are in positive territory in terms of the annual growth in new project numbers over the six
months to June 2012: Civil Engineering up by 6.4
per cent; Commercial up by 38.1 per cent; Industrial up by 3.1 per cent; and Community up by 0.3
per cent. Nonetheless, when we look at the situation in terms of the cold-hard cash, project values
were down across all sectors, bar Mining.
Meanwhile, the picture in QLD is mixed. Indeed,
a trend decline appears to have emerged and
against this backdrop the value of new projects
in the six months to June 2012 was 32.7 per cent
lower compared with the same period in 2011.
However, we are pleased to note an encouraging
and unmatched trend increase in the number of
new projects – QLD was the only state to report
three consecutive six-monthly increases since the
end of 2010.
Compared with the same period in 2011, the first
half of 2012 saw new project values decline by
58.9 per cent in Civil Engineering, 34.5 per cent in
Commercial, 5.4 per cent in Community, 1.3 per
cent in flats and units, and 39.6 per cent in Industrial.
17
DEFERRED PROJECTS: TRACKING AROUND RECENT RECORDS
A deferred project is a project that has been put
on hold and is left, essentially, at the crossroads
of two options; hopefully it will continue to
construction albeit at a later date, or the project
can be abandoned. Deferred projects provide
a good insight into general market sentiment
towards investment in the construction industry.
The chart below tracks project deferrals over the
last four years, showing a clear spike in 2009 in the
wake of the GFC.
Since then levels have continued to ease and
such is the case in this latest update; comparing
the six months to June 2012 with the same
period in 2011, the aggregate value of project
deferrals declined by 17.3 per cent. The decline
in the volume of deferrals, however, was a only a
marginal 0.5 per cent.
Lower levels of deferments tend to indicate
positive sentiment, while higher levels appear
to reflect cautiousness and uncertainty in the
marketplace.
Deferred projects AUST (VOLUME & VALUE)
Number of Deferred Projects
Value
$80.0 b
3,500
$70.0 b
3,000
$60.0 b
2,500
$50.0 b
2,000
$40.0 b
1,500
$30.0 b
1,000
$20.0 b
500
$10.0 b
0
Jun-2008
Dec-2008
Jun-2009
Dec-2009
Jun-2010
Half Years
18
Dec-2010
Jun-2011
Dec-2011
Jun-2012
$0.0 b
Total value ($b)
Volume
4,000
DEFERRED PROJECTS: STATE COMPARISON
Looking at the number of deferred projects
across the states, results are varied in this latest
update. Comparing the first half of 2012 with the
same period in 2011, most states recorded lower
numbers of project deferrals. VIC, WA and SA
however, saw increases in project deferrals across
these two periods.
Key movements, six months to June 2012
compared with the six months to June 2011:
• The sharpest declines in project deferrals were in TAS (-41.2 per cent) and QLD (-20.2 per cent).
• WA and SA saw the largest increases – deferral numbers were up by 86.7 per cent and 65.3 per cent, respectively.
# Deferred projects by state – Timeseries
1,400
Number of Deferred Projects
1,200
NSW & ACT
1,000
NT
QLD
800
SA
TAS
VIC
600
WA
400
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
200
Half Years
# Deferred projects by STATE - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
885
19
441
94
18
176
70
1,703
Jun-2011
858
32
642
101
17
414
75
2,139
Dec-2011
884
23
614
167
14
561
74
2,337
Growth
Jun-2012
813
27
512
167
10
459
140
2,128
19
1/2yr
-8.0%
17.4%
-16.6%
0.0%
-28.6%
-18.2%
89.2%
-8.9%
1yr
-5.2%
-15.6%
-20.2%
65.3%
-41.2%
10.9%
86.7%
-0.5%
Share
Jun-2011
40.1%
1.5%
30.0%
4.7%
0.8%
19.4%
3.5%
Jun-2012
38.2%
1.3%
24.1%
7.8%
0.5%
21.6%
6.6%
Chng
-1.91%
-0.23%
-5.95%
3.13%
-0.32%
2.21%
3.07%
DEFERRED PROJECTS: STATE COMPARISON [Cont.]
Deferred project values are also showing
divergent results across the states in this latest
update. Comparing the first half of 2012 with
the same period in 2011, most states recorded
declining values in project deferrals.
High value projects deferred in the six months to
June 2012:
The Southern states were the exceptions; across
these two periods, the value of deferrals increased
by 64.3 per cent in the combined jurisdictions of
NSW and ACT, 134.1 per cent in SA, and 116.0 per
cent in VIC.
• Swanston square in Vic - $100 million
• RAAF Base (Williamtown) in NSW - $275 million
• Homebush apartments in NSW - $221 million
• Currie street office tower in SA - $100 million
$ deferred projects by STATE
Jun-2011
$45.0 b
Jun-2012
Total Value of Deferred Projects ($b)
$40.0 b
$35.0 b
$30.0 b
$25.0 b
$20.0 b
$15.0 b
$10.0 b
$5.0 b
$0.0 b
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
$ Deferred projects by STATE (billions) - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
$11.2
$6.5
$12.8
$0.9
$0.1
$5.3
$3.3
$40.1
Jun-2011
$11.1
$0.5
$39.4
$1.7
$0.1
$4.5
$3.3
$60.5
Dec-2011
$10.8
$0.1
$11.6
$2.3
$0.1
$10.7
$6.0
$41.6
Growth
Jun-2012
$18.2
$0.3
$15.4
$3.9
$0.0
$9.8
$2.5
$50.0
20
1/2yr
68.2%
185.0%
32.2%
68.7%
-68.3%
-9.1%
-58.0%
20.1%
1yr
64.3%
-42.2%
-61.0%
134.1%
-34.3%
116.0%
-23.1%
-17.3%
Share
Jun-2011
18.3%
0.9%
65.2%
2.7%
0.1%
7.5%
5.4%
Jun-2012
36.3%
0.6%
30.7%
7.7%
0.1%
19.5%
5.0%
Chng
18.05%
-0.26%
-34.45%
5.01%
-0.02%
12.04%
-0.38%
DEFERRED PROJECTS: INDUSTRY COMPARISON
Turning to the number of deferred projects across
different industries; in this latest update, we find
widely divergent results. The Mining sector was
a clear outlier, with the increase in the number of
deferred projects dwarfing any other increases.
Key movements, six months to June 2012
compared with the six months to June 2011:
• The Mining sector recorded a 288.2 per cent increase in deferred projects, the highest of all sectors.
Meanwhile the commercial sector registered
some decent reductions to the number of project
deferrals.
• Deferred project numbers were down by 25.7 per cent in the Commercial sector.
• In the Industrial sector, project deferrals remained relatively steady across these two periods; up by 1.2 per cent.
# DEFERRED PROJECTS BY SECTOR – TIMESERIES
1,200
Number of Deferred Projects
1,000
Civil Engineering
Commercial
800
Community
Flats & Units
600
Industrial
Mining
400
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
200
Half Years
# DEFERRED PROJECTS BY SECTOR – Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
253
374
192
582
205
97
1,703
Jun-2011
320
490
218
836
241
34
2,139
Dec-2011
260
495
243
970
289
80
2,337
Growth
Jun-2012
273
364
241
874
244
132
2,128
21
1/2yr
5.0%
-26.5%
-0.8%
-9.9%
-15.6%
65.0%
-8.9%
1yr
-14.7%
-25.7%
10.6%
4.5%
1.2%
288.2%
-0.5%
Share
Jun-2011
15.0%
22.9%
10.2%
39.1%
11.3%
1.6%
Jun-2012
12.8%
17.1%
11.3%
41.1%
11.5%
6.2%
Chng
-2.13%
-5.80%
1.13%
1.99%
0.20%
4.61%
DEFERRED PROJECTS: INDUSTRY COMPARISON [Cont.]
The value of deferred projects is compared
against each industry in the following graph. This
is used to highlight movements within sectors
and is useful to assess the correlation between
the volume and the value of deferments.
Deferral values declined in Civil Engineering
(-94.1 per cent), Community (-59.1 per cent)
and Industrial (-55.1 per cent). Across these two
periods, the Mining sector experienced a blowout to the value of deferrals – up by a whopping
417.6 per cent.
In terms of the value of deferred projects, results
for the first half of 2012 compared with the same
period in 2011 are mixed across the different
sectors.
$ deferred projects by SECTOR
Jun-2011
Total Value of Deferred Projects ($b)
$35.0 b
Jun-2012
$30.0 b
$25.0 b
$20.0 b
$15.0 b
$10.0 b
$5.0 b
$0.0 b
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
$ Deferred projects by SECTOR (billions) - Growth & distribution
Growth
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
$1.5
$10.7
$1.2
$11.6
$3.7
$11.5
$40.1
Jun-2011
$32.0
$6.5
$4.5
$12.4
$2.8
$2.3
$60.5
Dec-2011
$2.9
$7.5
$1.4
$20.1
$4.6
$5.1
$41.6
Jun-2012
$1.9
$19.0
$1.9
$14.2
$1.3
$11.8
$50.0
22
1/2yr
-35.2%
154.3%
34.1%
-29.4%
-72.4%
130.4%
20.1%
1yr
-94.1%
194.0%
-59.1%
14.5%
-55.1%
417.6%
-17.3%
Share
Jun-2011
52.9%
10.7%
7.5%
20.5%
4.7%
3.8%
Jun-2012
3.8%
37.9%
3.7%
28.4%
2.6%
23.6%
Chng
-49.07%
27.27%
-3.79%
7.90%
-2.15%
19.83%
DEFERRED PROJECTS WRAP:
The construction industry continues to tread
cautiously with the number of deferred projects
relatively steady over the past 12 months,
although at levels elevated when compared to
levels observed pre-GFC. Overall the situation
is mixed, however the backdrop of global
uncertainty and low domestic confidence
sheds light on the increases in deferrals to the
construction of mining and commercial projects.
The increase in deferred mining projects is a clear
outlier among other sectors – compared with the
same period in 2011, the value of deferred mining
projects in the six months to June 2012 increased
by 417.6 per cent to a level of $11.8 billion, which
is just below the six monthly levels experienced
during the GFC. This pattern of change is also
affirmed by the 288.2 per cent increase in the
number of deferred Mining projects.
In value terms, there has been a decline in
projects deferred at the national aggregate level,
driven by a sizeable drop in QLD. This drop is off
a high base - the result of project deferrals due to
abnormally wet conditions and natural disasters
in late 2010 and early 2011, as well as the delay
of Brisbane’s $14.8 billion Cross River Rail project.
Wet weather then afflicted southeastern Australia
in the first half (especially early) 2012.
Other indicators are signalling continued strength
in Mining in the near future, but these increasing
deferments are reflecting the sentiment that the
mining boom will ease off in the not-too distant
future. The other sector to record a noteworthy
increase in the value (though not number) of
project deferrals was Commercial; against a
backdrop of global uncertainty and low domestic
confidence, the value of commercial construction
deferrals spiked in the first half of 2012 to $19.0
billion, a 194.0 per cent increase on the same
period in 2011.
NSW and VIC experienced widespread and severe
flooding, however the major increases in project
deferrals in these states were mainly reflected in
project values - the first half of 2012 compared
with the first half of 2011 saw the value of
deferred projects increase by 64.3 per cent in NSW
& ACT, while the increase in VIC was to the tune of
116.0 per cent.
Civil Engineering projects stand in sharp contrast.
However, before getting too carried away with
the 94.1 per cent decline in the value (nor the 12.8
per cent decline in the number) of deferrals in
the six months to June 2012 compared with the
same period in 2011, this decline was off a very
high base. Nonetheless, Civil Engineering project
deferrals are currently running at low levels not
seen since prior to the GFC.
The value of deferred projects increased in SA by a
whopping 134.1 per cent, but this was largely due
to deferral of the $3 billion Clinton Coal project
– the increase in terms of project numbers was a
65.3 per cent.
Turning to other sectors, comparing the first
half of 2012 with the same period in 2011, the
value of Flats and Units deferrals increased by
14.5 per cent, while Community and Industrial
construction deferrals fell by 59.1 and 55.1 per
cent, respectively.
Looking at the value of deferrals in the latest six
months compared with the same period in 2011,
other states showed more encouraging results there were reductions of 23.1 per cent in WA, 34.3
per cent in TAS, 61.0 per cent in QLD, and 42.2 per
cent in the NT.
23
ABANDONED PROJECTS: CONSIDERABLE FLUCTUATIONS
Abandoned projects are a valuable metric for the
overall performance of the construction industry,
and also add another dimension to the level of
confidence within the marketplace. Reasons for
abandoning a project vary considerably, lack
of available credit and constraints on labour
availability representing two examples.
charts below show overall levels for the volume
of abandoned projects have remained relatively
stable.
Comparing the six months to June 2012 with the
same period in 2011, the aggregate number of
project abandonments declined by 11.7 per cent.
In contrast, the value increased across these two
periods by 57.3 per cent to $20.1 billion.
Since our last report, there have been
considerable six monthly movements in the
value of abandoned projects. Nonetheless, the
Abandoned projects AUST (VOLUME & VALUE)
Volume
Value
$30.0 b
1,200
$25.0 b
1,000
$20.0 b
800
$15.0 b
600
$10.0 b
400
$5.0 b
200
0
Jun-2008
Dec-2008
Jun-2009
Dec-2009
Jun-2010
Half Years
24
Dec-2010
Jun-2011
Dec-2011
Jun-2012
$0.0 b
Total value ($b)
Number of Abandoned Projects
1,400
ABANDONED PROJECTS: STATE COMPARISON
The distribution by state of abandoned projects
can be observed in this section. The following
graph shows movements in the number of
abandoned projects by state and by time period.
Key movements, six months to June 2012
compared with the six months to June 2011:
• All states recorded double-digit declines in the number of project abandonments.
In this latest update, abandoned projects in the
six months to June 2012 were lower compared
with the same period in 2011 across all states,
except for the very visible increase in WA and the
more modest increase in VIC.
• The largest declines in project abandonments were in QLD and the NT, down by 36.1 per cent and 22.2 per cent, respectively.
• WA saw the sharpest increase with project abandonments up by 129.4 per cent.
# Abandoned projects by STATE – Timeseries
500
Number of Abandoned Projects
450
400
NSW & ACT
350
NT
QLD
300
SA
TAS
250
VIC
WA
200
150
100
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
50
Half Years
# Abandoned projects by STATE - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
329
8
313
71
7
167
95
990
Jun-2011
401
18
432
77
8
341
17
1,294
Dec-2011
313
18
285
76
17
387
68
1,164
Growth
Jun-2012
359
14
276
64
7
384
39
1,143
25
1/2yr
14.7%
-22.2%
-3.2%
-15.8%
-58.8%
-0.8%
-42.6%
-1.8%
1yr
-10.5%
-22.2%
-36.1%
-16.9%
-12.5%
12.6%
129.4%
-11.7%
Share
Jun-2011
31.0%
1.4%
33.4%
6.0%
0.6%
26.4%
1.3%
Jun-2012
31.4%
1.2%
24.1%
5.6%
0.6%
33.6%
3.4%
Chng
0.42%
-0.17%
-9.24%
-0.35%
-0.01%
7.24%
2.10%
ABANDONED PROJECTS: STATE COMPARISON [Cont.]
The value of abandonments in this latest update
has seen widespread increases. Comparing the
first half of 2012 with the same period in 2011,
the value of project abandonments increased
most sharply in the NT – up by 111.5 per cent.
abandonments in the six months to June 2012
was 88.9 per cent lower than in the same period
in 2011.
High value projects abandoned in the six months
to June 2012:
The combined jurisdictions of NSW and ACT also
experienced a substantial increase in the value of
abandonments across these two periods (up by
99.1 per cent) while QLD saw an increase of 79.3
per cent.
• Abbot point coal terminal expansion in QLD - $6.2 billion
• Civic place Parramatta gateway in NSW - $1.6 billion
• Narrabri coal seam gas project in NSW - $1.3 billion
WA recorded the largest decline – the value of
$ abandoned projects by STATE
Jun-2011
Total Value of Abandoned Projects ($b)
$12.0 b
Jun-2012
$10.0 b
$8.0 b
$6.0 b
$4.0 b
$2.0 b
$0.0 b
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
$ abandoned projects by STATE (billions) - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
$1.2
$0.0
$5.5
$0.1
$0.0
$1.0
$0.2
$8.0
Jun-2011
$3.5
$0.1
$6.2
$0.5
$0.2
$1.2
$1.3
$12.8
Dec-2011
$1.6
$0.0
$2.5
$0.3
$0.0
$1.2
$0.2
$5.8
Growth
Jun-2012
$7.0
$0.1
$11.0
$0.5
$0.0
$1.3
$0.1
$20.1
26
1/2yr
333.7%
153.1%
349.9%
83.2%
-8.4%
8.3%
-40.2%
244.1%
1yr
99.1%
111.5%
79.3%
13.0%
-76.3%
8.4%
-88.9%
57.3%
Share
Jun-2011
27.4%
0.4%
48.2%
3.8%
1.3%
9.1%
9.8%
Jun-2012
34.6%
0.6%
54.9%
2.7%
0.2%
6.2%
0.7%
Chng
7.27%
0.15%
6.74%
-1.06%
-1.14%
-2.81%
-9.14%
ABANDONED PROJECTS: INDUSTRY COMPARISON
Inspection of the number of abandonments
across different industries in this latest update
reveals declining levels for all sectors, bar Flats
and Units, which has been enduring a trend
increase in the number of abandonments since
December 2010.
Key movements, six months to June 2012
compared with the six months to June 2011:
• The Industrial sector recorded a 35.2 per cent reduction, the largest decline of all sectors.
• The number of abandonments declined by 25.3 per cent in the Mining sector and by 22.2 per cent in the Civil Engineering sector.
Comparing the first half of 2012 with the same
period in 2011, most sectors saw declines in the
number of abandonments around, if not above
the 20 per cent mark.
• Abandoned Flats and Units projects were 7.9 per cent higher.
# ABANDONED PROJECTS BY SECTOR – TIMESERIES
500
Number of Abandoned Projects
450
400
Civil Engineering
350
Commercial
Community
300
Flats & Units
250
Industrial
Mining
200
150
100
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
50
Half Years
# abandoned projects by SECTOR - Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
140
187
136
310
128
89
990
Jun-2011
185
267
151
429
179
83
1,294
Dec-2011
111
227
143
414
158
111
1,164
Growth
Jun-2012
144
221
137
463
116
62
1,143
27
1/2yr
29.7%
-2.6%
-4.2%
11.8%
-26.6%
-44.1%
-1.8%
1yr
-22.2%
-17.2%
-9.3%
7.9%
-35.2%
-25.3%
-11.7%
Share
Jun-2011
14.3%
20.6%
11.7%
33.2%
13.8%
6.4%
Jun-2012
12.6%
19.3%
12.0%
40.5%
10.1%
5.4%
Chng
-1.70%
-1.30%
0.32%
7.35%
-3.68%
-0.99%
Abandoned Projects: Industry Comparison [Cont.]
This latest update to the value of abandoned
projects shows divergent results across different
sectors.
Community sector and 16.4 per cent in the Flats
and Units sector.
The sharpest increases across these two periods
were experienced in the Mining sector (up by
165.3 per cent) and the Commercial sector (up by
146.3 per cent).
The first half of 2012 compared with the same
period in 2011 saw values down by 72.6 per
cent in the Industrial sector, 68.8 per cent in the
$ abandoned projects by SECTOR
Jun-2011
Total Value of Abandoned Projects ($b)
$10.0 b
Jun-2012
$9.0 b
$8.0 b
$7.0 b
$6.0 b
$5.0 b
$4.0 b
$3.0 b
$2.0 b
$1.0 b
$0.0 b
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
$ abandoned projects by SECTOR (billions) - Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
$2.9
$1.0
$0.3
$1.1
$1.3
$1.2
$8.0
Jun-2011
$1.9
$1.7
$1.4
$3.1
$1.3
$3.4
$12.8
Dec-2011
$0.5
$1.5
$0.6
$2.2
$0.6
$0.5
$5.8
Growth
Jun-2012
$3.5
$4.2
$0.4
$2.6
$0.4
$9.0
$20.1
28
1/2yr
560.3%
182.4%
-25.5%
22.0%
-38.6%
1616.5%
244.1%
1yr
87.1%
146.3%
-68.8%
-16.4%
-72.6%
165.3%
57.3%
Share
Jun-2011
14.5%
13.2%
10.8%
24.6%
10.2%
26.7%
Jun-2012
17.2%
20.8%
2.1%
13.1%
1.8%
45.0%
Chng
2.75%
7.50%
-8.65%
-11.52%
-8.42%
18.33%
ABANDONED PROJECTS WRAP:
Abandoned projects reveal very mixed results in
this latest update.
quarry, a farm and a beach. In recent times,
the persistently high Australian dollar has seen
the beach become deserted, but it’s certainly
not idyllic. Demonstrably, we can’t rely on the
quarry to be an ever-expanding pit to keep our
aggregate figures buoyant; against a backdrop of
falling commodity prices (from the peak reached
in early 2011) and rising domestic costs, the
value of abandoned Mining projects has been
increasing since the second half of 2009. The
six months to June 2012 saw the value of these
abandoned projects increase by 165.3 per cent
compared with the same period in 2011.
The aggregate number of abandoned projects
declined by a moderate 11.7 per cent in the six
months to June 2012 compared with the same
period in 2011. This decline was broad-based,
but moderate across the jurisdictions; the only
notable state that was the exception was WA,
with abandonments increasing by 129.4 per cent.
In contrast, the aggregate value of
abandonments increased by a non-trivial 57.3 per
cent in the six months to June 2012, compared
with the same period in 2011. Furthermore, there
were three states that saw substantial increases
in abandonment values across these two periods:
NSW by 99.1 per cent; NT by 111.5 per cent; and
QLD by 79.3 per cent. Though substantial, these
increases are not as dramatic, nor as widespread,
as was the case in late 2010. However, there are
a couple of realities to consider, especially when
we inspect abandonments across the different
sectors.
Another reality check is that of the current
economic climate of global uncertainty coupled
with low domestic confidence. Against this
backdrop we then see the mixed results coming
from the Commercial sector – the number of
abandoned projects in the first half of 2012 is
indeed remaining fairly steady against historic
levels. However, in terms of cold hard cash,
the six months to June 2012 saw the value of
Commercial project abandonments spike and
therefore post a 146.3 per cent increase on the six
months to June 2011.
One reality check is on Mining. A caricature
of the Australian economy is that it is but a
29
PROJECTS AT CONSTRUCTION: MIXED RESULTS
A project at construction represents the final stage
of a project’s life cycle. To reach this stage, the
project has proceeded through a series of prior
steps from planning to tendering and agreement.
Furthermore, if any obstacles in these steps have
been overcome, the project thus culminates into
the actual ‘bricks and mortar’ of construction work.
The previous edition to our report noted a decline
in new projects which was signalling subdued
activity in the near future. Now, more than twelve
months later, it appears that we are seeing this
take effect, with the value and volume of projects
at construction fairly sluggish. The number of
projects at construction in the six months to June
2012 was 2.4 per cent lower compared to the same
period in 2011.
In terms of value however, projects at construction
in the six months to June 2012 were just under $60
billion, which represents a 37.4 per cent increase
on the same period in 2011. This is a mixed result,
so the following analysis considers some of the
nuances of current construction activity.
projects at construction AUST (VOLUME & VALUE)
Number of Projects at Construction
Value
$100.0 b
9,000
$90.0 b
8,000
$80.0 b
7,000
$70.0 b
6,000
$60.0 b
5,000
$50.0 b
4,000
$40.0 b
3,000
$30.0 b
2,000
$20.0 b
1,000
$10.0 b
0
Jun-2008
Dec-2008
Jun-2009
Dec-2009
Jun-2010
Half Years
30
Dec-2010
Jun-2011
Dec-2011
Jun-2012
$0.0 b
Total value ($b)
Volume
10,000
PROJECTS AT CONSTRUCTION: STATE COMPARISON
Looking at the number of projects that have
reached construction across the states, results
are varied in this latest update, but overall quite
modest. Levels are declining in the combined
jurisdictions of NSW and ACT, as well as in VIC.
Elsewhere growth was quite modest, with the NT
the main exception.
Key movements, six months to June 2012
compared with the six months to June 2011:
• The largest increase in projects at construction was in the NT – up by 63.7 per cent.
• VIC suffered the largest reduction; numbers were down by 11.3 per cent, while the combined jurisdictions of NSW and ACT saw a decline of 9.4 per cent.
# projects at construction by state – Timeseries
3,000
NSW & ACT
2,500
NT
QLD
2,000
SA
TAS
VIC
1,500
WA
1,000
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
0
Dec-2008
500
Jun-2008
Number of Projects at Construction
3,500
Half Years
# projects at construction by STATE - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
1,785
213
1,100
499
118
1,426
1,003
6,144
Jun-2011
1,740
146
1,015
414
110
1,828
1,211
6,464
Dec-2011
1,471
208
1,311
411
79
1,993
1,243
6,716
Growth
Jun-2012
1,576
239
1,179
450
111
1,622
1,135
6,312
31
1/2yr
7.1%
14.9%
-10.1%
9.5%
40.5%
-18.6%
-8.7%
-6.0%
1yr
-9.4%
63.7%
16.2%
8.7%
0.9%
-11.3%
-6.3%
-2.4%
Share
Jun-2011
26.9%
2.3%
15.7%
6.4%
1.7%
28.3%
18.7%
Jun-2012
25.0%
3.8%
18.7%
7.1%
1.8%
25.7%
18.0%
Chng
-1.95%
1.53%
2.98%
0.72%
0.06%
-2.58%
-0.75%
PROJECTS AT CONSTRUCTION: STATE COMPARISON [Cont.]
Looking at the value of projects that have
reached construction, different states are
registering different results in this latest update.
High value projects that reached construction in
the six months to June 2012:
• Sino iron ore in WA - $6.0 billion
In the six months to June 2012 the value of
projects at construction in the NT increased
by a behemoth, 297.2 per cent compared with
the same period in 2011. TAS posted a surprise
result, a 166.1 per cent increase across these two
periods. Meanwhile, the largest reduction in the
value of projects was in SA, down by 32.0 per cent
• Caval ridge coal in QLD - $4.2 billion
• Mount Newman iron ore in WA - $822 million
• Fishermans landing LNG in QLD - $760 million
$ projects at construction by STATE
Jun-2011
Total Value of Projects at Construction ($b)
$25.0 b
Jun-2012
$20.0 b
$15.0 b
$10.0 b
$5.0 b
$0.0 b
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
$ projects at construction by STATE (billions) - Growth & distribution
Half Years
STATE
NSW & ACT
NT
QLD
SA
TAS
VIC
WA
NAT
Jun-2008
$8.7
$0.9
$6.2
$1.4
$0.2
$6.1
$6.4
$29.8
Jun-2011
$10.6
$1.0
$10.5
$4.2
$0.3
$5.1
$11.9
$43.5
Dec-2011
$10.8
$0.8
$53.9
$2.6
$0.2
$8.9
$14.7
$92.1
Growth
Jun-2012
$9.8
$3.8
$16.7
$2.8
$0.7
$6.9
$19.1
$59.8
32
1/2yr
-9.2%
346.2%
-69.0%
8.5%
239.8%
-22.9%
29.7%
-35.0%
1yr
-6.9%
297.2%
58.5%
-32.0%
166.1%
34.6%
59.8%
37.4%
Share
Jun-2011
24.3%
2.2%
24.2%
9.6%
0.6%
11.7%
27.4%
Jun-2012
16.5%
6.3%
27.9%
4.7%
1.1%
11.5%
31.9%
Chng
-7.82%
4.13%
3.73%
-4.84%
0.55%
-0.24%
4.48%
PROJECTS AT CONSTRUCTION: INDUSTRY COMPARISON
In this latest update, all sectors, bar Mining,
registered declines in the number of projects that
reached construction in the six months to June
2012 compared with the same period in 2011.
Key movements, six months to June 2012
compared with the six months to June 2011:
• The Mining sector recorded an 80.7 per cent increase.
Across these two periods, the sharpest
decline was experienced in the Flats and Units
sector, while the Civil Engineering projects at
construction were down only marginally.
• The number of Flats and Units projects that reached construction was 18.6 per cent lower.
•
Declines across in other sectors were more modest – Civil Engineering (-1.1 per cent), Commercial (-2.8 per cent) and Community (-3.9 per cent).
# projects at construction by SECTOR – TIMESERIES
4,500
Number of Projects at Construction
4,000
3,500
Civil Engineering
Commercial
3,000
Community
2,500
Flats & Units
Industrial
2,000
Mining
1,500
1,000
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
Jun-2009
Dec-2008
0
Jun-2008
500
Half Years
# projects at construction by sector - Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
1,792
880
1,148
1,057
776
491
6,144
Jun-2011
1,930
887
1,507
1,220
645
275
6,464
Dec-2011
1,942
971
1,506
1,136
670
491
6,716
Growth
Jun-2012
1,908
862
1,448
993
604
497
6,312
33
1/2yr
-1.8%
-11.2%
-3.9%
-12.6%
-9.9%
1.2%
-6.0%
1yr
-1.1%
-2.8%
-3.9%
-18.6%
-6.4%
80.7%
-2.4%
Share
Jun-2011
29.9%
13.7%
23.3%
18.9%
10.0%
4.3%
Jun-2012
30.2%
13.7%
22.9%
15.7%
9.6%
7.9%
Chng
0.37%
-0.07%
-0.37%
-3.14%
-0.41%
3.62%
PROJECTS AT CONSTRUCTION: INDUSTRY COMPARISON [Cont.]
In terms of the value of deferred projects, results
for the first half of 2012 compared with the same
period in 2011 are dominated by the increase in
the value of Mining projects – up by 141.9 per cent.
June 2012 were down compared with the same
period in 2011 – Civil Engineering by 9.9 per cent,
Commercial by 14.7 per cent, Community by 35.0
per cent, Flats and Units by 13.7 per cent, and
Industrial by 18.4 per cent.
Across all other sectors the value of projects that
had reached construction in the six months to
$ projects at construction by SECTOR
Jun-2011
Total Value of Projects at Construction ($b)
$40.0 b
Jun-2012
$35.0 b
$30.0 b
$25.0 b
$20.0 b
$15.0 b
$10.0 b
$5.0 b
$0.0 b
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
$ projects at construction by SECTOR (billions) - Growth & distribution
Half Years
SECTORS
Civil Engineering
Commercial
Community
Flats & Units
Industrial
Mining
All Sectors
Jun-2008
$7.0
$5.4
$4.0
$3.1
$2.1
$8.1
$29.8
Jun-2011
$7.6
$4.8
$8.2
$5.8
$1.9
$15.3
$43.5
Dec-2011
$10.5
$4.7
$8.7
$5.3
$1.5
$61.3
$92.1
Growth
Jun-2012
$6.8
$4.1
$5.3
$5.0
$1.6
$37.0
$59.8
34
1/2yr
-35.2%
-13.6%
-38.7%
-6.2%
3.6%
-39.6%
-35.0%
1yr
-9.9%
-14.7%
-35.0%
-13.7%
-18.4%
141.9%
37.4%
Share
Jun-2011
17.4%
11.0%
18.8%
13.3%
4.4%
35.2%
Jun-2012
11.4%
6.8%
8.9%
8.3%
2.6%
61.9%
Chng
-5.97%
-4.17%
-9.89%
-4.93%
-1.79%
26.75%
PROJECTS AT CONSTRUCTION WRAP:
The state of construction activity in recent times
has been conspicuous – mostly for the very
visible and unfortunate reality of significant
declines, but also for the disparity in activity
across sector and state lines. The nation’s multispeed economy is expressing itself quite clearly
in construction, and our update on Projects
at Construction – the culmination of projects
into real ‘bricks and mortar’ activity – is a clear
illustration.
The declines in others sectors were more modest
across these two periods - Civil Engineering was
down by 1.1 per cent, Commercial by 2.8 per
cent, and Industrial by 6.4 per cent.
Looking at different states’ performances, the
biggest increase was seen in the NT. In terms
of value, this was certainly off the back of the
onshore processing component of the Ichthy’s
gas field development which commenced
construction in May 2012. However, there’s more
to NT construction than this Ichthy’s gas project,
as the territory also recorded the greatest annual
increase in the actual number of projects at
construction. Notwithstanding these increases,
the NT remains an understudy to the resource
powerhouses of QLD and WA in terms of actual
levels of projects currently at construction.
Predictably, the mining boom has seen this sector
become a bastion of strength for construction,
with the annual increase in Mining projects
at construction dwarfing the performance of
other construction sectors. The six months to
June 2012 saw the number of Mining projects at
construction increase by 80.7 per cent compared
with the same period in 2011 (while the value
increased by a whopping 141.9 per cent).
Turning to other sectors, we find a picture that
stands in sharp contrast to the above.
In WA and QLD, the annual number of projects
at construction peaked in 2009/10. Since then,
levels have eased back, with the first half of 2012
posting a modest decline of 6.3 per cent in WA,
and growth of 16.2 per cent in QLD compared
with the same period in 2011.
In the six months to June 2012, compared
with the same period in 2011, all other sectors
recorded falls in projects at construction, in terms
of both number and value. The Flats and Units
and Community sectors recorded the worst
results. Understandably, Community construction
projects have come off the peaks that stemmed
from federal government stimulus measures.
Meanwhile, the trend decline since early 2010
in Flats and Units has continued; the number of
projects fell by 18.6 per cent in the six months
to June 2012 compared with the same period in
2011.
Since early 2010, projects at construction have
been in decline in the southeastern states
and looking at the six months to June 2012, in
particular, levels fell by 9.4 per cent in NSW and
ACT and 11.3 per cent in VIC compared with
the six months to June 2011. In TAS however,
levels remain relatively stable, where projects
at construction across these periods increased
by a marginal 0.9 per cent, while SA posted an
increase of 8.7 per cent.
35
CONCLUSION
Inspection of the different stages of the project
life cycle clearly illustrates the roller-coaster
ride on which the Australian economy has been
travelling in recent times.
speed nature and the challenges this situation
poses.
An examination of project deferrals and
abandonments provides a clear pointer that the
global economic environment is manifesting itself
in Australia’s construction industry. Uncertainty in
Europe continues to be a conspicuous backdrop
to project deferrals, while project abandonments
(this edition, particularly pronounced in mining),
are set against falling international commodity
prices and a broader sentiment that the mining
'boom' is approaching its peak.
Our previous report cautioned the reader
of an uncertain and patchy outlook for the
construction sector. What has subsequently
transpired, illustrated particularly in projects
currently at construction, is an industry that is
mixed at best, and possibly more accurately
described as sluggish across many areas. Of note
in this update is the stark divergence between
construction activity in the mining sector (an
outlier in terms of its impressive growth) and the
waning levels of construction activity in the Flats
and Units, and Community sectors. The situation
across the construction sector as a whole is highly
emblematic of the national economy’s multi-
However, turning to the pipeline of activity in the
near term, at best we can be cautiously optimistic
and understand recent increases in new projects
(modest and limited to project numbers, rather
than values) to be the greenshoots of recovery
36
in construction in the aggregate. If we take a
broader view of the situation, we can see that
compared to the declining pipeline that was
endemic across the states in the previous two
financial years, 2011/12 has seen new projects
finally start to increase. This hopefully signals
a return to decent construction activity in the
future.
being far more subdued). New Flats and Units
projects, meanwhile, are down slightly on the
previous year.
Clearly, the health of the economy over the
longer term requires a more balanced spread of
activity than is the current case of reliance on
the resources sector. The construction industry
typifies this situation, as we have clearly outlined
above. It is a challenge for business, and more
pointedly for governments in terms of getting
policy settings right, to ensure the adequate
provision of all forms of construction projects
which is commensurate to the requirements
of the Australian economy. That is a resource
allocation question deserving of greater policy
vision and focus than is currently evident.
However, the downside risks to this view could
still prove overwhelming. Amidst a very uncertain
and volatile global and domestic economic
environment, the value of new projects are yet
to show a decisive upwards trend. Furthermore,
multi-speed issues in this near-to-medium term
outlook are still, unfortunately, very much present
- the increase in new projects is dominated by the
Mining sector (despite the longer term outlook
37
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National Office:
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WA
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This report was prepared by Cordell Information in collaboration with the Housing Industry Association
The information contained within this report has been prepared with the utmost confidence and is, to the best of the authors' knowledge, accurate as at the date of publication. The information should
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39
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