A new report prepared by BIS Shrapnel for the Queensland Major Contractors Association and Construction Skills Queensland reveals that the size and number of major construction projects in Queensland will decline by over $7.5bn from 2012-13 through to 2016-17.
Released by Director General of Queensland’s Department of State Development, Infrastructure and Planning, Mr David Edwards, the 2013 Major Projects Report – Queensland Engineering Construction Outlook, has found the amount of construction work carried out on major projects will fall from an all-time high of $18.5bn in 2012-13 to $10.9bn in 2016-17.
Queensland Major Contractors Association President Tony Hackett points out that the report, though only a forecast is based on reliable current data and highlights many serious challenges for industry over the next four years.
According to Mr Hackett, Queensland still has many positives on the major projects front and this forecast decline is in the context of 2012-13 recording the highest ever level of major projects activity. However, a 40% decline is a serious investment challenge on the medium-term horizon. The uncertainty about a pipeline of viable projects coming to fruition against the backdrop of declining productivity levels, persistent skilled labour issues, fluctuating commodity prices and declining public investment in large infrastructure projects is also a concern.
Given that construction is such an important pillar of the Queensland economy, long term sustainability of the construction industry is critical. In the last 10 years engineering construction work done has grown from $6.5 billion to $33.5 billion in real terms with work done growing 44% in 2011/12 alone.
Major findings of the report:
- Heightened global economic turbulence will continue to factor heavily in investment decisions in major projects
- Escalating costs over several years and falling commodity prices have combined to undermine the competitiveness and financial feasibility of the next round of projects
- Labour costs have grown substantially in Queensland over the past decade – from 4.3% lower than the national average in 2003, to 8.6% higher forecasted by 2017
- An effort by both Federal and State Governments to consolidate their balance sheets will particularly affect the ‘roads and bridges’ sector of engineering construction
- The LNG market in Queensland should be seen as highly susceptible to risks including cost escalations, low gas extraction rates in the early phases and foreign competition from Asia and particularly US shale gas
- Major projects employment will peak over the next 12-18 months at about 24,700 people before declining to around 17,000 by 2017