Australia’s focus on infrastructure led revival, HomeBuilder success to revive construction growth in 2021, says GlobalData

Although the construction industry in Australia was designated as an essential service and exempted from lockdown restrictions, it was affected in 2020 due to limitations on labor availability at worksites, social distancing restrictions, supply chain disruptions and continuing weakness in residential market. The industry is expected to expand by 2.2% in real terms in 2021, following a decline of 2.1% in 2020, says GlobalData, a leading data and analytics company.

GlobalData’s report, Construction in Australia – Key trends and opportunities by state and territory to 2025 (Q2-2021), reveals that In 2021 the industry’s output will be supported by the government’s focus on infrastructure investment to revive the pandemic-hit economy. In mid-June 2020, the government announced that 15 infrastructure projects worth A$72bn (US$49.1bn) will be fast-tracked, supporting over 60,000 direct and indirect jobs. Moreover, the federal, state and territory governments have reached an agreement to cut approval time for infrastructure projects by half.

Continuing the focus, the 2021-22 budget also relies heavily on infrastructure expenditure to revive growth. Over the next 10 years an additional A$15.2bn (US$11.9bn) will be spent on infrastructure projects and related initiatives, building on the government’s existing A$110bn (US$85.9bn) 10-year rolling infrastructure pipeline to FY2030/31.

A number of priority projects have been targeted by the government for additional funding, including, a further A$2.6bn for the Darlington to Anzac Highway section of the North – South corridor, A$2bn for the Great Western Highway Duplication and A$2bn for a new intermodal terminal in Melbourne as part of the Inland Rail project.

Willis Rooney, Economist at GlobalData, comments: “The economic benefits accrued from these investments will be significant, given the substantial fiscal multiplier (the proportionate change in real GDP relative to a change in aggregate spending) that infrastructure investment generates. Australia’s public infrastructure multiplier is estimated by the OECD to be between 1.1 – 1.3 two years after investment, given the substantial spare capacity in the economy currently it is likely to be at the upper bound of this range.”

The HomeBuilder scheme, which has driven a record increase in private sector house approvals so far this year, will have its 6-month construction commencement period increased to 18 months, smoothing existing demand over 2022. In addition, a further 10,000 places will be supported on both the existing New Home Guarantee (NHG) scheme and the newly introduced Family Home Guarantee (FHG); the FHG allows single parents with dependents to build a new home, or purchase a new build, with a 2% deposit.

Further support includes a maximum withdrawal increase under the First Home Super Saver scheme to A$50,000. The measures are likely to provide some relief to the residential construction sector, which has dragged down the construction industry during the last two years.

Mr Rooney concludes: “The 2021 budget will generate substantial economic benefits for Australia and propel its economy to the 4.25% growth forecast by the Treasury in 2021. Driven by this upswing, the construction industry is expected to record an annual average growth of 3.4% between 2022-2025.”

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