The Australian construction industry is expected to contract by 5.7% in 2020 despite the country designating construction industry as ‘essential service’ and allowing it to continue during the lockdown due to the twin effects of COVID-19 and lower oil prices, according to GlobalData, a leading data and analytics company.

Dhananjay Sharma, Construction Analyst at GlobalData, comments: “Australia’s construction industry has been on a severe downturn, which will be compounded by the outbreak of COVID-19 and the subsequent negative impact on the economy in 2020. The historic fall in oil prices and the resultant cutback in investment decisions on new projects by oil producers will worsen the situation in Australian construction industry.”

GlobalData expects that the Australian federal government as well as the state governments individually will take important steps including investments in infrastructure to offset the weaknesses in the construction industry. The federal government’s ‘Infrastructure Investment Program’, is expected to deliver US$57.5bn in infrastructure funding till 2026/27, including funding of US$7.7bn ‘National Rail Program’ and equity for other major infrastructure investments.  

Among the states, New South Wales (NSW) government has eased restrictions on construction sites – allowing works on weekends as well as on public holidays and announced a first tranche of US$5.1bn of shovel ready construction project, including the Snowy Hydro 2.0 project and construction of 4,441 new houses. It has also announced suspension of license fees for building contractors for one year and discounting of license fees for three years. The step is expected to benefit around 200,000 tradesmen and would cost the NSW government up to US$34m.

The Victorian Government has approved four new multi-billion dollar building projects. The South Australian state government has announced that it will fast track new major infrastructure projects.

Sharma concludes: “The decline in residential construction, which started in 2019, will be aggravated by the rise in unemployment across the country. Dwelling units’ approvals were already down, contracting by 6.2% during the first two months of the year, pointing to a period of severe weakness in 2020. The downturn will be compounded by the rising unemployment and the impact on household incomes and confidence emanating from the COVID-19 outbreak.”