Road construction dwindles as private sector pulls out

Road construction tipped to decline significantly in coming years due to decrease in private investment and the completion of projects

December 13, 2010

Road construction is tipped to decline significantly in coming years due to a decrease in private investment and the completion of projects.

In its latest report, Road Construction in Australia 2010 to 2025, advisory firm BIS Shrapnel says construction has started falling and will continue through to the mid-2010s.

The report says construction activity fell by 7 percent to $15 billion last financial year – the first decline since the 2002 financial year.

"While public roads activity only slightly eased back, the overwhelming contributor to the decrease last year was weaker private work," BIS Shrapnel senior economist Damon Roast says.

"Much of his was due to projects nearing completion, for example the Clem7 in Brisbane and several runways and new mine-related works."

According to BIS Shrapnel, road construction will begin falling from the 2013 financial year due to the end of current government investment programs.

It expects the decline to run until the next round of the Federal Government’s Nation Building Program begins in the 2015 financial year.

"With the states and territories, most have started to look at cutting back on capital expenditure," Roast says.

While Australia came through the global financial crisis largely unscathed, Roast believes there is a still chance the domestic economy will be buffeted if ongoing financial concerns in Europe and the US continue.

"Any further GFC-like episodes could inflict serious damage and significantly test the resolve of governments who see road building as a means of stimulus," he says.

"Much of our supplies of public savings and ready-to-go projects have been exhausted."

BIS Shrapnel’s report predicts construction activity in NSW to decline from next financial year, but will be offset by public investment in major projects such as highways and arterial routes.

"The next major upswing will begin in 2015/16, given the resumption of major private financing for several potential mega-projects," BIS Shrapnel says.

Victoria is expected ease back in the 2015 financial year after construction activity hits its peak next financial year.

Meanwhile, road construction in Queensland is forecast to fall from record levels this financial year due to the completion of toll roads and major projects such as the Airport Link motorway upgrades finish.

South Australia is returning to normal levels after a boom over two years to the 2009 financial year, while activity in Tasmania is expected to increase this financial year before falling sharply.

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