ACIF Forecasts – November 2021

6 November 2021

The Australian Construction Industry Forum (ACIF) has released its Construction Industry Forecast for November 2021. We have published a summary here. ACA members have free access to the full forecasts, available on the ACIF Customised Forecasts Dashboard.

The full forecasts are available on the ACIF website. Remember, ACA members enjoy free access to the ACIF Customised Forecasts Dashboard. To sign up, head to this link. Members can also purchase the Australian Construction Market Report here.

Twin Booms in Housing and Infrastructure

The November ACIF Forecasts reveal that the industry is facing twin booms in housing and infrastructure. While the surge in work is welcome, the road ahead will also have challenges. The ACIF Forecasts indicate that materials and skills shortages, as well as increasing cost pressures, are looming.

ACIF expects building and construction to be a major contributor to growth and recovery, projecting a 6% increase to $256 billion, while infrastructure construction is set to grow by 7.5% in 2022.

Infrastructure construction will grow by 7.5% in 2022, an impressive figure buoyed by expanded government development programs. This will carry through to at least 2023–24.

Record low interest rates and government incentives have driven strong demand for housing, driving up prices and flooding markets with orders and work.
Strong demand for housing is buttressed by record low interest rates, the HomeBuilder program, and other government incentives. These are driving up prices and causing a surge in orders and building work. Input costs and building (especially house) prices are rising at an alarming rate, placing additional pressure on growing levels of inflation.

Governments have committed to a new wave of infrastructure investment, precipitating a surge in “hard” infrastructure, including energy, transport and water, as well as in “social” infrastructure, including health, education, and cultural and community buildings.

A full pipeline of work is challenged by materials and trades and professional shortages. Lingering restrictions – both interstate and international – are constraining skilled worker supply.

Bob Richardson, Chair of ACIF’s Construction Forecasting Council stated: “The growth in house building will drive expansion in employment, and governments are also committing to a new wave of infrastructure investment, including in energy, transport, and water as well as in ‘social’ infrastructure buildings. As always in our industry there are challenges in the outlook, including shortages in materials and skilled trades, supply chain disruption and rising prices.”

Residential building is expected to surge over the next two years, as builders will need time to work through their backlogs. Stimulus measures have begun to taper, with a drop off as steep as the ramp-up expected to materialise.

Kerry Barwise, ACIF Chief Forecaster and Managing Director, FTI Consulting commented: “Twin booms in house building and infrastructure indicate that the economic recovery will be led by building and construction, with twin growth trajectories set to add more than 100,000 jobs and to reach $256 billion in 2022.
Despite this surge supporting the economy into 2022, the going is getting tougher. Shortages of building materials and skilled trades, as well as alarmingly high input costs and rising house prices represent significant challenges, all of which may add pressure to already rising inflation.”

Non-residential building will continue to decrease modestly over the next two to three years. Strong spending increases in social infrastructure, including health, aged care, and other miscellaneous areas, will not be sufficient to offset expected falls in new offices, retail/wholesale trade, accommodation, commercial entertainment and recreation.

Heavy industry, including mining, is projected to grow significantly, at more than 20% over the next three years. This includes traditional areas such as iron ore, coal and LNG, as well as emerging areas such as hydrogen.

Nerida Conisbee, Deputy Chair of ACIF’s Construction Forecasting Council commented: “The new development market was hit hard by the COVID downturn, but the pipeline for the industry is now looking very strong.”

ACIF Forecasts are rolling ten-year forecasts of demand across residential, non-residential and engineering construction in Australia. The Forecasts are prepared by respected economic modellers, using high quality data sources, and are overseen by ACIF’s ​Construction Forecasting Council​, an industry panel of expert analysts and researchers.

ACIF Forecasts are used by thousands of professionals each year, from across the full range of stakeholders, from major organisations to small consultancies. The ACIF Forecasts are available in two formats: Australian Construction Market Report, a 110-page expert analysis on the economy and industry sectors ($350), plus the Customised Forecasts Dashboard ($300), an online portal where users can query the full ACIF Forecasts database on 20 work types, over a 20-year period. As an industry not-for-profit, ACIF produces this information to assist businesses and governments at all three levels navigate the rapidly changing marketplace and help them plan for the future.

ACA members have free access to the ACIF Dashboard. You can sign up here.