November 2024 ACIF Forecasts
The Australian Construction Industry Forum (ACIF) Forecasts were released on 14 November, forecasting that residential construction will bounce back. The ACIF November Forecasts show how the large pipeline of work in hand is sufficient to drive growth in building and construction activity despite slowing in the economy.
ACA members have free access to the ACIF Customised Forecasts dashboard. Head here for access and more information.
The Australian Construction Industry Forum has provided the following summary.
Activity is projected to rise to $299 billion this year (in 2024–25). The difference this year is that the rate of growth will fall to a modest 0.9 per cent. This will be just enough to keep the industry’s head above water. This is not to understate the difficulties encountered in the current economic environment. Builders are very much the meat in the sandwich between falling demand and higher costs. While the sharp spike in inflation in materials prices has moderated, input prices remain at elevated levels. Builders are also having to confront the impact of recent industrial relations changes at the same time as they are dealing with sustained labour shortages. Margins have been squeezed. The increase in construction insolvencies is an indicator of rising pressures.
The public sector has been a major contributor to the build-up in the pipeline of work. The investment programs in many states peaked last year and are now ramping down. Some governments are trimming their spending, cutting and deferring projects. Nevertheless there are still some fairly large items sustaining work flows into this year and next. Structural and policy change driving the transition to clean energy is already boosting construction work and more is on the way.
Prospects for the industry are also shaped by business investment decisions. The shift into data centres and in restructuring of logistics and supply chains is offset by an uncertain outlook in areas such as Offices, Accommodation, Entertainment and Recreation and retail. Mining and other resources are seeing some growth, most notably in Western Australia.
The boom in Engineering Construction, particularly Infrastructure Construction activities, has more than offset the decline in Residential Building. While growth in large-scale public transport projects has peaked, a wave of projects in renewable or clean energy supply and in water have taken up all of the slack in capacity that might have been freed. The ramp up in work yet to be done suggests that there is upside risk to the four per cent growth forecast for 2024–25.
In Heavy Industry, including Mining, interest in critical and strategic minerals and investment in clean energy supply is boosting activity, supported by ongoing development in traditional mining activities including iron ore, gold and copper. Work done is expected to continue to lift into 2024–25 and 2025–26. The upturn may run for longer, adding an upside risk to the forecasts.
Non-Residential Building activity grew steadily over the last three years. The situation for this category reflects large movements in the sub-components, with growth (sometimes double-digit growth) in Industrial, and Other Commercial being offset by large contractions in Accommodation and Entertainment and Recreation and, occasionally, Retail and Wholesale Trade. Reflecting this mixed performance, the outlook is finely balanced. The forecasts project a small decline in 2025–26 followed by a mild increase in 2025–26.
ACIF experts provided the following commentary.
“There are many factors that could disrupt the finely balanced outlook. There is a grave risk that fiscal policy and monetary policy settings will continue to pull in opposite directions. Interest rates may remain elevated for longer, suppressing residential building activity for longer. The surge in clean energy may not play out as expected. Not all of the risk is on the downside.”—Kerry Barwise, Lead for the ACIF Forecasts
“Government initiatives to combat the housing crisis could mobilise a larger increase in housing supply and this may arrive sooner than expected in these forecasts. Residential Building has struggled under the weight of higher mortgage rates and the phase out of various subsides. The value of approvals has tumbled down over the last two years.”—Nerida Conisbee, Chair of ACIF’s Construction Forecasting Council,
“The industry’s capacity in Residential Construction has been basically static. The forecasts project that the downtrend in work done will be carried forward one more year before a return to growth from 2025–26 when demand picks up and some of the supply side constraints are reduced.”—Andrew Scott, Deputy Chair of ACIF’s Construction Forecasting Council
The Australian Construction Industry Forum (ACIF) facilitates and supports an active dialogue between key players in residential and non-residential building, and engineering construction, other industry groups, and government agencies. ACIF’s focus is on innovation, collaboration, equity and sustainability for the industry.
ACIF produces regular Forecasts for the industry. The ACIF 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.
ACA members have free access to the ACIF Customised Forecasts dashboard. Head here for access and more information.
An extensive Australian Construction Market Report is also available to purchase. The Report gives businesses interested in the prospects of the building and construction industry accurate, credible analysis by state and for the nation overall on the indicators of demand. This includes rolling ten-year forecasts across residential and non residential building, and engineering construction work.