Article 2.

Construction 'to reach $82b in 2008-09'

November 22, 2007 - 10:49AM

Engineering and commercial construction activity by the private sector is expected to reach a record high of $82 billion in 2008-09, a new report shows.

But many of the country's leading construction companies say they are experiencing continued pressure from scarce resources and tight profit margins.

Construction companies are forecasting a 7.4 per cent increase in the total value of construction work which would build on a hefty 10.8 per cent increase expected for 2007-08 and 12.1 per cent growth in 2006-07, the Australian Industry Group (Ai Group)-Australian Constructors Association (ACA) construction outlook says.

"The survey confirms that engineering and commercial construction remains strong," ACA president Wal King said.

"It is also clear, however, that supply constraints and rises in construction costs pose a risk to growth prospects, with many firms continuing to face intense pressure from both scarce resources and tight profit margins."

Reflecting a sizeable backlog of work and further infrastructure investment plans, the report says engineering construction is forecast to be the major driver of growth, with total turnover predicted to rise by 14.2 per cent in 2007-08 and 9.7 per cent in 2008-09.

Non-residential building, or commercial construction, is forecast to expand further to generate $30 billion of work in 2008-09, although the pace of growth is expected to moderate to 7.1 per cent in 2007-08 and 3.5 per cent in 2008-09.

Apartment building sector work is expected to decline by 12.8 per cent in 2007-08, before regaining some ground in 2008-09 with a rise of 2.1 per cent.

Ai Group chief executive Heather Ridout says the continued growth of the engineering construction industry is positive news with the sector making a great contribution to the national economy.

"The construction industry continues to demonstrate its capacity to respond to the demands of the market but it will take much greater collaboration between clients and contractors if we are to maximise the benefits of the current surge in activity.

"We can no longer burden industry with the costs of tendering that are diverting valuable industry resources.

"We need new, collaborative procurement models that improve coordination between public sector agencies, both state and federal.

"Ideally, the industry needs three- to five-year visible project horizons to allow resource planning and better coordination."

Growth in engineering construction is expected to be broadly based, although key contributors to the strong two-year outlook include transport infrastructure, mining construction and heavy industry.

Solid rises are also expected in telecommunications infrastructure, water supply projects, power generation, and other civil projects such as the construction and upgrading of freight and port facilities to ease export bottlenecks.

This story was found at: http://www.theage.com.au/articles/2007/11/22/1195321911968.html