A modest recovery is forecast in the non-residential segment due to stronger private demand and activity picking up in the infrastructure building sector.
- In 2016 the Australian construction sector continued to suffer from subdued investment in mining and related projects. However, the industry saw significant increases in residential building activity, as the economy shifts away from its strong focus on mining.
- Residential building activity is expected to increase further in 2017 before slowing down and decreasing in 2018-2019, with an anticipated decline of 6%.
- Modest recovery is forecast in the non-residential segment due to stronger private demand and activity picking up in the infrastructure and commercial sectors. Engineering construction is also expected to increase, driven largely by the telecommunications sector due to rising National Broadband Network (NBN) related investment, as well as road, major rail and light rail projects.
- It is important to take into account regional differences, e.g. while higher housing investment is projected for New South Wales from 2017-2018 onwards, there are weaker growth prospects for Queensland, Western and South Australia.
- Payments in the construction sector take between 90-120 days on average, and the level of non-payment notifications remains high.
- Our underwriting approach remains cautious, particularly for small businesses, the mining-related segment and the Western Australia and Queensland markets generally.
