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Construction is the next sector set to boom

FORGET mining, the next booming industry in the Australian economy will be much closer to home.
That’s according to CommSec chief economist Craig James, who said construction will pick up the baton from mining to become the driving force behind Australia’s economy in the next few years.
“Builders will hold the upper hand rather than miners,” said Mr James speaking at a media briefing in Sydney to release Commbank’s latest small and medium-sized enterprise confidence report.
While investment in the mining sector tripled in the four years since 2009, it’s now set to slow down as demand from China falters and Mr James expects residential construction will pick up the slack.
Multi-storey construction like that at Barangaroo is set to benefit all sectors of the ec
Multi-storey construction like that at Barangaroo is set to benefit all sectors of the economy. Source: Supplied
“We’re already starting to see that with things like home lending. If more loans are being taken out for the construction of houses and apartments you tend to expect that is going to translate into more building work happening. It’s the same in terms of council approvals to build new dwellings — they’re at record highs,” Mr James said.
He also busted the ‘myth’ that times are tough in Australia, as the economy has experienced 22 years of consecutive growth with inflation rates at 2.7 per cent.
Unemployment is at 5.8 per cent with companies holding a healthy amount of cash on the books.
A slowdown in China’s economy has implications for Australia’s mining sector. Pictured, C
A slowdown in China’s economy has implications for Australia’s mining sector. Pictured, Chinese workers in Beijing.Source: AFP
While construction might not pay the same six-figure salaries as mining, it could benefit more people.
“The builders get the money, the carpenters get the money all the people providing curtains and carpets and landscape gardeners and light fittings. You think about the whole process of building a home all these people are getting extra dollars and they’re able to spend that through the economy,” Mr James said.
“And it’s likely to be broader in context whereas mining is much more specific to certain parts of Australia...we are going to see a number of boats being lifted all at one time.”
But despite the slowdown it’s not all bad news. It could just be the end of days where people go to the Pilbara to “fill water bottles for workers and get paid $120,000 a year,” Mr James said.
“It’s by no means doom and gloom for mining services, it’s just different sorts of companies are going to get the benefit.”
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Jobs hope rising for embattled building industry

NEW South Wales, Queensland and Western Australia are expected to lead Australia's building recovery with Sydney showing the most promise, according to a new report.
According to the Building in Australia 2013 report from economics forecasting firm BIS Shrapnel, the upswing in building activity needed to offset the post-mining-boom lull will gather momentum over the next two years.
While Brisbane will lead the regions as an epicentre of growth, BIS associate director Kim Hawtrey said the pace will be "uncomfortably slow".
"We're in for a real nail-biter," Dr Hawtrey said.
"We see an upswing in building but it will be uneven and slower to get going than usual. The next 12 months will
be a critical test of how quickly the construction sector can take on more of the heavy lifting, and the Australian economy will remain balanced on a knife edge."
Building, especially home construction, is not responding to low interest rates as might be expected.
"Home building has been punching below its weight and normally low mortgage rates would be stimulating the sector toward clear recovery by now. But the antibiotics are taking longer to work this time around," said Dr Hawtrey.
"High household debt, concerns about the global economy, planning restrictions in some states and lack of land supply are among the factors that explain this new phenomenon."
Baby builders put off by affordability concerns
Demographic changes are also at work. Population is growing strongly but generational changes mean it is not necessarily translating into demand for new housing.
"Baby boomers, once the drivers of home construction, are now putting a brake on building as their numbers outweigh younger generations," said Hawtrey.
"For their part, young people are discouraged by affordability barriers and changes to first home buyer grants."
The Building in Australia report provides an independent medium term assessment of
the Australian building industry outlook.
It contains demographic trends and detailed forecasts on the residential (housing, other dwellings), non-residential (commercial, industrial, social and institutional) sectors, and the alterations and additions market, by state.
The report covers key drivers for housing demand, population trends, the outlook for building material costs and the non-residential building market.
BIS report shows little growth in 2013/2014
Surprisingly, the Building in Australia 2013 Report predicts that residential building will show little overall growth in 2013/14, with gains in some areas matching losses in others.
It will be a year of change in the mix - from Victoria to New South Wales, and from high rise to bungalows - beforegaining strong traction the following year, in 2014/15.
An improvement in residential markets will be seen in New South Wales, Queensland and Western Australia, where population growth and stronger economies will see home building respond to rising stock deficiencies.
Each market has an estimated dwelling stock deficiency and in these states, recovery is expected to be driven by upgrader/downsizer demand and strong investor demand - including from overseas investors - with first home buyers taking longer to join in because of changes to grants.
Lower interest rates, together with solid economic growth and employment, will underpin improved confidence and promote new residential building - particularly in the key state of New South Wales.
However, Victoria and other southern states will see a contraction, offsetting the above.
This will be an inevitable correction following several record years of phenomenal home building in Victoria.
These markets are generally in oversupply, notably Victoria.
Consequently the immediate outlook for the number of dwelling commencements is mixed, and is forecast to change by -2 per cent in 2013/14.
Pent up demand to sustain better overall growth
Pent up demand and solid economic fundamentals will then sustain better overall national growth in home building during 2014/15 and 2015/16.
A stronger pick up is forecast for 2014/15 (+9 per cent) and 2015/16 (+4 per cent) as the market builds momentum.
This will be on the back of low interest rates, strong population growth and pent up demand in key states. The lower Australian dollar -- compared with recent years -- will help stimulate traditional industries.
The lower construction prior to 2013, as well as an expected improvement in confidence and income growth, will underpin the outlook.
Moderating the upturn will be residual consumer caution amid concerns over rising unemployment, affordability barriers and high household debt levels.
Natural cyclical factors will then lead to a correction in the cycle during 2016/17 (-5 per cent) and in 2017/18 (-8 per cent).
Nationally, the recovery will see private detached house starts grow by two per cent in 2013/14 and 12 per cent in 2014/15, the report predicts.

Source : Sunshine Coast Daily Newspaper (

Construction confidence grows

CONFIDENCE in the outlook for the Queensland building industry and the Queensland economy continued to grow during the March quarter, according to the March 2012 Survey of Industry Conditions report released by Master Builders on Tuesday.
Master Builders director of housing policy Paul Bidwell said the latest report highlights rising confidence for the fourth quarter in a row.
"We believe a range of factors have contributed to this improvement, with relatively stable interest rates and speculation of further rate cuts in 2012 at the top of the list," Mr Bidwell said.
"Positive media commentary regarding domestic and global economies and the landslide Queensland state election result have also played a role.
"While this continued growth in optimism is welcome, as it makes businesses more likely to spend, hire and invest, it is unfortunately not matched by an improvement in trading conditions during the March quarter.
"In the three months to March conditions in the residential and commercial sectors weakened. Turnover and profitability were both down, along with work in progress and average contract prices.
"The industry is optimistic that a gradual recovery is under way but, unfortunately, many businesses are not seeing any meaningful improvement in their individual circumstances, even in the regions where the resources sector is booming."
"The boom is yet to have any significant impact on many residential and commercial builders.
"Not surprisingly, the most critical constraint on business growth was the lacklustre level of demand, with the same list of usual suspects contributing to the softness in demand - weak consumer confidence, the two-speed domestic economy, the ongoing concerns about a possible second GFC, stagnant/falling house prices, the looming introduction of the carbon tax and housing affordability."
Report highlights include:
  • Businesses are increasingly confident that the industry is now entering the recovery phase. Consistent with that view, the Profitability and Turnover Indexes are forecast to increase over the next three months.
  • The majority of businesses expect their staffing and apprentice levels to stabilise in the short term.
  • Wages growth is only a problem in Central Queensland and Mackay, as a result of the resources boom.
  • Low affordability continued to dampen new housing demand, with the vast majority of respondents (86%) of the view that low affordability was having a negative impact on new housing demand.
  • The outlook for housing affordability is expected to improve slightly over the next 12 months thanks to the softening of house prices in some areas of the state.

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Build & Design Queensland Expo

Build & Design Queensland (BDQ) is the first dedicated architecture, construction and design trade expo focusing on the unique needs of Queensland building and design professionals.
The inaugural expo, at the Brisbane Convention and Exhibition Centre on 9 - 11 May 2012, is set to become home to the best in cutting edge build and design for the Queensland environment, in both the residential and commercial sector.  

BDQ is committed to driving the growth and regeneration of Queensland by bringing the industry together to help shape the future of the state. The Build & Design Queensland exhibition will offer visitors a powerful combination of local and national suppliers, new product innovation and inspiring ideas, complemented by educational seminars.
With the forecast spend of $10 billion on construction over the next two years* and the need for residential housing to accommodate the mining boom, BDQ will play a fundamental part in helping Queensland design and building professionals to drive the growth by securing new business and sourcing the right products.   
BDQ is co-located with the Australian Institute of Architects (AIA) National Architecture Conference and the CEDIA Expo.
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