skip to log on skip to main content
VoiceOver users please use the tab key when navigating expanded menus
Article related to:

Economy

What Delta means for Aus’ $A100bn opportunity

Senior Economist, ANZ

2021-09-17 02:00

Australia’s major project activity is set to rise over the next three years to a potential peak of close to $A100 billion, but the ongoing impacts of the pandemic pose a near-term risk.

Hitting that mark would require average annual growth of almost 20 per cent across the surveyed projects. As predicted in February, ANZ Research does not expect the pipeline will be fully realised – although a strong rise looks inevitable.

According to ANZ Research’s latest Australian Major Projects report, activity on projects worth $A100 million or more could expand to a combined value of around $A96 billion in 2023-24.   

While the ramp-up in the pipeline appears slower than previously projected, near-term risks remain. The spread of COVID-19’s Delta strain has delayed the return of some certainty to the outlook.

Extended lockdowns in major Australia population centres are restricting construction activity during the current third quarter, likely putting an end to the acceleration of growth in total non-residential construction work done in the first half of 2021.

But, in a positive sign, businesses are pretty confident about the private capex outlook for 2021-22, Australian Bureau of Statistics data show.  

Concern

ANZ Research remains concerned about Australia’s capacity to realise such a large volume of work, particularly in the public sector backed mega-projects valued at $A1.8 billion and above, and there are risks of further delays and cost escalations on key projects.

There are also supply-side challenges, with many countries investing in infrastructure to support the economic recovery from the pandemic. This is increasing competition for the limited global pool of workers, materials and equipment.

Even when Australia reopens its international borders, this level of competition will make it harder to attract the skilled and experienced workers needed. Global supply chains are also facing recurrent disruptions from COVID-19 outbreaks, and these are unlikely to disappear anytime soon.

The projected expansion in the major projects pipeline over the next three years is underpinned by broad-based growth across transport, electricity, resources and hospitals.

The sizeable public-sector backed major project pipeline including public-private partnerships, carries several mega-projects, concentrated in road and rail.

Governments are planning a sharp increase in overall infrastructure investment in 2021-22, but actual activity could again undershoot budget estimates, particularly given the latest lockdowns in Sydney and Melbourne. A number of major hospital projects have been brought forward.

Uncertainty about the way businesses and households will operate and behave when lockdowns end is weighing on the major project pipeline of non-residential buildings. Commercial building approvals are well down on pre-pandemic levels, and work yet to be done has been trending down over the past year.

Despite the increased popularity of working from home, though, the pipeline of potential major office projects looks robust.

Catherine Birch is a Senior Economist at ANZ

This story is an edited excerpt from the Australian Major Projects September 2021 Report, published September 16 2021. Click HERE to read the full document. 

anzcomau:article-hub/topic/economy,anzcomau:article-hub/geographies/australia
What Delta means for Aus’ $A100bn opportunity
Catherine Birch
Senior Economist, ANZ
2021-09-17
/content/dam/anzcom/images/article-hub/articles/institutional/2021-09/generic-construction-infrastructure-building.png

Related articles

This publication is published by Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (“ANZBGL”) in Australia. This publication is intended as thought-leadership material. It is not published with the intention of providing any direct or indirect recommendations relating to any financial product, asset class or trading strategy. The information in this publication is not intended to influence any person to make a decision in relation to a financial product or class of financial products. It is general in nature and does not take account of the circumstances of any individual or class of individuals. Nothing in this publication constitutes a recommendation, solicitation or offer by ANZBGL or its branches or subsidiaries (collectively “ANZ”) to you to acquire a product or service, or an offer by ANZ to provide you with other products or services. All information contained in this publication is based on information available at the time of publication. While this publication has been prepared in good faith, no representation, warranty, assurance or undertaking is or will be made, and no responsibility or liability is or will be accepted by ANZ in relation to the accuracy or completeness of this publication or the use of information contained in this publication. ANZ does not provide any financial, investment, legal or taxation advice in connection with this publication.

Top