Market Report, "Australia Infrastructure Report Q3 2016", published

Australia's construction industry is poised for an uptick in growth as government supported infrastructure development starts to overcome headwinds presented by a decline in capital expenditure in the mining sector. The Liberal party's plans hinge on promoting additional private sector investment through a shift to a user-pays system for transport infrastructure; however, we not strong downside risk to our positive outlook stemming from political uncertainty in the run-up to federal elections in July.

Latest Updates

We maintain our forecasts for an acceleration of growth for the Australia construction industry from 2016, with real growth expected to reach 1.8% in real terms (up from 0.03% in 2015).

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This will be driven by a surge in the transport infrastructure industry, with the near-term forecast supported by groundbreakings of a number of high-value road projects and a large project pipeline (valued at AUD184bn).

Additionally, the positive outlook for infrastructure development is supported by policy announcements from the Coalition Government, especially the long list of priority projects in the Australian Infrastructure Plan released in February.

Under the Liberal Party's plans, financing will come in large part from the private sector, through asset recycling and the use of PPPs as the country shifts to a user-pays model for transport infrastructure development.

However, we note strong downside risks to our positive outlook stemming from uncertainty over policy continuity, especially as we draw closer to a federal election in July.

Capital expenditure cuts in the mining and extractive sector will continue to weigh on industrial and overall construction growth. However, this downward pressure will begin to recede as commodity prices bottom in 2016.

Risk/Reward Index

Australia has risen to the top position in the Asia Pacific region on our Infrastructure RRI in Q216, with an overall score of 69.1 out of 100.

The Industry Rewards score improved drastically, in line with an improved outlook for construction industry growth. Australia now receives a score of 52.5 for this indicator, up from 45.0.

Australia's performance remains strong in terms of Risks, supported by a transparent operating environment and strong financing availability.

The Australia Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.

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