WA engineering work to slump 20%

14/09/2009 - 11:48

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Engineering construction activity in Western Australia is tipped to slump 20 per cent over the next two years, above that of a national 15 per cent decline, economic forecaster BIS Shrapnel says.

Engineering construction activity in Western Australia is tipped to slump 20 per cent over the next two years, above that of a national 15 per cent decline, economic forecaster BIS Shrapnel says.

The economic forecaster today released an update to its engineering construction activity forecast from 2008/09 to 2022/23, which had previously flagged the state's activity to fall 15 per cent.

The state's fall in engineering work is on the back of a 12 per cent rise in engineering construction activity in the 2009 financial year, BIS said.

BIS said the 20 per cent decline in WA over the next two years is due to activity in mining and mining-related sectors, such as rail and harbours, retreating from unprecedented levels.

It added that the oil and gas sector is a key exception, with $43 billion Gorgon gas project, approved earlier today, due to start construction in the first half of 2010.

Water activity in the state will also grow throughout the next two years with the Southern Seawater desalination project and Ord River expansion project.

Nationally, BIS has projected a 15 per cent fall in engineering construction activity over the next two years, driven by a 25 per cent slump in privately funded work over the same period.

The fall is on the back of fewer upcoming projects taking the place of current projects, which are predominately in mining and related sectors.

"While the outlook for the global economy has improved during 2009, we are still forecasting a substantial setback to minerals investment over the next one to two years given the ongoing credit squeeze and global slump in industrial production," senior manager for BIS Shrapnel's infrastructure and mining unit Adrian Hart said.

"Even including work starting on the Gorgon LNG project in the first half of 2010, mining and heavy industry construction is set to decline by one-third over 2009/10 and 2010/11."

Mr Hart said the upcoming downturn in private investment justified the need for governments to stay the course on their own spending and investment plans for at least the next two years.

"There seems to be a perception that, having enjoyed an unprecedented boom over the past eight years, private funding for infrastructure will simply accelerate again from here, despite an ongoing financial crisis and the biggest global economic slump since World War II," he said.

"To the contrary, the next 12 to 18 months are going to see a sharp setback to privately funded construction work - both in engineering construction and non-residential building - as the fallout from the financial crisis comes through."

Mr Hart added that given in 2008/09 the private sector funded nearly two-thirds of all civil construction activity, which was worth around $44 billion in constant 2006/07 prices, declining activity from this sector will have substantial impact on overall activity.

According to the updated forecasts, BIS Shrapnel expects a sustained recovery in privately-funded engineering construction activity from 2012, contingent on a full resolution of credit problems and a pick-up in global economic growth.

This would present governments an opportunity to begin winding back their stimulus measures, Mr Hart said.

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