The ABS this morning released engineering construction data for the September quarter of 2012, which revealed continued strong growth in the value of work done but also a continued shrinking of the construction pipeline, which corresponds with the upcoming peaking of the mining investment boom.
According to the ABS, the total value of engineering construction in real seasonally-adjusted terms lifted by 3.6% in the September quarter to be up 13.9% over the year, driven entirely by the private sector (see below chart).
You can see the big uplift in activity from 2003 as the commodity price boom took hold, with the key mining states of Western Australia and Queensland driving most of the increased construction activity (see below chart).
There are clouds developing on the horizon, however, with the pipeline of construction projects continuing to shrink, albeit from highly elevated levels. After peaking at $161 billion in September 2011, the pipeline of construction projects – both commenced and yet to begin – fell to $139 billion as at September 2012, consistent with the view that Australian mining investment will peak sometime over the next 12 months (see below chart).
That’s a lot of tradies and construction labour.
That regional (central?) Qld construction boost is timely indeed.
Life is great in the sunshine state!
The current pipeline of work would seem to be 4 years at the 2012 rate of work (based on an eyeball of the graph provided).
Let’s say 3 years as some of it is cancelled or deferred.
So where is the big driver for net reduction in employment in the mining and processing construction and operations boom over the next 3 years?
That would seem to leave employment as likely to be relatively stable over the medium term in the absence of external shocks, given that the currency has been at these levels for some years now and that construction is well below the highs of the late 2000′s.
While there might be some high currency effects still flowing through, they are likely to be increasingly offset by the reduced interest rates.
There might be some hits to employment from the balance of state and federal austerity but the likely big moves seem to be 2 to 3 years off.