Engineering booms, pipeline shrinks

Advertisement

By Leith van Onselen

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).

Advertisement

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).

Advertisement

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).

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.