How long will the infrastructure boom last?

The AFR is excited:

The infrastructure boom could last longer than the mining boom, engineers have forecast as rising job vacancies on hundreds of projects, worth more than $100 billion around the country push up engineering and construction wages.

“The jobs data is as clear as a bell, we’re on the up,” said Brent Jackson, executive general manager of industry body Engineers Australia. “Because we’ve got so many projects on the boil, we’re not going to see this boom back off for an awfully long time.”

Engineering and construction is one of the few industries in which workers are getting pay rises as demand for skilled engineers enables people to jump from one project to another, boosting their salaries.

Some 3579 engineering jobs were available nationally in June – up 32 per cent on a year earlier, according to Engineers Australia. Most of the jobs are in NSW and Victoria as the states proceed with tens of billions of dollars of new road and rail projects.

“There’s no doubt it’s a competitive market out there – the east coast is experiencing an unprecedented infrastructure boom,” said Joe Barr, chief executive of contractor John Holland.

It’s certainly good news to see some major city de-clogging. But in terms of adding to growth (and jobs) it isn’t going to last “decades”. In fact, it’ll be largely over next year:

The big jump in spending is this year. For 2018 and 2019 the rise is a lousy $2bn or so. By 2020 a new capex cliff appears.

So, this year adds 0.4-0.5% to growth. For two years after that just 0.1%. Then it takes it all away fast as the NBN spend retrenches.

One has to remember that building-led growth is dumb growth. It only adds to growth and jobs if it is building more than the year before. That is, you make yourself thoroughly hostage to the rate of change in spending.

Obviously this kind of resembles a ponzi-scheme.

Comments

  1. No doubt Engineers Australia will be all over this to push the Government to import more members.. ahem I mean critically needed skills to meet the ‘shortage’. Rather than training up graduates.

      • True, that already happens in the construction industry. I worked awhile on a large Government building project a couple of years ago and the majority of the drafting was done in Vietnam.

      • True, that already happens in the construction industry. I worked awhile on a large Government building project a couple of years ago and the majority of the drafting was done in Vietnam.

        Yes, I believe that could be so, however the Vietnamese have very good skill sets in CAD (3D-modeling) that would would be ridiculously expensive in Australia. Atlas is doing well out of all this. http://www.atlasindustries.com/

      • Speaking from personal experience, this is EXACTLY what is happening, and has been for years.

        My engineering department went from 35 down to 7 during the mining bust. We now outsource to our Indian or eastern European (Romania if you can believe it) counterparts. Our German boss categorically said we will never see those positions return.

        @blackmore, not just drafting, but FEA’s

    • They’ll be fine. There are probably thousands of buildings needing to be re-engineered once people start wanting the flammable cladding removed. That will keep them going at least a decade – it took us 30 years to put the stuff up after all.

  2. Mr SquiggleMEMBER

    ‘One has to remember that building-led growth is dumb growth. It only adds to growth and jobs if it is building more than the year before.’

    Yup – thats a common characteristic of a ponzi scheme. Building jobs are generally temporary, they only last as long as the project, so the only way to keep the ball rolling is …….. find another project……more appartments, more crowding, etc

    • Yup. Keynesian ditch digging at its finest (and most expensive).

      But the economics establishment will be cock-a-hoop at the thought of the magical ‘multiplier’.

      Sorry … mythical, not magical. Can’t believe the economics students are still taught (and believe) that shit.

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