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Construction at record levels



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F O R I M M E D I A T E R E L E A S E

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CONSTRUCTION AT RECORD LEVELS

HIA, Australia’s peak building industry association estimates non-residential construction activity reached the record level of $31 billion in the 1998/99 financial year. Work done on non-residential building is estimated to have risen by 5 per cent to $13.5 billion, and engineering construction by 4 per cent to $17.5 billion. Non-residential building was higher, at $15.4 billion, at the peak of the office­ building boom in 1989/90. Engineering construction activity, however, will be the highest ever recorded.

Activity in the first half of the year was at an annual rate of $31.1 billion, but HIA expects that the rate eased slightly in the second half as some major engineering construction projects drew to a close. Non-residential building, however, is estimated to have accelerated from an annual rate of S13.2 billion in the first half, to $13.9 billion in the second.

Total Non-residential building and engineering construction has risen in each of the past six years - from $21.4 billion in 1992/93 to an estimated $31 billion in 1998/99. The boom has now ended, and HIA predicts a fall of 8 per cent in the year ahead and 9 per cent in 2000/01.

Non-residential building is forecast to fall by 7 per cent in 1999/2000 and by 2 per cent in 2000/01. Engineering construction is expected to fall by 8 per cent, and then by 15 per cent in 2000/01.

In the first ten months of 1998/99, non-residential building work approved was at an annual rate 15 per cent lower than in 1997/98, with large falls in approvals of hotels and entertainment facilities, health care buildings and offices. The sharp fall in business confidence in the second half of 1998 would have caused the postponement or cancellation of many projects. Business confidence, however,

has since picked up strongly. This recovery in confidence, along with the fact that non-residential building activity is not high in relation to its long-term-trend level, suggests a relatively mild further decline in 2000/01.

Engineering construction, on the other hand, is at historically very high levels. Many of the roadworks, telecommunications roll-outs and mining developments that have driven activity higher over the past few years, are now drawing to a close. The fall in activity, which began in the second half of 1998/99, is expected to accelerate over the next two years.

At first sight, HIA's non-residential building forecasts seem to be at odds with those recently published by BIS-Shrapnel. BIS-Shrapnel, however, forecasts work commenced, whereas HIA forecasts work done. Because of the large size and long lives of many projects, these two measures can yield vastly different

results. BIS-Shrapnel expects work commenced to fall by 12 per cent to $12.1 billion in 1998/99, and by a further 11 per cent in 1999/2000. These forecasts are not inconsistent with HIA's view that work done will rise by 5 per cent in 1998/99 and fall by 7 per cent in 2000/01. If BIS-Shrapnel is right about commencements

in the year ahead, however, activity will fall rather more steeply, in 2000/01, than HIA has forecast.

Housing Industry Association Limited ACN No 004 631 752 . 72

Construction at Record levels ..2

NEW HOUSING FORECAST: by state and territory Value o f work done on new housing, $ million, constant 1996/97 prices

NSW Vic Qld SA WA Tas NT ACT Aust

1996/97 4,714 2,610 3,158 491 1,505 193 178 200 13,049

1997/98 5,418 3,520 3,660 606 1,755 165 230 165 15,519

1998/99 f 5,900 3,960 3,320 680 1,880 145 260 165 16,310

1999/2000 f 5,940 4,000 3,350 590 1,800 145 210 165 16,200

2000/01 f % change

5,450 3,700 3,200 550 1,520 130 215 160 14,925

1997/98 15 35 16 23 17 -14 29 -18 19

1998/99 9 13 -9 12 7 -12 13 0 5

1999/2000 1 1 1 -13 -4 0 -19 0 -1

2000/01 f = forecast

-8 -8 -4 -7 -16 -10 2 -3 -8

HOUSING RENOVATIONS FORECAST: by state and territory Value of work done on housing renovations, $ million, constant 1996/97 pnces

NSW Vic Qld SA WA Tas NT ACT Aust

1996/97 4,053 3,100 2,260 813 1,240 243 140 156 12,005

1997/98 4,658 3,370 2,390 823 1,320 243 185 162 13,151

1998/99 f 4,800 3,517 2,418 832 1.349 246 193 170 13,525

1999/2000 f 4,900 3,410 2,280 810 1,325 225 206 173 13,329

2000/01 f % change

4,600 3,270 2,290 755 1,280 210 185 158 12,748

1997/98 15 9 6 1 6 0 32 4 10

1998/99 3 4 1 1 2 1 4 5 3

1999/2000 2 -3 -6 -3 -2 -9 7 2 -1

2000/01 f = forecast

-6 -4 0 -7 -3 -7 -10 -9 -4

N0N-RESIDENT1AL BUILDING FORECAST: by state and territory Value of work done on non-residential building, $ million, constant 1996/97 prices

NSW Vic Qld SA WA Tas NT ACT Aust

1996/97 4,366 3,252 2,523 663 1,063 . 218 267 402 12,755

1997/98 4,933 2,850 2,552 669 1,113 158 206 369 12,850

1998/99 f 5,340 3,245 2,700 560 860 185 300 250 13,450

1999/2000 f 5,000 2,950 2,550 490 850 170 220 220 12,450

2000/01 f % change

4,850 2,850 2,500 480 825 165 245 270 12,185

1997/98 13 -12 1 1 5 -28 -23 -8 1

1998/99 f 8 14 6 -16 -23 17 4 5 -32 5

1999/2000 f -6 -9 -6 -13 -1 -8 -27 -12 -7

2000/01 f = forecast

-3 -3 -2 -2 -3 -3 11 23 -2

ENGINEERING CONSTRUCTION FORECAST: by state and territory Value of work done on engineering construction, $ million, constant 1996/97 prices

NSW Vic Qld SA WA Tas NT ACT Aust

1996/97 5,010 2,472 3,593 845 2,684 233 191 136 15,165

1997/98 5,152 2,983 3,787 1,140 3,217 213 200 146 16,838

1998/99 f 5,300 3,100 4,400 920 3,140 210 330 130 17,530

1999/2000 f 5,450 2,750 4,000 770 2,550 195 280 115 16,110

2000/01 f % change

4,700 2,430 3,200 630 2,320 175 200 110 13,765

1997/98 3 21 5 35 20 -9 5 7 11

1998/99 3 4 16 -19 -2 -1 65 -11 4

1999/2000 3 -11 -9 -16 -19 -7 -15 -12 -8

2000/01 f = forecast

-14 -12 -20 -18 -9 -10 -29 -4 -15

FURTHER INFORMATION: Please contact Mr Geoff Bills, HIA Chief Economist on (03) 9787 3261