Daily News

View All News

Australia – Construction set to be the next ‘boom’ sector

17 April 2014

Following a slowdown of the mining sector, which has traditionally been a pillar of the Australian economy and labour market, some predict that the next sector set to ‘boom’ will be construction, reports heraldsun.com.au.

Craig James, Chief Economist at stockbroking firm CommSec, believes that construction will pick up the baton from mining to become the driving force behind Australia’s economy in the next few years.

“Builders will hold the upper hand rather than miners,” said Mr James speaking at a media briefing in Sydney to release Commbank’s latest small and medium-sized enterprise confidence report.

While investment in the mining sector tripled in the four years since 2009, it’s now set to slow down as demand from China falters and Mr James expects residential construction will pick up the slack.

“We’re already starting to see that with things like home lending. If more loans are being taken out for the construction of houses and apartments you tend to expect that is going to translate into more building work happening. It’s the same in terms of council approvals to build new dwellings — they’re at record highs,” Mr James said.

He also busted the ‘myth’ that times are tough in Australia, as the economy has experienced 22 years of consecutive growth with inflation rates at +2.7%. Unemployment is at 5.8% with companies holding a healthy amount of cash on the books.

While construction might not pay the same six-figure salaries as mining, it could benefit more people. Mr James explained: “The builders get the money, the carpenters get the money, all the people providing curtains and carpets and landscape gardeners and light fittings. You think about the whole process of building a home all these people are getting extra dollars and they’re able to spend that through the economy. And it’s likely to be broader in context whereas mining is much more specific to certain parts of Australia...we are going to see a number of boats being lifted all at one time.”

Despite the slowdown it’s not all bad news. It could just be the end of days where people go to the Pilbara (a region in the north of Western Australia known for its petroleum, natural gas and iron ore deposits) to: “Fill water bottles for workers and get paid AUD 120,000 a year. It’s by no means doom and gloom for mining services, it’s just different sorts of companies are going to get the benefit,” Mr James concluded.