Capacity to Spare Defence and the NT Construction Industry

Transcription

1 Capacity to Spare Defence and the NT Construction Industry July 216 proudly sponsored by

2 Master Builders NT Master Builders NT is the peak industry organisation for the construction sector in the Northern Territory. We seek to provide our industry with high quality data that enables high quality decision making by investors, construction businesses and Government. Contact Details Postal Address Po Box 37121, Winnellie NT 82 Street Address 11/396 Stuart Highway, Winnellie NT 82 Phone: July, 216 PAGE 2

3 Introduction In late February, 216 both the Prime Minister and the Defence Minister released the 216 Defence White Paper and its associated Integrated Investment Plan. Those documents highlighted the Governments commitment to develop approximately $8bn of new Defence infrastructure in the Territory over the coming decade. Master Builders NT released its first Capacity to Spare summary report in August, 215. That document was designed to highlight our forecasts for NT construction activity and the anticipated Defence build-up, based on the information available at the time. This version updates that summary report, utilising the new proposed expenditure levels and recalibrated forecasts for underlying demand for construction services, as known today. This work has been developed again by our respected economic researchers, Independent Economics P/L, who continue to be long term partners of the Master Builders network. In the following pages you will find the latest forecasts presented in aggregate, and also for each of the key industry sectors. You will also find our impact analysis, presented in a somewhat unique way. In most economic modelling, there is a single assumption made about the level of local industry participation and the presentation of one set of outcomes as a result. Master Builders NT has adopted a different model. The impact of investment is obviously highly dependent on the level of local industry engagement. We have therefore presented our impact analysis against 4 separate scenarios for local delivery of construction works. There are the full and zero scenarios, as well as low and high. Together, they show the opportunity available to decision makers. Something we believe is vitally important within the context of the North Australian Development Agenda. Further information on this work is available from Master Builders NT on or you can visit our website Disclaimer Economic modelling is very sensitive to the assumptions used, timing and the data available at the time. Master Builders NT is very proud to make this work available to our industry. However, we do not take responsibility for any decisions or actions taken by third parties based on this information. July, 216 PAGE 3

4 Forecast for Total Construction 1, 8, 6, 4, 2, Without new defence The level of construction activity continues to re-balance, with continued falls occurring through to 218/19. This forecast does not include the anticipated Defence program commencing from 217. NT Construction Forecast & New Defence Spending 1, 8, 6, 4, 2, With new defence Without new defence The injection of Defence investment has a significant impact on construction activity going forward. July, 216 PAGE 4

5 Forecasts for Type of Construction Non-Residential Building Forecasts 1, 1,2 8, 1, 6, 8 4, 6 4 2, Engineering Construction Residential Building Non-residential Building Non-residential Building This chart breaks down the forecast in construction activity into the main component elements. It shows that most of the correction is being driven by decreases in engineering construction activity. The decline in non-residential activity has essentially now mostly `washed through the economy and the residential sector continues to remain fairly stable. The slow-down in non-residential construction continues, but the falls had moderated considerably. The loss of private demand after a sustained period of investment is the number one driver behind the results for this sector. Engineering Construction Forecasts Residential Building Forecasts 1, 1, 8, 8 6, 6 4, 4 2, Engineering Construction Residential building The falls in engineering construction reflect the end of the mining investment boom, the progress of the Ichthys LNG project and the pressure of the resources sector from commodity prices, which has seen some projects/ investments delayed. Despite falls in population, the residential sector continues to be stable, if not necessarily experiencing growth. This is no doubt driven by a low interest rate regime and first home buyer incentives, as well as some changes to household formation rates and housing preferences. June, 216 PAGE 5

6 Four Scenarios for Local Participation Region Type None Low High Full Darwin non-res building % 4% 98% 1% airfield construction % 3% 75% 1% Outback NT non-res building % 2% 85% 1% airfield construction % 15% 6% 1% NT Industries High Local Participation While the construction is clearly the major beneficiary of investment in infrastructure, its clear that a number of other industries are also significantly boosted by the Defence program. July, 216 PAGE 6

7 Various Local Participation Scenarios Greater Darwin 4.% 3.5% 3.% 2.5% 2.% 3.7% 3.4% 1.5% 1.% 1.1%.5%.% -.5% -1.% Local Industry Participation Full Local High Local Low Local No Local -.5% Outback NT 11.% 1.% 9.% 7.% 6.4% 5.% 3.% 1.% 1.5%.% -1.% -.1% Local Industry Participation Full Local High Local Low Local No Local NT 7.% 6.5% 6.% 5.% 4.7% 4.% 3.% 2.% 1.% 1.3%.% -1.% -.3% Local Industry Participation Full Local High Local Low Local No Local June, 216 PAGE 7

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