Newcastle ACIF Forecasts. 13 April 2012

Transcription

1 Newcastle ACIF Forecasts Click to edit Master title style 13 April 2012 Click to edit Master subtitle style 1

2 Sponsors 2

3 Disclaimer Inherent Limitations This presentation of construction forecasts is given subject to the written terms of the Allen Consulting Group s engagement. The services provided in connection with this engagement comprise an advisory engagement which is not subject to Australian Auditing Standards or Australian Standards on Review or Assurance Engagements, and consequently no opinions or conclusions intended to convey assurance have been expressed. No warranty of completeness, accuracy or reliability is given in relation to the statements and representations made by, and the information and documentation provided by, the Australian Construction Industry Forum management consulted as part of the process. The Allen Consulting Group has indicated within this presentation the sources of the information provided. We have not sought to independently verify those sources unless otherwise noted within the presentation. Any economic projections or forecasts in this presentation rely on economic inputs that are subject to unavoidable statistical variation. They also rely on economic parameters that are subject to unavoidable statistical variation. While all care has been taken to ensure that statistical variation is kept to a minimum, care should be taken whenever using this information. Any estimates or projections will only take into account information available to the Allen Consulting Group up to the date of the deliverable and so findings may be affected by new information. Events may have occurred since we prepared this report which may impact on it and its findings. No reliance should be placed by the Australian Construction Industry Forum or any other party on additional oral remarks provided during the presentation, unless these are confirmed in writing by the Allen Consulting Group. The Allen Consulting Group is under no obligation in any circumstance to update this presentation, in either oral or written form, for events occurring after the presentation has been issued in final form. The findings in this presentation have been formed on the above basis and do not represent our conclusive findings, which are only be contained in our final written report. Third Party Reliance This presentation has been prepared at the request of the Australian Construction Industry Forum in accordance with the terms of the Allen Consulting Group s engagement letter dated 14 February Other than our responsibility to the Australian Construction Industry Forum, neither the Allen Consulting Group nor any member or employee of the Allen Consulting Group undertakes responsibility arising in any way from reliance placed by a third party on this presentation. Any reliance placed is that party s sole responsibility. The presentation is provided solely for the benefit of the parties identified in the engagement letter and is not to be copied, quoted or referred to in whole or in part without the Allen Consulting Group s prior written consent. The Allen Consulting Group accepts no responsibility to anyone other than the parties identified in the engagement letter for the information contained in this presentation. This presentation only provides a summary of the Allen Consulting Group s findings during the course of the work undertaken for the Australian Construction Industry Forum under the terms of the engagement letter dated 14 February

4 Outline What is being forecast: ACIF forecasts; and Demand based forecasts. The central case macroeconomic parameters. The approach. The April 2012 forecasts: ACIF forecasts; and Demand driven forecasts. 4

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6 BASELINE MACRO ECONOMIC FORECASTS GDP Inflation GFCF RESIDENTIAL Interest rates Exchange rates Construction investment NON- RESIDENTIAL ENGINEERING The ACIF forecasts SHARES MODEL PUBLIC INVESTMENT Budget Papers Past shares RESIDENTIAL Houses Units/townhouses Large alterations Small alterations NON-RESIDENTIAL Retail, Offices, Industrial, Accommodation, Health and aged care, Educational, Other commercial ENGINEERING Roads, Electricity, Telecom, Mining, Bridges and rail, Recreation, Water and sewerage TRENDS and TIMING Cordell completions and approvals AUSTRALIA + STATES + CAPITALS LEVELS + PERCENT CHANGES 6

7 Scope of the ACIF forecasts Note: eleven year total forecast period, quarterly for two years, annual for nine. 7

8 Construction Activity Forecasts: the process Macroeconomic variables such as population growth, GDP growth, and capital expenditure growth provides an indication of the underlying trends in the economy. Cordell Construction Project Data provides information about specific movements in educational non-residential building construction activity. The ACIF forecast of educational non-residential building construction activity are based on macroeconomic forecasts and construction type specific indicators. 8

9 Constructing Electricity and Pipeline Engineering Construction Activity Forecasts Macroeconomic variables such as population growth, exchange rates, GDP growth, and capital expenditure growth provides an indication of the underlying trends in the economy. Cordell Construction Project Data provides information about specific movements in electricity and pipeline engineering construction activity. The ACIF forecast of electricity and pipeline engineering construction activity are based on macroeconomic forecasts and construction type specific indicators. 9

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11 POPULATIO N BY REGION AUSTRALIA ON THE MOVE NEED FOR SERVICES office space industrial space retail DEMAND AGE PROFILE dwellings hospital beds classrooms SUPPLY Growth in the population is important, as is aging. Older cities need more hospital but less office space CORDELL SPENDING ON SECTORS BY REGION eg health care in Sydney The DEMAND DRIVEN forecasts PARAMETERS eg hospital beds per 1, year olds PARAMETERS eg $ per hospital bed DEMAND FOR UNITS OF A SERVICE SUPPLY ON TOP OF HOSPITAL BEDS GAP OR OVERSUPPLY (or equilibrium) 11

12 The macroeconomic environment The central case is based on the global economy muddling through. Sustained growth in the Chinese economy outweighs the adverse impact of Europe. Australian economy experiences continued resource driven growth. Some moderation to longer term outlook is driven by: The high AUD and the pressures it places on other export intensive sectors. The wind-back of the fiscal stimulus packages. 12

13 Growth and employment Source: Deloitte Access Economics Business Outlook data 2012 Note: financial year to year % change data 13

14 Unemployment Source: Deloitte Access Economics Business Outlook data 2012 Note: % change year to year quarterly data 14

15 Interest rates and inflation Source: Deloitte Access Economics Business Outlook data 2012 Note: year to year % change quarterly data 15

16 Macro assumptions Dec 11 (Actuals*) Dec 12 (Forecast**) 5 year average to 2015 GDP (rolling year %) Unemployment rate (%) Labour price index(annual % change) Underlying CPI (annual % change) 90 day bank bill (% p.a.) year bond (% p.a.) *Actuals from ABS national accounts December 2011 update and RBA. **December 2012 forecasts and 5 year averages from Deloitte Access Economics Business Outlook Data. 16

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18 Real Activity ($ billion per year, prices) Residential building expected to pick up from , driven by population pressures and supply deficits. Non-Residential building to remain flat. Engineering Construction increasing to 2014, driven by mining boom, rail projects, and CPM driven renewable energy. 18

19 Real Activity (% change, prices) 19

20 Real Activity (% of GDP, prices) Residential building growth to remain steady, driven by underlying supply gap. Non-Residential building growth to return to trend. Engineering Construction growth remains high after peaking in

21 Nominal activity ($billion per year) 21

22 Nominal activity ($billion per year) 22

23 Price Index ( = 1) 23

24 Change in Price Index ( = 1) 24

25 Construction employment ( 000 jobs) Construction employment grows with overall construction activity. 25

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27 Population growth Source: ABS cat no 3222 series B 27

28 Newcastle s population

29 Newcastle s changing population profile 2010 and

30 A note about the results All results presented are nominal unless otherwise stated. The forecasts presented are financial year estimates. The first forecast year is Where quarterly data are presented it is noted and the first forecast quarter is December

31 New Houses Construction of new dipped below trend in as programs such as state government stamp duty concessions were rolled back. Recovery in medium term on the back of incomes growth and significant nation wide housing supply gap. Longer term construction predominantly linked to interest rate movements. 31

32 Newcastle houses new supply and new demand 32

33 Unmet demand for new houses ( , % of additional demand with no planned supply) 33

34 Units & Townhouses Strong increases in approvals of units and townhouses, particularly in major urban markets. Housing affordability pressures and the rising costs of fuel driving nation wide shift in preference towards units and townhouses. 34

35 Newcastle attached dwellings new supply and new demand 35

36 Unmet demand for new attached dwellings ( , % of demand with no planned supply) 36

37 Large Alterations & Additions Large alterations and additions growing moderately with rising incomes. 37

38 Small Alterations & Additions This sector of the economy will continue to grow strongly, particularly on the back of strong income and employment data. 38

39 Residential Building excl. small alterations & additions Following the downturn in , this sector is expected to return to trend growth from Strong macroeconomic fundamentals, demographic trends and the significant housing shortfall drive this longer term trend. 39

40 Residential Building ($billion year by state) Strong growth in Sydney in the near term : Sydney residential overtakes Melbourne in Driven predominantly by urban infill (units and townhouses). Queensland strong short term growth due to flood recovery. 40

41 National residential starts ( 000) Volume of construction fairly constant (though cyclical) to The short-term outlook is promising, but cycles are driven in the longer term by macroeconomic fundamentals, predominantly interest rates. 41

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43 Retail/Wholesale Trade Retail/wholesale trade is projected to return to pre-gfc trend in spite of structural issues including high AUD, shift to online retail. 43

44 Retail building by region ($b per year) 44

45 Newcastle retail space new supply and new demand 45

46 Unmet demand for new retail space ( , % of additional demand with no planned supply) 46

47 Offices Nominal value of office construction fell significantly during GFC. A deep decline: office construction is projected to return to pre GFC levels by around Large projects driving some of the medium term recovery (e.g. Barangaroo). 47

48 Offices by region ($b per year) 48

49 Newcastle office space new supply and new demand 49

50 Unmet demand for new office space ( , % of additional demand with no planned supply) 50

51 Industrial Industrial construction suffered from GFC and more recently from exchange rate pressures. Approvals and commencements: short term rebound in sector due to large projects. 51

52 Newcastle industrial space new supply and new demand 52

53 Unmet demand for new industrial space ( , % of additional demand with no planned supply) 53

54 Accommodation GFC dampened global tourism demand. Problem exacerbated by high AUD Australia a more expensive destination. Good news from large projects in pipeline, e.g. Commonwealth Games. 54

55 Health & Aged Care Gold Coast, Sunshine Coast hospital very large projects that have significant local impacts. Demography: demand for these services will only increase as the population grows and ages. 55

56 Newcastle hospital beds new supply and new demand 56

57 Unmet demand for new hospital beds ( , % of demand increase with no planned supply) 57

58 Educational BER passed through economy largely by Not the expected hole in educational building from BER didn t bring projects forward so much as create new projects. The demand based forecasts do show a gap in classroom construction. 58

59 Newcastle classrooms new supply and new demand 59

60 Unmet demand for new classrooms ( , % of demand with no planned supply) 60

61 Non-Residential Building Overall return to trend in medium term. Single digit growth rate projected in medium to longer term. 61

62 Non-Residential Construction by region ($billion per year) 62

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64 Forecast Major Engineering Starts Project Type Start Value ($bn) Kipper LNG Project VIC mining 2011Q3 1.1 Southdown Magnetite Project WA mining 2013Q2 1.6 Grosvenor Coal Project QLD mining 2012Q1 1.3 Olympic Dam Desalination Plant and Pipeline SA water 2013Q3 0.7 Brisbane Airport New Parallel Runway QLD roads 2013Q3 1 Balmoral South Iron Ore Project WA mining 2014Q3 2.7 North Rankin Redevelopment Project WA heavy industry 2013Q2 5 Marillana Iron Ore Project WA mining 2014Q1 1.9 West Pilbara Iron Ore Project WA mining 2013Q1 5.8 Gold Coast Rapid Transit Project - Stage 1 QLD rail 2012Q1 0.9 Ernest Henry Underground Expansion QLD mining 2011Q4 0.6 South West Rail Link - Stage B2 NSW rail 2012Q1 0.5 Moura Link - Aldoga Rail Project QLD rail 2012Q2 1 Delta Electricity Marulan Gas Turbine Facilities NSW electricity 2013Q1 0.5 Wheatstone Gas Project WA ming 2016Q2 29 Perdaman Collie Urea Plant WA heavy industry 2012Q4 3.5 Moorabool Wind Farm VIC electricity 2013Q1 0.8 West Pilbara Iron Ore Project - Anketell Point Port WA ports 2012Q1 3.1 Mount Newman Iron Ore Operations WA mining 2011Q4 0.8 Torrens Island Power Station Expansion SA electricity 2012Q3 0.8 Solar Dawn Power Plant QLD electricity 2012Q2 1.2 Source: Cordell Construction Data 64

65 Roads Road reconstruction is driven predominantly by QLD floods. Return to background growth rates thereafter. 65

66 Electricity & Pipelines Strong growth in the medium term induced by the carbon price mechanism. There are a number of clean energy initiatives coming on line in the short term e.g $2bn wind farms in Silverton (NSW), $1bn Kennedy (QLD),$2bn Coolah (NSW), Solar Dawn 66

67 Telecommunications Strong NBN induced growth in prospect in the coming years and over the longer term. 67

68 Bridges, Railways, Harbours There are two significant drivers of rail construction growth: North west rail link, $12bn (NSW) and Cross river rail project, $14 bn (QLD). Growth flattens in longer term. 68

69 Water and Sewerage Minimal large scale investment in water and sewerage evident in the data. 69

70 Heavy Industry incl. Mining Short term strong growth driven by three very large LNG projects: $30 bn Australia Pacific LNG, $30 bn Wheatstone LNG and $30 bn Browse LNG. Longer term flattening as these projects finish and are not replaced. 70

71 Engineering Construction Overall the medium term forecast for engineering construction is positive. Over the longer term, growth flattens out as large mining projects wind up. 71

72 Engineering by state ($billion per year) 72

73 Overall unmet demand in Newcastle ( , % of additional demand with no planned supply) 73

74 Wrap up The relatively strong performance of the Australian economy drives strong growth in construction in general. Residential construction is strong in the longer term, driven by population pressures, demographic trends and the existing housing shortfall. Non-residential construction is flat in real terms. The BER caused an uplift in the face of the GFC, but once this has passed through non-residential returns to a trend of slow growth. Engineering construction grows strongly on the back of the mining boom, and key policy initiatives such as the RET, the CPM and the NBN. 74