Construction boost to Oz GDP intensifies need for skilled immigrants.
Government figures show that Australian construction work spending was much stronger than expected in the last quarter as investment on infrastructure projects jumped, boding well for growth in the economy as a whole.
Government data showed the value of construction work fell just 0.1 per cent in the quarter to a seasonally adjusted $35.03 billion, a huge improvement on forecasts of a 4.0 per cent fall. First-quarter data was revised upwards to show fall of 2.2 per cent, from a drop of 3.7 per cent.
The data showed weakness in residential and non-residential building investments, but that was offset by a strong 5.7 per cent rebound in engineering work, such as on roads and mines.
This once again underscores Australia’s ever tightening skills bottleneck and the concommitant need to bring appropriately qualified and experienced trades people and professional people into the country to fill the ever-growing list of vacancies.
For the first time, spending on engineering projects outstripped investment in housing and commercial building.
The data is a key building block for the second-quarter gross domestic product (GDP) report due on September 2 and the surprise result could mean there is an upside risk to analysts’ forecasts.
“The unexpected rebound in engineering works in the second quarter points to a less weak-than-expected investment result for next week’s GDP result, providing some upside to our forecast,” said Scott Haslem, chief economist at UBS.
Australia dodged a technical recession in the first quarter, one of the few rich nations to do so. Earlier this month, the Reserve Bank of Australia raised its growth forecasts, forecasting a GDP growth of 0.5 per cent for all of 2009.
The RBA also dropped an easy monetary policy bias, and made clear rates could be expected to rise to normal levels over time. The cash rate is currently at a record low of 3 per cent.
Financial markets are fully pricing in a first 25 basis point rate rise in December, with a chance the RBA could move as early as November. The Aussie dollar is currently at around 87 US cents and heading north.
The construction sector accounts for about 15 per cent of the entire economy. Spending on buildings fell 5.7 per cent, with investment on residential activity dropping 2.6 per cent.
Yet spending on engineering projects rose 5.7 per cent in the quarter, to be up a whopping 22.7 per cent year-on-year.
It was led by robust investment in mining projects and private-public ventures to build roads, rails and ports. The public sector has also helped as state governments spent big on infrastructure.
“The strength (in engineering spending) was particularly notable in the private sector and was broad based across all states,” said Paul Brennan, analyst at Citi.
“Overall, the construction data reinforce our view that GDP will show positive growth in the June quarter.”
The amount for building in the pipeline also showed resilience. Work approved but yet to be started stood at $10.07 billion, up from $9.39 billion in the previous quarter.
And there was reason for optimism on engineering as well, when the federal government approved a massive $50 billion liquefied natural gas project off western Australia, one of several in development.
Adam Carr, senior economist at ICAP, said the data pointed to a stronger business investment outlook than earlier assumed.
“So then, I am feeling comfortable with my view that we won’t see a massive slump in investment going forward. It is coming off, but not at a worrying pace,” he said.
One regional example of this infrastructure boom is the Hunter Valley region of New South Wales is positioning itself for an economic boom, with infrastructure giants Australian Rail Track Corporation, EnergyAustralia and Hunter Water ready to spend $15 billion on projects over the next 10 years in preparation for the region’s projected population of 800,000 by 2030.
The Hunter is going from strength to strength, with all indicators showing the area is driving the NSW economy.
NSW Treasurer Eric Roozendaal, Hunter Business Chamber officials and an economist from the Hunter Valley Research Foundation say the region is doing “extremely well” across all sectors, reflected in an unemployment rate of just over 6 per cent, considerably lower than the Illawarra at 8.3 per cent.
Mr Roozendaal described the Hunter as a powerhouse of the NSW economy and one of the powerhouses of the Australian economy.
He said consumer and business confidence had lifted in the Hunter in the June quarter and jobs had increased in the mining and manufacturing sectors.
Hunter Business Chamber chief executive Peter Shinnick said the building sector was about to receive a shot in the arm, with Bovis Lend Lease ready to roll out tens of millions of dollars in contracts through the Schools Building Education Revolution program.
In addition, the Australian Rail Track Corporation, EnergyAustralia and Hunter Water had long-term plans for the Hunter.
The rail corporation has recently released its 2009-2018 Hunter Valley Corridor Capacity Strategy, listing $2.5 billion in projects.
EnergyAustralia will spend more than $11 billion on capacity upgrades and Hunter Water more than $2 billion on various projects including Tillegra Dam.
“We’re talking major programs and major jobs and this is government spending. On top of that is the substantial investment by the private sector,” Mr Shinnick said.
Hunter Business Chamber member and Maitland Chamber of Commerce and Industry president Jennifer Nichols said there was still a lot of interest from major businesses such as OfficeWorks in booming centres like Maitland.
“And they do intensive research before they move in. They are putting their hands up and saying Maitland and the Hunter is where we want to be,” Mrs Nichols said.
“We have been well prepared in terms of our attitude and the way we took on the economic crisis, which is reflected in reports from the Property Council and Hunter Valley Research Foundation who both agree we weathered the storm quite well.”
Hunter Valley Research Foundation economist Andrew Searles said the Hunter had grown stronger because its economy had diversified since the 1990s.
“There have been significant structural shifts in the way the region’s economy has moved, with more being employed in the knowledge sector such as health, education, property development services and engineering,” Mr Searles said.
Mr Shinnick said the port’s coal-loading capacity was the key to the Hunter’s economic growth.
“In 2013 the capacity at Newcastle Port will be 200 million tonnes, double what it currently is,” he said.
“This will lead to a whole bunch of other investments by resources-based companies.
“If you thought we went through an economic boom in 2008, wait for another year or two. It will be bigger and better.”
Potential skilled immigrants now resident in various countries, would be very encouraged by these developments and the range and choice available in skilled occupations and locations around this huge, diverse and beautiful country. This is especially so if they are seeking long-term futures and the prospect of permanent residency.
Well over 100,000 skilled migrants will be accepted into Australia even in the current budget period, which coincides with severe economic strictures in most developed economies. Those wishing to move to Australia, or considering that possibility, could consult an online Australian visa advisor, or check the demand for their trade or profession and maybe accessing a skilled visa assessment.
Anyone considering this move might be well-advised to select a reputable, proven and successful Australian visa advisory specialist and start researching that lucky country’s opportunities both current, and into the future.