Our latest report on infrastructure construction data looks into which sectors are trending up, and which are trending down. The report examines trends in infrastructure construction over the past 26 years using data from the ABS.

All forms of engineering construction contribute to Australia’s GDP. However, infrastructure facilities in Australia’s cities and population centres, by virtue of wider accessibility to large numbers of businesses and consumers, are likely to have higher economic multipliers and higher productivity potential.

Congestion in Australia’s cities has not been resolved and public transport remains inadequate and there is a long list of unresolved issues in other infrastructure areas. The increases in public sector infrastructure recorded in our latest report are consistent with political pronouncements that action is underway to correct these problems.

However, compared to the nation’s response to the resources boom, the response to the infrastructure deficiency in cities and other population centres is slow.

From an economic perspective, the increase in public sector infrastructure has not come close to offsetting the reduction in construction in the resources sector resulting in a net depressive effect on economic activity. The case for a substantial surge in public sector infrastructure remains strong.

The increases in public sector infrastructure recorded in this report are consistent with political pronouncements that action is underway to correct these problems. But, comparing the relative scales of engineering construction components suggests that these efforts are more modest than put forward, and this needs to change.

The slow rise of public sector construction

Practically all public sector engineering construction is the construction of infrastructure, mainly in cities and other major population centres and the transport links between them. The public sector is now emerging from a period of below-average growth in engineering construction on infrastructure.

Last year public sector infrastructure construction increased by 6.3 per cent and in the year ending 30 June 2017 construction grew by 10.7 per cent.

Three-quarters of public sector engineering construction completed in 2016-17 was on roads (43.2%), telecommunications facilities (16.9%) and on railways (13.2%) and there were substantial increases in construction completed in each of these asset classes.

"From an economic perspective, the increase in public sector infrastructure has not come close to offsetting the reduction in construction in the resources sector resulting in a net depressive effect on economic activity."

There were, however, several areas where public sector construction contracted in 2016-17, notably harbours, sewerage and electricity. The large scale of growth sectors ensured the overall outcome.

Last year public sector commencements on infrastructure fell, but remained consistent with the scale of commencements achieved over the past decade. There was a large amount of unfinished construction outstanding on projects already underway sufficient for about 4.2 years of work at the current rate of public sector completions. These trends suggest that the current scale of completions is likely to continue for several more years.

It is important to keep these positive changes in perspective. In constant price terms, public sector infrastructure completed in 2016-17 was $28,779.6 million. This is higher than completions in the previous three years, but less than the 2009-10 outcome of $30,184.2 million.

Private sector construction proves to be a mixed bag

Private sector construction is less clear-cut than the public sector because it is divided between construction providing the infrastructure necessary to support resources projects, and construction on infrastructure that is complementary to public sector infrastructure.

Long-term average annual growth in private sector infrastructure was high (9.0% per year) and was strongly influenced by resources factors. The resources construction boom is now over and average annual growth over the past five years was, in fact, a contraction of 7.9 per cent per year.

During this period only the construction of bridges, electricity facilities and telecommunications facilities showed positive outcomes.

"But the key point to remember is that there continues to be a substantial amount of engineering construction taking place in the resources sector and it is likely to continue for a few years yet."

Last year, private sector construction on infrastructure contracted by 2.7 per cent to $18,920.8 million in constant prices with strong results in roads and telecommunications. The negative impact of the end of the resources boom on private sector infrastructure has now been offset by growth in public sector infrastructure completions.

The continued relevance of mining sector work

Much of the discussion about the end of the resources boom gives the impression that engineering construction in this sector has pretty much disappeared.

Certainly, it is true to say that, just as there was an extraordinarily rapid increase in construction as the boom gathered pace, there has been a rapid fall in construction in recent years.

But the key point to remember is that there continues to be a substantial amount of engineering construction taking place in the resources sector and it is likely to continue for a few years yet.

Indeed, engineering construction completed in the resources sector last year was larger than public sector construction on infrastructure and will have spillover effects in private sector construction on associated infrastructure.

About the data

This report updates trends in engineering construction on infrastructure through to 30 June 2017. The statistics used are Australian Bureau of Statistics (ABS) statistics on engineering construction. These statistics measure engineering construction commencements, work completed and work outstanding on projects underway. This construction adds to the stock of infrastructure and is a reliable surrogate measure of infrastructure. Recourse to a surrogate is necessary because governments consistently refuse to make available statistics on the stock of Australia’s infrastructure, its condition, its capacity and its remaining economic life.

The approach used in the report is to differentiate between public and private sector construction. Sectors are defined by ownership of the asset under construction: private sector construction relates to assets that when completed are owned and operated by the private sector; public sector construction relates to assets that when completed are owned and operated by public sector agencies irrespective of whether construction was undertaken by public sector agencies or by private entities under contract to the public sector. It is important to note that all three levels of government are included in the public sector and it is not appropriate to attribute activity to any one sector.