Brenda Strong

Economic report laments the end of investment boom

DECLINING commodity prices and the end of the LNG industry's construction phase have slashed investment in commercial construction across Australia.

The Deloitte Access Economics Investment Monitor June Quarter report, released on Wednesday, found private construction work had dropped 13% in the past year and declined for six quarters in a row.

Ongoing falls in commodity prices had caused resource sector projects to be "tossed on to the scrap

heap" and the end of the LNG sector's construction phase meant things were likely to get worse before they got better, the report warned.

However, Deloitte Access Economics partner and report author Stephen Smith said despite the lack of investment, other fundamentals in the commercial construction sector were improving.

"Higher asset prices are lifting household wealth, low interest rates mean capital is cheap and a lower (Australian) dollar is providing a competitive boost to export sectors," the report said.

"But for now at least, that good news is yet to manifest as increased commercial construction work.

"So for now, commercial construction continues to step sideways, while engineering construction has stepped over the edge of the 'construction cliff'.

"The glory days of the investment boom are gone."

Mr Smith said there had been a $14 billion decline in the value of projects under construction or committed over the June quarter.

"That has seen the value of definite projects reach their lowest value since the end of 2011," he said.

That decline was on top of an 11% decline in projects under construction in 2014, Mr Smith said.

He said, however, the value of planned projects had increased $21.7 billion over the same time period.

The Investment Monitor is a quarterly report that examines construction sector investment data.



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