20 WESTERN AUSTRALIAN 18 INFRASTRUCTURE …...• The challenge will be to sustain WA public infrastructure investment beyond the current wave of projects across transport and telecommunications

2018

WESTERN AUSTRALIAN INFRASTRUCTURE REPORT

Aubin Grove Train Station and Russell Road Upgrade. Photo courtesy of Georgiou Group

© November 2017 Civil Contractors Federation WA. All rights reserved.

This report has been prepared by Adrian Hart and Rubhen Jeya from BIS Oxford Economics. It has been prepared on the basis of publicly available information. BIS Oxford Economics has relied upon and assumed, without independent verification, the accuracy and completeness of all such information. It contains selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant to the Purpose. The recipient acknowledges that circumstances may change and that this report may become outdated as a result. BIS Oxford Economics is under no obligation to update or correct this report. BIS Oxford Economics, its related bodies corporate and other affiliates, and their respective directors, employees, consultants and agents (‘Oxford Economics Group’) make no representation or warranty as to the accuracy, completeness, timeliness or reliability of the contents of this report. To the maximum extent permitted by law, no member of the Oxford Economics Group accepts any liability (including, without limitation, any liability arising from fault or negligence on the part of any of them) for any loss whatsoever arising from the use of this report or its contents or otherwise arising in connection with it. This report may contain forward-looking statements, forecasts, estimates and projections. No independent third party has reviewed the reasonableness of any such statements or assumptions. No member of the Oxford Economics Group represents or warrants that such Forward Statements will be achieved or will prove to be correct. Actual future results and operations could vary materially from the Forward Statements. Similarly, no representation or warranty is made that the assumptions on which the Forward Statements are based may be reasonable. No audit, review or verification has been undertaken by the Oxford Economics Group or an independent third party of the assumptions, data, results, calculations and forecasts presented or referred to in this report.

Civil Contractors FederationWestern Australia Branch70 Verde DriveJandakot, WA 6164Phone: (08) 9414 1486Fax: (08) 9414 1496Email: [email protected]: ccfwa.com.auTwitter: @CCFWA

BIS Oxford Economics Pty LtdLevel 8, 99 Walker StreetNorth Sydney NSW 2060Contact: Adrian HartAssociate Director – Construction, Mining and MaintenancePhone: (02) 8458 4233Fax: (02) 9959 5795 Email: [email protected] Web: bis.com.auTwitter: @BIS_OE

Contents

Executive summary 6

1. WA economic outlook 10Outlook for the global economy 11Outlook for commodity prices 13Outlook for the Australian economy 14Outlook for WA 16Need for an open policy conversation to drive sustainable long-term growth 18Key risks to the WA economic outlook 20

2. WA infrastructure outlook 24Recent trends and outlook for construction activity 25State of play and outlook for infrastructure and mining construction 28WA construction cost trends 32

3. WA major projects (project value >$50 million) 34

2018


2018


6 BIS Oxford Economics – CCF WA

This is the third WA Infrastructure Report published by the CCF WA in conjunction with BIS Oxford Economics research, forecasting and analysis. Western Australia’s civil construction industry continues to face myriad challenges as the WA economy transitions from the mining boom to more

balanced and sustainable growth.

Across Australia, the aggregate economic and construction story represents a balance of what are highly imbalanced state markets. As the mining investment boom has receded, economic and population growth has slowed sharply in the former resources-focused boom states such as WA. Excess supplies of housing and commercial space built up during and just after the boom will take time to unwind, deterring private investment, while weaker state government balance sheets give less room to manoeuvre for State-funded public investment.

By contrast, the lower post-boom Australian dollar has reinvigorated New South Wales and Victoria, with renewed growth in trade-exposed industries driving a new wave in private investment. Asset recycling coupled with stronger state government revenues is also driving a boom in public investment in these states. Together these positive investment drivers are providing a boost to national civil construction activity.

The positive news for contractors and suppliers to the civil construction industry in WA is that the worst is now behind us. Growth is rebalancing, and the construction industry has taken steps to reduce excess capacity. But growth in demand and construction activity is not expected to rise spectacularly either. Rather, investment, construction activity and economic growth are likely to remain soft for the next two years in WA as the excess supply of housing and commercial space is gradually absorbed and the State Government takes steps to improve budget finances.

Key findings• Total construction work done in WA fell nearly 30 per cent or $14.4 billion during 2016/17. The fall in oil and gas construction contributed nearly $8 billion of the decline alone, but pipelines, other mining and heavy industry construction, residential building and non-residential building also fell. Total construction activity in 2016/17 was 40 per cent lower than the 2013/14 peak.

• However, excluding oil and gas construction, WA engineering construction is expected to rise through the next five years. Initially this growth will be focused in key publicly-funded civil construction markets such as telecommunications, roads and railways construction – where Commonwealth funding support is significant – but will eventually extend into rising non-LNG mining and heavy industry construction as commodity prices and depletions at existing mines underwrite the next round of resources projects.

• The challenge will be to sustain WA public infrastructure investment beyond the current wave of projects across transport and telecommunications. Publicly funded civil infrastructure construction activity rose 7.7 per cent in 2016/17 to the highest level since 2009/10, but is expected to fall again as large construction projects such as the NBN rollout and the Forrestfield Airport Link wind down.

• Sharply falling total building and construction activity in WA in recent years – along with the lost ‘multiplier’ benefits construction spending has on the economy – has driven a record contraction in State final demand, a key determinant of employment. While WA is now over the worst period of contraction, further falls in residential building activity and other parts of the construction industry will keep growth in demand and the broader economy soft.

Executive summary

Positive investment drivers are providing a

boost to national civil construction activity but investment, construction

activity and economic growth are likely to

remain soft in WA for the next two years

Total construction work done in WA in 2016/17

was 40 per cent lower than the 2013/14 peak.

However, excluding oil and gas construction, WA engineering construction

is expected to rise through the next five

years

Western Australian Infrastructure Report 2018 7

• Falling activity across building and construction has impacted employment in the WA construction industry. In 2016/17, average construction employment fell 10.5 per cent to 133,000 persons – the biggest single year decline since the 1990/91 national recession. Declining activity in building, which tends to be more employment intensive than the civil construction segment, is expected to see a further 10,000 construction jobs put at risk.

Key indicators WA: State final demand, gross State product and engineering construction activity, 2014/15 constant prices

• Sharply falling total building and construction activity in Western Australia in recent years – along with the lost ‘multiplier’ benefits construction spending has on the economy – has driven a record contraction in State Final Demand, a key determinant of employment. While Western Australia is now over the worst period of contraction, further falls in residential building activity (and other parts of the construction industry) will keep growth in demand and the broader economy soft.

• Falling activity across building and construction has impact on employment in the Western Australian construction industry. In 2016/17, average construction employment fell 10.5 per cent to 133,000 persons – the biggest single year decline since the 1990/91 national recession. Declining building activity in coming years, which tends to be more employment intensive than the civil construction segment, is expected to see a further 10,000 construction jobs put at risk, despite a steady outlook for civil construction work.

Key Indicators Western Australia: State Final Demand, Gross State Product and Engineering Construction Activity, 2014/15 Constant Prices

Source: BIS Oxford Economics, ABS data

Post-boom Policy Challenges

Western Australia continues to face a number of challenges as it transitions away from a boom driven by resources investment to more balanced economic growth. Investment, and the construction activity it generates, plays an important role in driving economic growth. In the short term, investment cycles have large impacts on economic growth – particularly via multipliers impacting the rest of the economy. In the medium to long term, investment cycles affect the sustainability of growth; that is, spending on new productive capacity effectively creates the upper bound for economic growth before tightening capacity leads to inflationary pressures.

-30

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87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17e 19f 21f

WA Oil and Gas Work Done (RHS) WA Engineering Construction less Oil and Gas (RHS)WA SFD A%Ch WA GSP A%ch

Source: BIS Oxford Economics, ABS data

$ Billion

Year ended June

Post-boom policy challengesWA continues to face multiple challenges as it transitions away from a boom driven by resources investment to more balanced economic growth. Investment, and the construction activity it generates, plays an important role in driving economic growth.

In the short term, investment cycles have large impacts on economic growth – particularly via multipliers impacting the rest of the economy. In the medium to long term, investment cycles affect the sustainability of growth; that is, spending on new productive capacity effectively creates the upper bound for economic growth before tightening capacity leads to inflationary pressures.

The resources investment boom and bust has certainly impacted the wider economy, even in a resources-focused state such as WA. The mining boom wasn’t costless. The associated rise in the Australian dollar drove a structural change away from dollar-exposed industries, making room for the growth in industries servicing mining investment. The investment bust and the associated fall in the Australian dollar is reversing that structural change.

As WA transitions its economy away from resources investment, new drivers for economic growth, competitiveness, productivity and rising living standards are needed. While a falling Australian dollar will help speed the structural adjustment in the economy, there is more which can be done through domestic economic policies. In particular:

• Continuation of microeconomic reforms to boost competitiveness and productivity

As WA transitions from resources investment, new drivers for economic growth are needed

Growth in State final demand – the sum of household consumption, government consumption and investment, both public and private – has been very weak or negative in recent years


Executive Summary

• Reforming the fiscal tax/transfer system to minimise current inefficiencies, improve fairness and ensure that governments can fund rising recurrent expenditures (particularly in the areas of health and welfare) through the economic cycle

• Boosting productivity growth, which has been relatively weak over the past decade, through initiatives that encourage research and innovation, as well as investing in productivity-enhancing infrastructure.

While easy to state as a policy prescription, it is difficult in practice for the WA economy to diversify away from its largest industry, mining. Structural change is hard and, following years of new investment, the WA economy is even more concentrated in mining, and less diversified, than ever before. However, WA needs its other industries to step up to help sustain growth in demand and employment. The lower post-boom Australian dollar – albeit flirting with US$0.80 – is a key ‘X factor’, immediately boosting the competitiveness of trade-exposed industries that were suppressed during the mining boom. But more could, and should, be done as a matter of public policy to assist the WA economy in its transition towards more balanced and sustainable growth.

Infrastructure investment can play an important role here to support economic growth in the short term, but it can also play a more vital strategic economic role in the long term by building on WA’s core strengths – affordable housing, low energy costs, and close proximity to Asian markets – which can stimulate business investment, employment and population growth. Used effectively, public infrastructure investment can stimulate private investment and can be an important tool in establishing sensible policy settings that will help boost productivity and competitiveness in the long term.

A return to stable, if weak, economic growth from here provides an opportunity for reassessing WA’s longer term economic plan and, in particular, looking at ways to encourage and fund public and private investment that drives economic growth, attracts population growth and stimulates employment. Without a coherent plan, there remains a significant risk that future levels of investment will be inadequate, will not capitalise on WA’s growth potential, and ultimately lead to a loss in productivity and living standards. With public sector spending only making up a very small part of the total WA economy, achieving a longer-term economic vision will depend crucially on how the public sector can develop policies which stimulate private decisions on where to invest and live.

The next waves of growth in the WA economy are already emerging. Now is the time to get the policy settings right.

Public infrastructure investment can play a

vital strategic economic role in the long term

by stimulating private investment that builds on

WA’s core strengths


Sunset Heritage Precinct Site Services Infrastructure Upgrade. Photo courtesy of Tracc Civil


The Western Australian economy suffered an unprecedented collapse in demand during 2016/17, with State final demand (SFD)1 down 7.4 per cent in the year, and a cumulative 15 per cent since the peaking of the resources investment boom in 2012/13. By contrast, the next weakest episodes in SFD

was the 4.3 per cent decline during the national 1990/91 recession, and a three-year period of zero growth in SFD following the Asian Financial Crisis.

The good news is that the WA economy is now through the worst of the downturn in demand, investment and construction activity. The flipside to this is that demand growth will not recover quickly nor strongly from here. The reality is WA, ever buffeted by the fortunes of the mining industry, has just been through the largest ever boom/bust cycle in resources investment. Several years of flat growth in demand (and albeit slightly stronger growth in gross State product, which includes net exports) as the WA economy re-absorbs surplus capacity built up during the boom and recalibrates public finances is the natural reality check to the previous cycle.

A return to stable, if weak, economic growth from here does, however, provide an opportunity for reassessing WA’s longer term economic plan and, in particular, looking at ways to encourage public and private investment that drives economic growth, attracts population growth and stimulates employment. It is important that, while investment should naturally be lower than during the boom years, it should not fall below levels that threaten long term productivity growth or the sustainability of existing infrastructure and business assets.

Unfortunately, this is the risk facing sustainable productive infrastructure investment. While public investment grew strongly in the 2000s, financed by ultimately unsustainable growth in government revenues (and hence, consequently, debt), it slumped by 15 per cent over 2014/15 and 2015/16. Growth has resumed in 2016/17, with much riding on the Commonwealth Government’s financing of the NBN rollout, as well as key road and rail projects, to drive this result. Long-term projections of public investment contained in the 2017-18 State Budget suggest falling public infrastructure investment towards the end of the decade.

While easy to state as a policy prescription, it is difficult in practice for the WA economy to diversify away from its largest industry, mining. Structural change is difficult. If anything, following the investment of hundreds of billions of dollars in new resources assets over the past decade, and surging mining exports as these assets move to their production phase, the WA economy is even more concentrated in mining, and less diversified, than ever before.

However, WA needs its other industries to step up to sustain growth in demand and employment. The lower post-boom Australian dollar (albeit edging back to US$0.80) is a key ‘X factor’, immediately boosting the competitiveness of trade-exposed industries that were suppressed during the mining boom, such as agriculture and manufacturing, as well as services such as tourism and education. But more could, and should, be done as a matter of public policy to assist the WA economy in its transition towards more balanced and sustainable growth.

1. According to the Australian Bureau of Statistics’ Australian System of National Accounts: Concepts, Sources and Methods (Cat. No. 5216.0, 2015, pp481-482), state final demand (SFD) is the aggregate level of final consumption expenditure and gross fixed capital formation within a state over a specified period of time. It equals household final consumption expenditure (HFCE) plus government final consumption expenditure (GFCE) plus gross fixed capital formation (GFCF). In simple terms, SFD is the sum of private and public consumption and investment within a state, and is a measure of demand in a state economy.

It is important that public infrastructure

investment should not fall below levels that threaten

long term productivity growth

Following the investment of hundreds of billions

of dollars in new resources assets over

the past decade, the WA economy is even more

concentrated in mining, and less diversified, than

ever before

1. WA economic outlook


Infrastructure investment can play an important role here to support economic growth in the short term, but it can also play a vital economic role in the long term by building on WA’s core strengths – affordable housing, low energy costs, and proximity to Asian markets – to stimulate business investment, employment and population growth. Used effectively, public infrastructure investment can stimulate or “crowd in” private investment in trade-exposed industries benefiting from the lower dollar and can be an important policy tool to help boost productivity and competitiveness in the long term.

The key points to WA’s economic outlook include:• Despite a range of risk factors (China, North Korea, US, Brexit), global economic

growth is predicted to strengthen over the next two years, providing support to the WA economy. Indicators currently point to robust and stable activity in the world economy, with world GDP predicted to grow at an average of 3.5 per cent over the next five years.

• The Australian economy, nationally, has weathered the worst of the resources investment bust, but its legacy will live on in resource regions that are now heavily oversupplied in terms of housing and commercial/industrial space. While further declines in mining investment are still to come as the $200 billion LNG investment boom moves to completion, the worst is over.

• Unsynchronised investment cycles and slow structural change are keeping the Australian economy soft. This is not a steady state economy, with large variations by state and industry. Private investment will continue to fall as the recent residential building cycle unwinds, while public investment is increasing. Patchy quarterly growth figures will likely continue through to the end of the decade before non-mining business investment builds momentum sufficiently to drive stronger growth. The resources investment boom was a massive distraction for the Australian economy, driving a process of structural change (through the high dollar) to service mining regions, production and exports. Now, with a lower dollar, the challenge is to rebuild trade-exposed industries decimated during the boom. This process has only just started.

• In WA, structural adjustment is more difficult and will take longer, with the consequence that growth in domestic demand (SFD) and the broader economy (GSP) will be constrained well below long-term averages until the end of the decade. While the worst of the downturn in investment has passed, further falls are expected over the next two years as the mining investment bust reaches a trough, as residential and non-residential building moves lower, and as growth in infrastructure investment is mixed. This environment, combined with much stronger growth in investment and construction in the eastern states, is likely to pose challenges for local construction contractors and other market participants before a return to stronger growth in investment and the broader economy at the end of the decade.

Outlook for the global economy

During the coming structural readjustment, the Australian and WA economies are being supported by a relatively positive global economy. Despite several well-known risk factors (conflict in North Korea, Chinese financial stability, US and global trade policies), forward indicators point to robust and stable activity in the world economy. Reflecting a boost in relatively broad-based support from global trade, world GDP growth is anticipated to increase this calendar year and next, before moderating slightly. The picture across countries and regions is mixed, but overall positive for the Australian and WA economies, with relatively stronger growth expected amongst key trading partners.

Although growth has slowed since 2010, emerging economies still posted growth of

World GDP is predicted to grow at an average of 3.5 per cent over the next five years

In Australia, patchy growth will likely continue through to the end of the decade before non-mining business investment builds momentum sufficiently to drive stronger growth


4.2 per cent in calendar 2016. Declines in oil prices and more hawkish signals from central banks in advanced economies may worsen the external backdrop for some emerging economies, driving growth lower.

We predict growth in developed economies – at 2 per cent in calendar 2016 – will pick up to around 2.5 per cent by calendar 2018 and 2019. Importantly, Australia’s trading partner growth (weighted by exports share) will grow at a faster rate over the next five years, due to the high weighting of the relatively fast-growing economies of China, East Asia and India in Australia’s export mix.

In China, GDP growth has moderated in recent years from pre-GFC rates of around 10 per cent, partly reflecting efforts to rebalance the economy towards household consumption. Chinese economic growth is expected to soften gradually from 6.7 per cent in calendar 2016 to 5.2 per cent by 2022. China’s real GDP growth is easing as the country continues its transition to a demand-driven economy amid further urbanisation, demographic changes and weaker growth in investment.

Japan’s GDP is forecast to grow by 1.4 per cent in calendar 2017 and by a similar rate in 2018 as improving global demand and a weak yen support growth in exports and business investment. Moreover, fiscal and monetary policy will remain helpful. Given solid employment, we expect domestic demand to become an increasing driver of growth.

Economic growth in India is expected to be just shy of 7 per cent in 2017. Demonetisation and banking sector stresses are weighing on growth. But, the Indian economy is on the mend and will outperform other large economies including China, due to a continued pick-up in consumption, higher infrastructure spending and a reasonable outlook for exports.

Despite the stronger global environment, growth in the United States remains constrained at around 2 per cent. US economic growth is forecast to be 2.2 per cent in calendar 2017, accelerating to 2.4 per cent in calendar 2018. The combination of solid increases in employment and moderate wage growth will drive household income, consumer spending and residential investment. Business investment is forecast to accelerate, driven by improving domestic demand and export gains from a stronger global climate and rebounding energy sector activity.

The uncertainty surrounding the likelihood, timing and magnitude of President Trump’s policy proposals explain why he is seen as the greatest upside and downside risk to US and global growth in the short term. Political uncertainty represents a downside risk to business expansion. Trump’s proposed fiscal stimulus measures – especially those relating to large civil infrastructure projects – have the potential to boost growth from 2019, given the long lead times in getting major infrastructure projects ‘shovel-ready’ from the planning stages to commencement. Passing of legislation, notably complex tax reforms, will also take time. Nevertheless, stronger US economic growth is expected to be tempered by the Federal Reserve raising interest rates towards more ‘normal’ monetary policy settings, and to ward off inflationary pressures from easing fiscal policy. This tightening cycle also presents a risk for the international economy; emerging economies potentially face the risk of rising capital outflows as investors rebalance portfolios and shift balances to higher returns on offer in advanced economies. Emerging economies may need to raise rates – higher than what would be typically warranted by domestic circumstances – to prevent the destabilisation of capital outflows, falling asset prices and weaker confidence.

Encouragingly, the Eurozone is expanding at the fastest pace since the global financial crisis. Export conditions are improving, investment is recovering, and weaker inflation and strong consumer confidence and employment are increasing household spending. However, the recent rise in the euro is likely to have an adverse impact on exports in the near term.

WA economic outlook

Chinese economic growth is easing as it transitions

to a demand-driven economy

India will outperform other large economies

US President Trump’s proposed fiscal stimulus

measures have the potential to boost growth

from 2019


Figure 1.1: Economic growth by global region and Australia, calendar years

strong consumer confidence and employment are increasing household spending. However, the recent rise in the euro is likely to have an adverse impact on exports in the near term.

Figure 1.1: Economic Growth by Global Region and Australia, Calendar Years

Outlook for Commodity Prices

Improvements in global economic conditions have – in conjunction with international policy developments – also helped drive a recovery in commodity prices through 2016/17. This has had positive and negative impacts on the Australian economy.

On the one hand, higher prices have underpinned higher-than-anticipated mining industry profits, royalties, exploration activity and helped accelerate development of the next round of mining projects. On the downside, higher commodity prices (in conjunction with delays to the interest rate tightening cycle in the US) has also driven an appreciation of the Australian dollar towards (and above) US$0.80, which is likely to have a contractionary impact on other trade-exposed industries, slowing the structural readjustment needed in the economy to achieve more balanced growth.

Prices for most resource commodities recovered from their cyclical lows through 2016, but over the December quarter 2016 and March quarter 2017, key commodities experienced significant rises, particularly iron ore and coal – Australia’s flagship commodity exports (accounting for almost a third of the value of exports of goods and services). The jump in coal prices was underpinned by a government-driven curtailment of production in China, while stronger global demand and disruptions in Australia also played a part in the price increases of both coal and iron ore. China has since eased its production restrictions and a large portion of supply has now come back onstream, causing average export prices to pull back over the June quarter 2017.

BIS Oxford Economics believes the recent strengthening in the Australian dollar will be relatively short-lived. Iron ore and thermal coal prices are predicted to continue to retreat from recent peaks, while global prices for a number of commodities are expected to ease somewhat over 2017/18 before recovering over subsequent years as the global oversupply in a number of commodities dissipates.

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World OECD Australia

Year ended December Source: BIS Oxford Economics, OECD, Consensus

Annual growth in Real GDP

Outlook for commodity prices

Improvements in global economic conditions have – in conjunction with international policy developments – also helped drive a recovery in commodity prices through 2016/17. This has had positive and negative impacts on the Australian economy.

On the one hand, higher prices have underpinned higher-than-anticipated mining industry profits, royalties, exploration activity and helped accelerate development of the next round of mining projects. On the downside, higher commodity prices (in conjunction with delays to the interest rate tightening cycle in the US) has also driven an appreciation of the Australian dollar towards (and above) US$0.80, which is likely to have a contractionary impact on other trade-exposed industries, slowing the structural readjustment needed in the economy to achieve more balanced growth.

Prices for most resource commodities recovered from their cyclical lows through 2016, but over the December quarter 2016 and March quarter 2017, key commodities experienced significant rises, particularly iron ore and coal, Australia’s flagship commodity exports, which together account for almost a third of the value of exports of goods and services.

The jump in coal prices was underpinned by a government-driven curtailment of production in China, while stronger global demand and disruptions in Australia also played a part in the price increases of both coal and iron ore. China has since eased its production restrictions and a large portion of supply has now come back onstream, causing average export prices to pull back over the June quarter 2017.

BIS Oxford Economics believes the recent strengthening in the Australian dollar will be relatively short-lived. Iron ore and thermal coal prices are predicted to continue to retreat from recent peaks, while global prices for a number of commodities are expected to ease somewhat over 2017/18 before recovering over subsequent years as the global oversupply in a number of commodities dissipates.

Iron ore and thermal coal prices are predicted to continue to retreat from recent peaks


Figure 1.2 Commodity prices (A$) Figure 1.2 Commodity Prices (A$)

Outlook for the Australian Economy

The Australian economy grew by just 2.0 per cent in 2016/17 – the weakest rate of growth since 2008/09. While a weak outcome, this result extends Australia’s long period of uninterrupted economic growth to 26 years – a new world record.

Large slices of luck and lessons learned from the last recession (in 1990/91) have helped successive Australian governments and the Reserve Bank of Australia steer the economy through the 1997/98 Asian crisis, the 2000/01 downturn, the global financial crisis in 2008, and a large bust in resources investment since 2012/13.

Overall, however, the Australian economy has been unable to sustain economic growth above 3 per cent since the peaking of the resources investment cycle in 2012/13. Much of this weaker economic performance is due to very weak growth in domestic demand during the period, which has been negatively impacted by the ongoing decline in resources investment.

While partially cushioned by a boom in residential investment since 2013/14 and, more recently, by a recovery in public infrastructure investment, economic growth has also been hampered by record low growth in wage incomes, with households spending more of what they earn and reducing savings to maintain just moderate household expenditure growth. Weak wage growth has also driven weaker than budgeted tax revenues for governments, lengthening the time horizon required to return to sustainable budget surpluses, and limiting the firepower of governments to counter weak private investment with higher public investment without further increasing public debt.

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1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Quarterly Average Prices (Log Scale)

Source: BIS Oxford Economics, OCE dataAs at June

Coking Coal(A$/t)

Iron Ore(A$/t)

Thermal Coal(A$/t)

Crude Oil (Brent)(A$/bbl)

AUD Quarterly Average (RHS)

Outlook for the Australian economy

The Australian economy grew by just 2 per cent in 2016/17 – the weakest rate of growth since 2008/09. While a weak outcome, this result extends Australia’s long period of uninterrupted economic growth to 26 years – a new world record.

Large slices of luck and lessons learned from the last recession in 1990/91 have helped successive Australian governments and the Reserve Bank of Australia steer the economy through the 1997/98 Asian crisis, the 2000/01 downturn, the global financial crisis in 2008, and a large bust in resources investment since 2012/13.

Overall, however, the Australian economy has been unable to sustain economic growth above 3 per cent since the peaking of the resources investment cycle in 2012/13. Much of this weaker economic performance is due to very weak growth in domestic demand during the period, which has been negatively impacted by the ongoing decline in resources investment.

While partially cushioned by a boom in residential investment since 2013/14 and, more recently, by a recovery in public infrastructure investment, economic growth has also been hampered by record low growth in wage incomes, with households spending more of what they earn and reducing savings to maintain just moderate household expenditure growth. Weak wage growth has also driven weaker-than-budgeted tax revenues for governments, lengthening the time horizon required to return to sustainable budget surpluses, and limiting the firepower of governments to counter weak private investment with higher public investment without further increasing public debt.

Unlike many other resources-exporting economies, Australia did not experience a recession in the wake of the resources investment bust. Strong growth in mining production and exports from world class, competitive deposits, supercharged by a much lower dollar – which also stimulated other exports of goods and services – has

Slower growth in the Australian economy has

been due to very weak growth in domestic

demand

WA economic outlook


helped offset some of the pain from weaker demand growth. Economic growth, which includes net exports, has generally been higher than growth in domestic demand.

The challenge for Australia is that mining exports, particularly, are highly capital – rather than labour – intensive. Stronger, sustainable growth in employment requires stronger growth in local expenditures; in domestic demand. In turn, this requires the return of growth in non-mining business investment, which has remained stalled since the GFC.

The problem for non-mining industry sectors has generally been weak growth in demand, weak profits and excess capacity. In that environment, it is foolhardy for businesses to invest ahead of requirements, straining cash flows and locking in additional costs before they have the revenue to support them. Most businesses are still in cost-cutting mode, preserving cash and deferring investment until demand recovers. Low interest rates in this environment have had relatively little impact. While there has been plenty of funds available, this just hasn’t been the business environment for investment. That will come later.

The next growth phase in the Australian economy will be driven by non-mining business investment. When it does recover, it will be to service growing demand, driven by a growth logic – evidenced by rising profits – and augmented by a technology catch-up. In turn, this will have a strong multiplier through business services into the rest of the economy. While non-mining business profits did increase in the June quarter 2017, it is still too early to say that businesses are confident in the path of future demand and profits, and are willing to make the psychological shift from caution to a ‘go for growth’ investment mentality.

Part of the reason for this is that nationally, by region and industry, growth and profitability is highly fragmented. New South Wales and Victoria, after spending much of the mining boom years suppressed, have returned to very strong economic growth. But growth in demand is still very weak in many other regions. In some states such as WA and Queensland, state final demand has outright declined.

Challenges remain ahead for the Australian economy, too, which are likely to keep business confidence and investment on a weak plane over the next two years. Wage growth, except for skilled professions and trades in some sectors and states, is likely to remain relatively weak, affecting retail trade and household expenditures. Politics is highly adversarial, with major political parties unable to forge a workable consensus on many important policy areas surrounding taxation, energy security, and the environment. But, more importantly, investment cycles across Australia are likely to remain highly unsynchronised over the next two years – keeping overall economic growth constrained to around 2.5 per cent per annum on average over 2017/18 and 2018/19.

These unsynchronised investment cycles include:• Residential investment, a key driver of growth over the three years to 2015/16,

which is expected to have peaked in 2016/17 and then decline over the next three years, with particularly large declines expected in the volatile high-density apartment market.

• Mining investment is now entering its fifth year of an expected six-year decline, with further significant declines to come over the next 18 months as the LNG investment boom finally runs its course. This will see mining construction fall around 78 per cent from the 2013/14 peak to the 2018/19 trough. However, mining equipment purchases and exploration have started to recover across most commodities, indicating the initial stages of the next upturn.

• Public investment finally started to recover in 2015/16 after five years of decline, surging 14 per cent in 2016/17 alone. Growth in public investment is being supported by new transport infrastructure, but will be offset in part after 2017/18 by falling investment in Australia’s largest public infrastructure project – the NBN.

Despite low interest rates, most businesses are still in cost-cutting mode, deferring investment until demand recovers

Mining equipment purchases and exploration have started to recover


Total public investment is expected to be flat or falling, and hence be a drag on Australia’s economic growth, by the end of the decade.

• Non-mining business investment is currently showing only modest growth but is expected to strengthen from late decade as higher profitability, demand and capacity utilisation a change in psychology.

Figure 1.3: Australia – basic economic indicators

• Public investment finally started to recover in 2015/16 after five years of decline, surging 14 per cent in 2016/17 alone. Growth in public investment is being supported by new transport infrastructure, but will be offset in part after 2017/18 by falling investment in Australia’s largest public infrastructure project – the NBN. Total public investment is expected to be flat or falling (and hence be a drag on Australia’s economic growth) by the end of the decade.

• Non-mining business investment is currently showing only modest growth but is expected to strengthen from late decade as higher profitability, demand and capacity utilisation (in turn supported by a slightly weaker Australian dollar) drive a change in psychology.

Figure 1.3: Australia – Basic Economic Indicators

Consequently, domestic demand growth will improve markedly late in the decade, as the declines in mining and residential investment bottom out and start showing signs of recovery. Capacity constraints and expected improvements in business confidence are predicted to drive an acceleration in non-mining business investment. But until that time, economic growth and inflation are expected to remain relatively subdued, with the Reserve Bank unlikely to be in a strong position to raise interest rates until 2019/20.

Outlook for WA

Differences in the timing and magnitude of regional investment cycles are creating large differences in economic performance and construction activity by state. Strong pipelines of infrastructure projects, relative undersupply in housing, higher population growth and private sector confidence to invest is driving a construction upswing in New South Wales and Victoria, which in turn is spilling over into broader industry growth.

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Consequently, domestic demand growth will improve markedly late in the decade, as the declines in mining and residential investment bottom out and start showing signs of recovery. Capacity constraints and expected improvements in business confidence are predicted to drive an acceleration in non-mining business investment. But until that time, economic growth and inflation are expected to remain relatively subdued, with the Reserve Bank unlikely to be in a strong position to raise interest rates until 2019/20.

Outlook for WA

Differences in the timing and magnitude of regional investment cycles are creating large differences in economic performance and construction activity by state. Strong pipelines of infrastructure projects, relative undersupply in housing, higher population growth and private sector confidence to invest is driving a construction upswing in New South Wales and Victoria, which in turn is spilling over into broader industry growth.

The eastern states – led by NSW and Victoria – are at the start of a tremendous wave in land transport investment, as shown in Figure 1.5 (page18), which is being supercharged by asset recycling strategies and strong growth in own-source revenues from property taxes, in turn driven by robust increases in population growth. This boom in land transport infrastructure investment is drawing in resources from other states, including WA, which will create its own challenges as other states begin to increase their own infrastructure investment.

The Reserve Bank is unlikely to be in a strong position to raise interest

rates until 2019/20

The eastern states boom in land transport

infrastructure investment is drawing in resources

from other states, including WA

WA economic outlook


Figure 1.4: Comparisons of State (SFD) and national (GNE) growth in final demand

driving a construction upswing in New South Wales and Victoria, which in turn is spilling over into broader industry growth.

Figure 1.4: Comparisons of State (SFD) and National (GNE) Growth in Final Demand

The eastern states – and particularly New South Wales and Victoria – are at the start of a tremendous wave in land transport investment, as shown in Figure 1.5, which is being supercharged by asset recycling strategies and strong growth in own source revenues from property taxes (in turn driven by robust increases in population growth). This boom in land transport infrastructure investment is

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Year ended June Source: ABS, BIS Oxford Economics

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By contrast, investment growth and construction activity remains relatively weak or falling in the former resources boom states of Queensland and WA. These states are now generating strong growth in mining production and exports as a direct consequence of the previous resources investment boom, boosting GSP. However, growth in SFD – the sum of household consumption, government consumption and investment, both public and private – has been very weak or negative in recent years. This is important, as growth in SFD tends to be a greater driver of growth in employment and incomes than growth in capital-intensive mining exports.

Real SFD in WA has been in decline since 2013/14, but the pace of contraction intensified in 2015/16 (minus 4 per cent) and 2016/17 (minus 7.4 per cent) as the resources investment bust hit hardest and, in 2014/15 and 2015/16, public investment also contracted. Overall, the 2016/17 outcome was the worst in the State’s history, while the 15 per cent cumulative decline since 2012/13 is also a record – in terms of both the period of contraction (four years) and magnitude.

Strong growth in mining production has boosted WA’s gross State product but growth in State final demand has been very weak or negative in recent years.


Figure 1.5: Major transport project construction (over $2 billion in construction value)

drawing in resources from other states, including Western Australia, which will create its own challenges as other states begin to increase their own infrastructure investment.

Figure 1.5: Major Transport Projects Construction (over $2 billion in Construction Value)

By contrast, investment growth and construction activity remains relatively weak or falling in the former resources boom states of Queensland and Western Australia. These states are now generating strong growth in mining production and exports as a direct consequence of the previous resources investment boom, boosting Gross State Product (GSP). However, growth in State Final Demand (SFD, the sum of household consumption, government consumption and investment – both public and private) has been very weak or negative in recent years. This is important, as growth in SFD tends to be a greater driver of growth in employment and incomes than growth in capital-intensive mining exports.

Real SFD in Western Australia has been in decline since 2013/14, but the pace of contraction intensified in 2015/16 (minus 4 per cent) and 2016/17 (minus 7.4 per cent) as the resources investment bust hit hardest and, in 2014/15 and 2015/16, public investment also contracted. Overall, the 2016/17 outcome was the worst in the state’s history, while the 15 per cent cumulative decline since 2012/13 is also a record – in terms of both the period of contraction (four years) and magnitude.

The good news is that the worst of the decline in SFD has now passed in Western Australia. But it is too early to say that strong growth in demand (and employment) is going to return anytime soon. Rather, the immediate prospects for the Western Australian economy is for flat growth at best in SFD over the next two years as the tail end of the LNG investment bust (expected to strip another $10 billion in measured investment) and further falls in residential building offset weak growth in household and government spending. Improved prospects for new mining investment through sustained higher commodity prices has the potential to provide some upside to this outlook, but this will be an improvement at the margins at best. Only once the full impact of the resources bust has been absorbed, as well as its impact on affected sectors such as housing, can it be said that the Western Australian economy is back to sustainable, stronger growth. Even so, flat growth from here

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SA North-South CorridorWA Forrestfield Airport Rail Link & MetronetWA Hancock Roy Hill (Pilbara)WA Fortescue Metal Group (Pilbara)WA BHP Billiton (Pilbara)WA Rio Tinto (Pilbara)VIC Melbourne Airport LinkVIC Inland Rail (VIC component)VIC Melbourne Metro RailVIC Level Crossing Removal ProgramVIC Regional Rail LinkVIC North East LinkVIC Western DistributorVIC EastLinkQLD Acacia Ridge to Port of BrisbaneQLD Cross River RailQLD Inland Rail (QLD component)QLD Warrego HighwayQLD Gateway MotorwayQLD Bruce Highway UpgradeQLD TransApexQLD Ipswich MotorwayNSW Inland Rail (NSW component)NSW Sydney Metro WestNSW Sydney Metro City & SouthwestNSW Sydney Metro NorthwestNSW F6 ExtensionNSW Western Harbour Tunnel & Beaches LinkNSW Western Sydney Infrastructure PlanNSW NorthConnexNSW WestConnexNSW Pacific Highway Upgrade

Notes: This chart is based on projects with over $2 bil l ion in construction work done. Solid areas are road projects, dotted areas are rail projects. Source: BIS Oxford Economics

$ Billion (in FY15 constant prices) Forecast

Year ended June Source: BIS Oxford Economics

The good news is that the worst of the decline in SFD has now passed in WA. But it is too early to say strong growth in demand (and employment) is going to return anytime soon. Rather, the immediate prospects for the WA economy is for flat growth in SFD at best over the next two years as the tail end of the LNG investment bust (expected to strip another $10 billion in measured investment) and further falls in residential building offset weak growth in household and government spending. Improved prospects for new mining investment through sustained higher commodity prices has the potential to provide some upside to this outlook, but this will be an improvement at the margins at best. Only once the full impact of the resources bust has been absorbed, as well as its impact on affected sectors such as housing, can it be said that the WA economy is back to sustainable, stronger growth. Even so, flat growth from here would be a substantial improvement – and confidence builder – compared to the sharp contraction of the state economy over the past few years.

Broader measures of economic activity, such as GSP, which includes the value of net exports on top of domestic demand, will recover more quickly in WA given strong export growth, particularly gas exports as new LNG facilities ramp up to full production. The lower post-boom Australian dollar is also stimulating exports and investment in other trade-exposed industry sectors that were hit hard during the boom years. WA – and Perth particularly – has already seen a strong recovery in new accommodation building, and future growth in exports of services such as tourism, education and business services in addition to agriculture, mining and manufacturing products will also assist recovery in the broader WA economy over the next few years.

Flat growth would be a substantial improvement – and confidence builder – compared to the sharp

contraction over the past few years.

WA economic outlook


The State Budget projects a substantial decline in general government infrastructure investment over the forward estimates

Sustained investment in productive infrastructure will be a critical component of a broader economic strategy

Need for an open policy conversation to drive sustainable long-term growth

By the end of the decade, BIS Oxford Economics expects the WA economy will be back to achieving more ‘normal’ rates of sustainable growth – both in terms of domestic demand (SFD) and the broader economy (GSP). But the next few years will remain challenging. This tough reality is reflected in the recently released 2017-18 State Budget, which itself forecasts another decline in SFD in 2017/18 – stretching the total decline over five consecutive years – before eking out very weak (1 per cent) growth in 2018/19.

While containing several positive initiatives to support new growth industries (tourism, education, defence, science and innovation), the 2017-18 State Budget did not offer a completely convincing strategy for delivering sustainable economic growth over the long term. Some measures, such as the new payroll tax provisions, higher gold royalties and increased utility charges, while aimed at budget repair, may have a contractionary impact on the State economy in the near term.

While new road and rail infrastructure investment in the State Budget is welcome in the near-term, the Budget projects a substantial decline in general government infrastructure investment over the forward estimates, which will be a drag on growth during the recovery phase of the State economy and potentially to levels representing underinvestment in infrastructure. Some promised infrastructure projects, such as the Ellenbrook rail line, although credibly proposed were not funded in the State Budget, raising concerns that their timelines may be pushed back as the State Government concentrates on budget repair.

With the State economy now past the worst of the resources investment downturn, there is no better time to have an open and transparent discussion on the long term economic strategy for WA. This should concentrate on leveraging from (or improving) WA’s core or potential strengths compared to eastern state rivals such as its:

• More affordable housing.• Lower “cost of living” and “cost of doing business” pressures, particularly with

regards to transport, utilities (notably energy), commercial rents, and government charges.

• Closer proximity to Asia and further afield, with Perth in the unique position within Australia to offer direct flights to London from early 2018.

• Abundant natural resources, including mineral wealth and iconic tourism destinations.

• Enviable lifestyle benefits.

The core aim of the economic strategy should be to attract businesses and people back to WA following the exodus of population and consequent very weak population growth in aggregate since the end of the resources investment boom.

Overall, the public sector only makes up a very small part of the total WA economy – around 16 per cent in expenditure terms – and this is not expected to change in the future. Consequently, achieving longer term economic goals will depend crucially on how the public sector can develop policies to stimulate private decisions on where to invest and live.

While acknowledging the measures announced in the State Budget, sustained investment in productive infrastructure will be a critical component of a broader economic strategy. This includes sustained investment in transport and utilities to ensure cities and regional centres offer competitive benefits compared to eastern state counterparts and help keep cost of living (and cost of business) pressures contained. It also means investing in critical infrastructure for new growth regions to stimulate


Greater Commonwealth contributions and reviews

of GST distribution may provide WA a more sustainable growth

path for infrastructure investment

private investment.

Funding for sustainable productive infrastructure investment should not derail investment itself, as discussed in previous CCF WA infrastructure reports. Despite its weakened post-boom financial position – which the recent State Budget is addressing through targeted tax and spend policies – the State Government still has other, important funding levers available to it.

Crucially, asset recycling has not been used in WA as it has in other states, including the recent $1.4 billion sale of South Australia’s land titles registry. Asset recycling remains a potential source of funding for future infrastructure projects, so long as there is effective post-sale regulation of privatised assets to ensure prices remain competitive. Introducing tolling on major roads – possibly in the form of time-of-use tolling to manage peak demands – or more fundamental reform such as a broad-based road user charge, could also help fund future infrastructure projects.

Finally, developing a more constructive relationship with the Commonwealth Government will also be crucial, and this extends beyond the use of the Commonwealth’s balance sheet. With more effective business case planning and vetting for specific infrastructure projects, this may see greater Commonwealth contributions flow for state infrastructure projects. Just as importantly, joint reviews of the current horizontal fiscal equalisation process (i.e. GST distributions) and how this can better mesh with own-source revenue generation (e.g. mining royalties) may provide WA a more sustainable growth path for revenues that can be put towards productive infrastructure investment in the future.

Key risks to the WA economic outlook

There are external and domestic risks to the WA economic outlook, both on the upside and downside. On the external front, the main risks revolve around policy decisions enacted by major trading partners such as China, as well as the United States, and the performance of these economies affecting trade, commodity prices and US interest rate settings. On the domestic side, the main risks include the potential for policy missteps which may delay the recovery in non-mining business investment.

A key external risk relates to any extreme trade policies enacted by US President Trump. During the 2016 presidential campaign, Trump promised to significantly raise protection, abandon the Trans-Pacific Partnership (TPP) trade agreement (a regional trade agreement between the 12 Pacific Rim countries including Australia and the US), renegotiate the North American Free Trade Agreement (NAFTA) and impose punitive measures against China and Mexico in particular. Australia has been a major beneficiary of the significant growth in trade between China and the US, and indeed, China and the rest of the world. Trump’s threat to impose 45 per cent tariffs on China, if enacted, would result in retaliatory action by China and an ugly trade war would ensue, which could potentially cause another global recession. This time, Australia would not be immune.

Conversely, an upside risk to WA’s economic growth also relates to Trump’s election promises to dramatically cut taxes and raise Federal infrastructure spending. If fully (or mostly) enacted, this could raise US growth by more than forecast and, provided there were not material increases in protection by the US, lift global economic growth as well as commodity prices.

Another key downside risk concerns a sharper than anticipated slowdown in Chinese economic growth, and hence demand for Australian commodities. This would put the WA mining industry, particularly, in a more vulnerable position.

Domestically, there also remain several risks to the WA economic outlook. The high

Extreme US trade policies are a key external risk

WA economic outlook


concentration of public investment expected in the eastern states could see capacity and capability constraints emerge there, driving up the cost of infrastructure projects as well as delaying them. This could limit the capacity for growth in WA infrastructure investment, or make it more costly. Alternatively, policy missteps aimed at correcting an overheated residential market and high house prices in the eastern states – such as significant changes to negative gearing or capital gains tax policies –may drive a steeper-than-anticipated downturn in residential investment in WA. Thirdly, there remains the risk that the forecast recovery in business investment will take longer to come through, which means that the economy will stay softer for longer. If the recovery does not come through, we expect the Reserve Bank to support economic recovery by keeping interest rates at historically low levels even longer than our current forecast. Conversely, there is an upside ‘risk’ that non-mining investment comes through sooner and stronger than anticipated, possibly via the tradeables sectors ramping up investment faster than we expect, which may then flow quickly onto other industries.

Longer term, the main risk to WA’s growth prospects relate to the fundamental drivers of growth – lower population growth and a failure for labour productivity growth to maintain its long-term average.

Emerging capacity and capability constraints could drive up the cost of infrastructure projects, while policy missteps may drive a steeper-than-anticipated downturn in residential investment

Great Eastern Highway Passing Lanes Southern Cross to Kalgoorlie. Photo courtesy of WBHO Infrastructure


WA’s transition from resources investment boom to production-driven growth has seen a precipitous fall in construction activity, led by mining and heavy industry construction but also residential and non-residential building. The resources boom had attracted greater net population

inflows, boosting demand for housing and commercial services. But, over the past few years, this virtuous cycle of investment and growth has been in sharp reverse, resulting in the largest ever sustained decline in State final demand.

On the positive side, the worst of the decline in investment, construction activity and economic growth in WA is now in the past. Although BIS Oxford Economics is forecasting another $14 billion decline in WA construction activity over the next three years, over $10 billion of this decline is focused in the LNG-dominated mining and heavy industry construction segment. Excluding oil and gas construction, total engineering construction in WA (comprising transport, utilities and non-oil and gas mining and heavy industry construction) is forecast to increase from here.

However, the resources investment boom will leave a longer-lasting legacy on the wider building and construction industry. In particular, the boom in residential and non-residential building during the resources cycle – when population growth was much stronger – has produced an oversupply of housing and commercial office space that will take many years to unwind, constraining new building work. Furthermore, tight State Government finances as a result of weaker post-boom revenues is likely to drive falling levels of State-funded public investment in the medium term, as evidenced in the forward projections from the 2017-18 State Budget.

The recent release of the Productivity Commission’s draft report into horizontal fiscal equalisation has raised hopes of a more favourable GST distribution for WA, which may help address these funding concerns. However, any change to the GST distribution formula – which would impact adversely on the other states and territories – would be politically difficult to enact. In the meantime, while the current GST distribution regime remains, WA’s construction industry is likely to benefit from specific purpose Commonwealth payments directed to infrastructure projects.

The key points can be summarised as follows:• WA construction work done (encompassing residential building, non-residential

building and engineering construction), fell nearly 30 per cent or $14.4 billion during 2016/17, of which the fall in oil and gas construction contributed nearly $8 billion alone. Apart from oil and gas, there were also significant declines in other engineering construction (particularly pipelines and other mining and heavy industry construction), residential building and non-residential building. Total construction activity in 2016/17 was 40 per cent lower than the 2013/14 peak.

• Outside of oil and gas construction, which is expected to fall another $10 billion over the next two years as existing projects are completed, engineering construction is expected to rise right through the next five years. Initially this growth will be focused in key civil construction markets such as telecommunications, roads and railways construction, but will extend into rising non-LNG mining and heavy industry construction as commodity prices and depletions at existing mines underwrite the next round of resources projects.

• Publicly funded civil infrastructure construction activity rose 7.7 per cent in 2016/17 to the highest level since 2009/10. However, much of this was driven by a 46 per cent increase in public sector funded telecommunications work (the NBN) as well as rising railways work. A key challenge will be sustaining publicly funded civil activity as the NBN rollout winds down in coming years, and work on the large Forrestfield Airport Link peaks.

Excluding oil and gas construction, total

engineering construction in WA is forecast to

increase

2. WA infrastructure outlook

While the current GST distribution regime

remains, WA is likely to benefit from specific

purpose Commonwealth payments directed to

infrastructure projects


• Falling building and construction activity, as well as relatively lower prices for international inputs such as steel and oil, is expected to see only weak growth in construction prices. Aggregate measures of WA construction costs have shown cost growth has slowed significantly since the peak of the investment boom, averaging near zero growth over the past two years. However, with the pace of decline in total building and construction work in WA slowing, excess capacity trimmed from local construction businesses, and activity ramping up sharply on the east coast, growth in construction prices could re-accelerate in coming years.

Recent trends and outlook for construction activity

WA’s construction industry remains heavily influenced by the requirements of the mining industry. While rising through much of the 2000s, activity was supercharged by a second wave of resources investment between 2009/10 and 2013/14 focused in LNG and iron ore, as shown in Figure 2.1. Since 2002/03, annual construction work done in WA soared from around $15 billion per annum to a four-year consecutive period above $55 billion1, ending in 2014/15.

Figure 2.1: WA, value of construction work done by segment, $billion, 2014/15 constant pricesFigure 2.1: WA, Value of Construction Work Done by Segment

$Billion, 2014/15 Constant Prices

Over the past three years, this virtuous cycle of ever-rising construction has moved into sharp reverse. Total construction work done has eased from a peak of $57.8 billion in 2013/14 to $35.0 billion in 2016/17. While the worst phase of the construction downturn has passed, BIS Oxford Economics expects further (albeit smaller) declines across the broader building and construction market over the next three years. This is the normal “end-game” of a decade-long, record-breaking construction boom, and despite realising much lower levels of activity compared to the boom years, construction work done will remain over a third higher than any year prior to 2004/05.

Engineering Construction

An analysis of engineering construction work done in WA highlights the long dominance of mining and heavy industry construction over civil construction2, itself reflecting the magnitude of resources investment vis-à-vis infrastructure investment. Large “other minerals” (mostly iron ore) and LNG projects dominate mining and heavy industry construction activity in WA. While other minerals construction activity fell heavily from 2012/13 (in line with much lower commodity prices), the LNG investment boom was much bigger and lasted much longer, only turning down in measured terms in 2016/17 (falling over $7 billion in the year). Looking ahead, relative strength in commodity prices, combined with the need to replace depleting iron ore reserves, is expected to drive increases in other minerals construction, albeit nowhere near the levels experienced during the mining boom. By contrast, the completion of major oil and gas projects will strip over $10 billion in work done over the next two years. This will dominate the outlook for mining and heavy industry construction.

2 Mining and heavy industry construction includes the direct construction of mines, refineries, smelters, chemical plants, materials handling and storage facilities, oil refineries and platforms, blast furnaces, steel mills and other heavy industrial facilities. Civil construction includes all other non-building construction including transport infrastructure (roads, bridges, railways, harbours), utilities infrastructure (electricity, water, sewerage, telecommunications and pipelines), recreation infrastructure (excluding recreation buildings such as roofed stadiums) and other (e.g. site clearing) civil construction.

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Mining and heavy industry construction led the growth, rising from $3.3 billion in 2004/05 to five consecutive years above $25 billion between 2011/12 and 2015/16. Booming resources investment in turn brought rapid population growth, which then drove increasing demand for residential and non-residential building. Meanwhile, the State and Federal Governments’ fiscal capacity to spend was enhanced by rising tax revenues, which provided funding for an extensive infrastructure investment program.

Over the past three years, this virtuous cycle of ever-rising construction has moved into sharp reverse. Total construction work done has eased from a peak of

1. All figures quoted in this section (unless otherwise specified) are expressed in constant 2014/15 prices. This means that changes in the dollar value represent changes in the quantity of work, not changes in price. A discussion of price changes for construction work is presented at the rear of this section.

Construction work done in WA soared from around $15 billion per annum to a four-year consecutive period above $55 billion


Despite easing from a peak of $57.8 billion in 2013/14 to $35 billion

in 2016/17, construction work done will remain

over one-third higher than any year prior to

2004/05

$57.8 billion in 2013/14 to $35 billion in 2016/17. While the worst phase of the construction downturn has passed, BIS Oxford Economics expects further, albeit smaller, declines across the broader building and construction market over the next three years. This is the normal end-game of a decade-long, record-breaking construction boom, and despite realising much lower levels of activity compared to the boom years, construction work done will remain over one-third higher than any year prior to 2004/05.

Engineering constructionAn analysis of engineering construction work done in WA highlights the long dominance of mining and heavy industry construction over civil construction2. Large “other minerals” (mostly iron ore) and LNG projects dominate mining and heavy industry construction activity in WA. While other minerals construction activity fell heavily from 2012/13 in line with much lower commodity prices, the LNG investment boom was much bigger and lasted much longer, only turning down in measured terms in 2016/17, falling over $7 billion in that year.

Looking ahead, relative strength in commodity prices, combined with the need to replace depleting iron ore reserves, is expected to drive increases in other minerals construction, albeit nowhere near the levels experienced during the mining boom. By contrast, the completion of major oil and gas projects will strip over $10 billion in work done over the next two years.

Civil construction, meanwhile, piggy-backed off the resources boom, peaking at $19.2 billion in 2012/13, with the greatest growth in resource-related civil construction such as railways, harbours and pipelines. However, there was also strong growth in non-resources civil construction as governments used the boom to finance a range of infrastructure projects across roads, rail, water and electricity, and then as subdivision development boomed.

While the resources investment bust has driven weaker levels of purely State Government funded civil construction, rising Federal Government supported work, particularly in telecommunications (NBN), roads and railways has helped sustain publicly funded civil work around $3.5 billion per annum in recent years. However, this has been more than offset by falling privately funded (mining-related) civil works, driving total civil work down to just $6.8 billion in 2016/17. The worst is over for slumping civil construction work, however, with activity expected to be more or less sustained at around $6.5 billion in work done per annum, although significant differences are expected by segment.

Residential buildingHousing construction could not keep pace with population growth in WA during the resources boom and, as a result, residential building enjoyed strong growth, particularly at what turned out to be the tail end of the cycle.

The buildup of significant underlying stock deficiency, low interest rates and a strong pipeline of work kept residential building work done in WA at high levels – reaching a peak of $9.1 billion in 2014/15. However, much weaker population growth in the wake of the resources investment downturn has meant that there is insufficient demand to

2. Mining and heavy industry construction includes the direct construction of mines, refineries, smelters, chemical plants, materials handling and storage facilities, oil refineries and platforms, blast furnaces, steel mills and other heavy industrial facilities. Civil construction includes all other non-building construction including transport infrastructure (roads, bridges, railways, harbours), utilities infrastructure (electricity, water, sewerage, telecommunications and pipelines), recreation infrastructure (excluding recreation buildings such as roofed stadiums) and other (e.g. site clearing) civil construction.

WA infrastructure outlook

The slump is over, with civil construction activity is expected to be more or less sustained at around

$6.5 billion per annum


soak up residential building completions. Interstate migration outflows have added to the sharp downward correction in residential building. Residential building work done in WA slumped more than 22 per cent in 2016/17 alone, and BIS Oxford Economics expects a further 20 per cent decline over the next three years given a weaker profile for population growth and excess supply of houses.

Figure 2.2: WA population growth (thousands of persons & per cent)

Civil construction, meanwhile, piggy-backed off the resources boom, peaking at $19.2 billion in 2012/13, with the greatest growth in resource-related civil construction such as railways, harbours and pipelines. However, there was also strong growth in non-resources civil construction as governments used the boom to finance a range of infrastructure projects across roads, rail, water and electricity, and then as subdivision development boomed. While the resources investment bust has driven weaker levels of purely State Government funded civil construction, rising Federal Government supported work, particularly in telecommunications (NBN), roads and railways has helped sustain publicly funded civil work around $3.5 billion per annum in recent years. However, this has been more than offset by falling privately funded (mining-related) civil works, driving total civil work down to just $6.8 billion in 2016/17. The worst is over for slumping civil construction work, however, with activity expected to be more or less sustained at around $6.5 billion in work done per annum, although significant differences are expected by segment.

Residential Building

Housing construction could not keep pace with population growth in WA during the resources boom and, as a result, residential building enjoyed strong growth, particularly at what turned out to be the tail end of the cycle. The buildup of significant underlying stock deficiency, low interest rates and a strong pipeline of work kept residential building work done in WA at high levels – reaching a peak of $9.1 billion in 2014/15. However, much weaker population growth in the wake of the resources investment downturn has meant that there is insufficient demand to soak up residential building completions. Interstate migration outflows have added to the sharp downward correction in residential building. Residential building work done in WA slumped more than 22 per cent in 2016/17 alone, and BIS Oxford Economics expects a further 20 per cent decline over the next three years given a weaker profile for population growth and excess supply of houses.

Figure 2.2: WA Population Growth (Thousands of Persons & Per Cent) Source: BIS Shrapnel, ABS data

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Non-residential buildingNon-residential building work done across WA was relatively less volatile than residential building, peaking in 2011/12 at $6.1 billion. Commercial and industrial building was the main contributor although public funding – in particular the education stimulus, followed by hospital developments – also drove up activity in the early 2010s. With the phasing out of the education building stimulus and an oversupply in office markets, total non-residential building activity has eased over the past four years, despite an uptick in accommodation building stimulated by the lower Australian dollar. Looking ahead, a $1 billion-plus program of retail renovations, new retail developments, and rising spending on education and health projects, will be unable to offset further significant declines in commercial and industrial building through the next few years.

Construction employment Falling activity across building and construction has started to impact on employment in the construction industry. In 2016/17, average construction employment fell 10.5 per cent to 133,000 persons – the biggest single year decline since the 1990/91 national recession. Declining activity in building construction, which tends to be more employment intensive than the civil construction segment, is expected to see a further 10,000 construction jobs put at risk through the next three years, despite a steady outlook for civil construction work.

Residential building slumped more than 22 per cent in 2016/17 and we expect a further 20 per cent decline over the next three years

Construction employment fell 10.5 per cent in 2016/17 – the biggest single-year decline since 1990/91

Retail developments and renovations won’t offset declines in commercial and industrial building


State of play and outlook for infrastructure and mining construction

WA’s engineering construction market is heavily influenced by the privately funded investment requirements of the mining industry, which accounted for around 65 per cent of work done in the past five years. As the mining industry suffers steep declines in the near term, its contribution to overall engineering construction is expected to decline to around 50 per cent but it will still dominate the path of engineering construction work.

Publicly funded engineering construction in WA, meanwhile, has been relatively stable since 2012. While publicly funded civil construction is expected to edge slightly higher in the next two years, courtesy of peak levels of funding for major road (NorthLink) and rail (Forrestfield Airport Link) projects, sustaining these levels will be a challenge at the end of the decade and into the early 2020s. Not only will work be winding down on large transport projects, but NBN-related telecommunications construction will also be falling sharply, itself stripping approximately $600 million in annual work done by 2020/21.

The less than rosy long-term outlook for public infrastructure investment is captured in the 2017-18 State Budget which, following a significant lift in the current financial year, is anticipated to fall substantially in subsequent years. Tight State Government finances suggests that sustaining public investment into the medium-term may depend heavily on soliciting greater Commonwealth Government contributions for major projects, which may increasingly take the form of ‘GST top-ups’. By late this decade, growth in civil construction will likely be dependent again on private resources investment.

Figure 2.3: WA engineering construction, $billion, 2014/15 pricesFigure 2.3: WA Engineering Construction, $Billion, 2014/15 Prices

Transport Infrastructure

Transport infrastructure construction includes the construction or roads, bridges, railways and harbours, and amounted to $2.7 billion in work done during 2016/17. This is down 12 per cent from the previous year, and 76 per cent below the peak of $11.6 billion in 2012/13. The cause of the steep decline is weaker resources investment, which had driven some large scale “one-off” projects in harbours (down from $5.4 billion in 2012/13 to $524 million in 2016/17) and rail (from $3.6 billion in 2012/13 to $370 million in 2016). Roads construction (which also includes privately funded mining access roads as well as subdivision developments) progressively weakened from $2.4 billion in 2012/13 to $1.8 billion in 2016/17. Publicly funded road construction has been generally steady in the $1.1-$1.2 billion per annum range over the past five years.

BIS Oxford Economics expects that 2016/17 was the weakest year for transport construction, but growth in work done will not be spectacular from here either, with activity generally being between $3.1-3.3 billion per annum. A list of major transport projects, covering projects above $50 million, is included in the project list which forms Section 3 of this report.

0

10

20

30

40

50

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019f 2021f

Privately funded

Publicly funded

Year ended June Source: BIS Oxford Economics, ABS

$ Billion (in constant prices), value of work done

Transport infrastructureTransport infrastructure construction includes the construction or roads, bridges, railways and harbours, and amounted to $2.7 billion in work done during 2016/17. This is down 12 per cent from the previous year, and 76 per cent below the peak of $11.6 billion in 2012/13. The cause of the steep decline is weaker resources investment, which had driven some large scale one-off projects in harbours (down from $5.4 billion in 2012/13 to $524 million in 2016/17) and rail (from $3.6 billion in

Publicly funded civil construction is expected

to edge slightly higher in the next two years



2012/13 to $370 million in 2016). Roads construction (which also includes privately funded mining access roads as well as subdivision developments) progressively weakened from $2.4 billion in 2012/13 to $1.8 billion in 2016/17. Publicly funded road construction has been generally steady in the $1.1-$1.2 billion per annum range over the past five years.

BIS Oxford Economics expects that 2016/17 was the weakest year for transport construction, but growth in work done will not be spectacular from here either, with activity generally being between $3.1-3.3 billion per annum. A list of major transport projects, covering projects above $50 million, is included in the project list which forms Section 3 of this report (page 34).

Figure 2.4: WA engineering construction, $billion, 2014/15 prices – transport sectors

Figure 2.4: WA Engineering Construction, $Billion, 2014/15 Prices Transport Sectors

Electricity, Water and Sewerage Infrastructure

Over the eight years to 2013/14, electricity construction activity was very strong, averaging $2.3 billion per annum, more than three times the historical average. This was primarily driven by upgrades to transmission and distribution assets, as well as mining-related generation projects. Since then, as electricity projects reached completion, activity has declined significantly. Since the 2012/13 peak, electricity work done has fallen by 60 per cent to $1.1 billion (still relatively high from a long-term historical perspective). Over the four years to 2019/20, growth in electricity construction is forecast to be relatively flat, with some renewables generation projects offsetting further falls in networks activity.

The construction of the Southern Seawater Desalination Plant (which included significant non-civil construction) was the most influential project to impact WA’s work done figure in the water segment. There is however little in the pipeline for major water projects over the medium term, although water network renewals and extensions will continue to provide steady and significant opportunities (totalling around $600 million annually) for contractors. Meanwhile sewerage construction activity is expected to be relatively buoyant, supported by the $196 million Woodman Point Wastewater Treatment Plant.

0

2

4

6

8

10

12

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019f 2021f

Harbours

Railways

Bridges

Roads



Electricity, water and sewerage infrastructureOver the eight years to 2013/14, electricity construction activity was very strong, averaging $2.3 billion per annum, more than three times the historical average. This was primarily driven by upgrades to transmission and distribution assets, as well as mining-related generation projects. Since then, as electricity projects reached completion, activity has declined significantly.

Since the 2012/13 peak, electricity work done has fallen by 60 per cent to $1.1 billion – still relatively high from a long-term historical perspective. Over the four years to 2019/20, growth in electricity construction is forecast to be relatively flat, with some renewables generation projects offsetting further falls in networks activity.

The construction of the Southern Seawater Desalination Plant, which included significant non-civil construction, boosted WA’s work done figure in the water segment from 2009 to 2013. There is however little in the pipeline for major water projects over the medium term, although water network renewals and extensions will continue to provide steady and significant opportunities (totalling around $600 million annually) for contractors. Meanwhile sewerage construction activity is expected to be relatively buoyant, supported by the $196 million Woodman Point Wastewater Treatment Plant.

2016/17 was the weakest year for transport construction but growth will not be spectacular

Water network renewals and extensions will continue to provide steady and significant opportunities


Figure 2.5: WA engineering construction, $billion, 2014/15 prices – electricity, water and sewerage sectors

Figure 2.5: WA Engineering Construction, $Billion, 2014/15 Prices Electricity, Water and Sewerage Sectors

Telecoms, Recreation and (Non-Water) Pipelines Infrastructure

The telecommunications sub-sector has had significant activity on the tail of the National Broadband Network (NBN). With its progressive roll out, and as the private sector invests in new telecoms networks to service remote mining and offshore gas regions, telecommunications construction work done surged 38 per cent to $1.3 billion during 2016/17. However, telecoms work is expected to decline sharply over the next few years as the NBN rollout moves past peak phases, offsetting further increases in privately funded telecoms work (4.5G and 5G, as well as further investment in mobile and wireless networks and towers).

Recreation infrastructure construction has moved to a higher plane since 2009/10, peaking in 2012/13 at $800 million but has fallen back in recent years, amounting to $527 million in 2016/17, and is projected to ease further over the next few years (driven mainly by the private sector). It is noted that this segment does not include, directly, the construction of the $800 million Perth Stadium, which is classified as a non-residential building project but included some related civil works associated with its construction.

After a period of very strong activity in non-water pipelines infrastructure between 2011/12 to 2014/15, supporting the development of several large LNG and conventional gas projects, the level of activity has fallen considerably in recent years. At its peak in 2014/15, pipelines construction drove $3.5 billion in work done, but by 2016/17 this had fallen back to $318 million, the lowest level since 2008/09. Activity is expected to move a little higher in coming years as gas pipelines are developed to support on-site gas-fired power stations at some of next round of mining projects including the Gruyere gold mine.

0

1

2

3

4

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019f 2021f

Electricity

Sewerage and drainage

Water



Telecoms, recreation and (non-water) pipelines infrastructureThe telecommunications sub-sector has had significant activity on the tail of the National Broadband Network (NBN). With its progressive roll out, and as the private sector invested in new telecoms networks to service remote mining and offshore gas regions, telecommunications construction work done surged 38 per cent to $1.3 billion during 2016/17.

However, telecoms work is expected to decline sharply over the next few years as the NBN rollout moves past peak phases, offsetting further increases in privately funded telecoms work (4.5G and 5G, as well as further investment in mobile and wireless networks and towers).

Figure 2.6: WA engineering construction, $billion, 2014/15 prices – telecoms, recreation & pipelines sectorsFigure 2.6: WA Engineering Construction, $Billion, 2014/15 Prices

Telecoms, Recreation & Pipelines Sectors

Mining and Heavy Industry Construction

Mining and heavy industry construction in WA is dominated by oil and gas construction (LNG, as well as conventional oil and gas projects) as well as “other minerals” construction. Collectively, these two sub-segments of mining and heavy industry construction accounted for 70 per cent of total engineering construction work done for the state in 2016/17 (down from 74 per cent the previous year). Mining and heavy industry construction activity remained at near peak levels throughout the five-year period from 2011/12 to 2015/16, averaging $26.2 billion annually (while recording a peak of $27.2 billion in 2014/15). The elevated levels of activity are attributable to the increase in oil and gas engineering work across a number of significant LNG projects including Gorgon’s three trains, Wheatstone and Prelude.

In 2016/17, however, mining and heavy industry construction fell 37 per cent as work officially concluded on the Gorgon LNG project and “other minerals” construction settled at a 12-year trough. While oil and gas construction is expected to fall a further $10 billion over the next two years as Wheatstone and Prelude, amongst other large projects, are completed, much of this decline is driven by the conclusion of a phase of imports of overseas fabricated, multi-billion dollar, LNG modules which contain little domestic construction work, but are still included in the ABS’s definition of work done. Meanwhile, “other minerals” construction is expected to pick up over the next few years, gradually at first, but gathering more steam by the end of the decade as large iron ore sustaining capital projects for Rio Tinto, BHP Billiton and FMG ramp up strongly. Consequently, BIS Oxford Economics believes mining construction – although forecast to decline further in coming years – is actually bumping along the bottom now in terms of domestic construction work done, and will add to engineering construction work significantly towards the end of the decade.

0

1

2

3

4

5

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019f 2021f

Pipelines

Recreation

Telecommunications



Telecoms work is expected to decline

sharply over the next few years



Recreation infrastructure construction has moved to a higher plane since 2009/10, peaking in 2012/13 at $800 million but has fallen back in recent years, amounting to $527 million in 2016/17, and is projected to ease further over the next few years, driven mainly by the private sector. It is noted that this segment does not include, directly, the construction of the $800 million Perth Stadium, which is classified as a non-residential building project but included some related civil works associated with its construction.

After a period of very strong activity in non-water pipelines infrastructure between 2011/12 to 2014/15, supporting the development of several large LNG and conventional gas projects, activity has fallen considerably in recent years. At its peak in 2014/15, pipelines construction drove $3.5 billion in work done, but by 2016/17 this had fallen back to $318 million, the lowest level since 2008/09. Activity is expected to move a little higher in coming years as gas pipelines are developed to support on-site gas-fired power stations at some of next round of mining projects including the Gruyere gold mine.

Mining and heavy industry constructionMining and heavy industry construction in WA is dominated by oil and gas construction – LNG and conventional oil and gas projects – as well as ‘other minerals’ construction, which together accounted for 70 per cent of total engineering construction work done in 2016/17, down from 74 per cent the previous year. Mining and heavy industry construction activity remained at near-peak levels from 2011/12 to 2015/16, averaging $26.2 billion annually and peaking at $27.2 billion in 2014/15, mainly due to significant LNG projects including Gorgon’s three trains, Wheatstone and Prelude.

Figure 2.7: WA engineering construction, $billion, 2014/15 prices – mining and heavy industry construction sectors

Figure 2.7: WA Engineering Construction, $Billion, 2014/15 Prices Mining and Heavy Industry Construction Sectors

WA Construction Cost Trends

Growth in construction costs tends to be highly correlated with construction activity because high levels of demand in construction activity not only places pressure on the existing supply of inputs, boosting input prices, but also allows construction companies to seek higher margins

The price of key inputs such as steel, oil and other base materials are determined globally and may occur independent of domestic construction activity. As a primary exporter of key raw materials, Australian construction is susceptible to increases through the reinforcing impact of rising pricing where the rise in cost of mining further increases construction costs.

Figure 2.8 illustrates the strong correlation between rising construction activity and construction costs in WA since 2000. The construction price data is represented by the Road and Bridge Index (RBI) from the ABS Producer Price Index series. Growth in construction prices was at its strongest during the boom phase in resources investment (2004-2009), with a second wave of price growth between 2011 and 2014.

As a marker of costs in the civil construction sector, growth in the RBI has slowed substantially since 2013. Over 2015/16 and 2016/17, annual average growth in the RBI for WA has been around zero, on average, indicating minimal pricing pressures in the civil construction industry nationally. This view is supported by recent weak growth in construction industry wages, as well as other construction inputs, including fuel. However, there remains the risk that cost pressures will re-emerge in areas where there is a heavy concentration of construction work, as supplies tighten for local labour and materials.

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5

10

15

20

25

30

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019f 2021f

Other heavy industry

Other minerals (includes iron ore)

Coal

Bauxite, alumina and aluminium

Oil and gas



In 2016/17, however, mining and heavy industry construction fell 37 per cent as work officially concluded on the Gorgon LNG project and ‘other minerals’ construction settled at a 12-year trough. Oil and gas construction is expected to fall a further $10 billion over the next two years as Wheatstone and Prelude, amongst other large projects, are completed. Much of this decline, however, is driven by the conclusion of a phase of imports of overseas fabricated, multi-billion dollar, LNG modules which contain little domestic construction work, but are still included in the ABS’s definition of work done. Meanwhile, ‘other minerals’ construction is expected to pick up over the

Non-water pipelines infrastructure activity is expected to increase as gas pipelines are developed

Much of the decline in oil and gas construction activity is driven by the conclusion of a phase of imports of multi-billion dollar LNG modules which contain little domestic construction work


next few years, gradually at first, but gathering more steam by the end of the decade as large iron ore sustaining capital projects for Rio Tinto, BHP and FMG ramp up strongly. Consequently, BIS Oxford Economics believes mining construction – although forecast to decline further in coming years – is actually bumping along the bottom now in terms of domestic construction work done, and will add to engineering construction work significantly towards the end of the decade.

WA construction cost trends

Growth in construction costs tends to be highly correlated with construction activity because high levels of demand in construction activity not only places pressure on the existing supply of inputs, boosting input prices, but also allows construction companies to seek higher margins

The price of key inputs such as steel, oil and other base materials are determined globally and may occur independent of domestic construction activity. As a primary exporter of key raw materials, Australian construction is susceptible to increases through the reinforcing impact of rising pricing where the rise in cost of mining further increases construction costs.

Figure 2.8 illustrates the strong correlation between rising construction activity and construction costs in WA – represented by the Road and Bridge Index (RBI) from the ABS Producer Price Index series – since 2000. Growth in the RBI has slowed substantially since 2013. Over 2015/16 and 2016/17, annual average growth has been around zero, indicating minimal pricing pressures in the civil construction industry nationally. This view is supported by recent weak growth in construction industry wages, as well as other construction inputs, including fuel. However, there remains the risk that cost pressures will re-emerge in areas where there is a heavy concentration of construction work, as supplies tighten for local labour and materials.

Figure 2.8: WA construction and cost indexes, 2014/15=100Figure 2.8: WA Construction and Cost Indexes, 2014/15=100

Source: BIS Shrapnel, ABS data

Overall, nominal price levels for WA construction remain around 70 per cent higher than that experienced in 2000. Analysis of margins data coupled with construction prices suggest that construction contractors are absorbing price increases as they compete aggressively for work. However, this situation may unwind over the next five years as total construction activity stabilises, and rises strongly in some interstate markets (such as New South Wales and Victoria).

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30

40

50

60

70

40

50

60

70

80

90

100

110

2000 2002 2004 2006 2008 2010 2012 2014 2016

Non Oil and Gas Construction (RHS) $bn Oil and Gas Construction (RHS) $Bn WA Road and Bridge Index (LHS)

Source: BIS Oxford Economics, ABS

Price index, 2013/14 = 100 $Billion, 2014/15 Prices

Overall, nominal price levels for WA construction remain around 70 per cent higher than that experienced in 2000. Analysis of margins data coupled with construction prices suggest that construction contractors are absorbing price increases as they compete aggressively for work. However, this situation may unwind over the next five years as total construction activity stabilises, and rises strongly in some interstate markets such as New South Wales and Victoria.

WA Infrastructure Outlook


Jandakot 2ML Tank Roof Replacement. Photo courtesy of Westforce Construction


Project description Sponsor Region Total project value ($m)

Engineering value ($m) Project status Commence-

ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

ROADS, BRIDGES and RUNWAYS

Armadale Road - Duplication (Anstey Road to Tapper Road)

WA Government / Federal Government Perth 145 102 Under

Procurement 2017/18 2019/20 30 70 2

Bussell Highway - Margaret River Perimeter Road WA Government South West 58 23 Under Construction 2017/18 2018/19 14 9

Great Northern Highway - Muchea to Wubin, Stage 2

WA Government / Federal Government Wheatbelt 347 260 Under

Construction 2015/16 2018/19 30 100 65

Mandurah Traffic Bridge - Old Mandurah Bridge Replacement

WA Government / City of Mandurah Peel 52 41 Under

Construction 2015/16 2017/18 23 7

Mitchell Freeway - Burns Beach Road to Hester Avenue


Construction 2015/16 2017/18 98 4

North West Coastal Highway - Minilya to Barradale WA Government / Federal Government Gascoyne 106 80 Under

Construction 2014/15 2016/17 3

Reid Highway dual carriageway - Altone to Swan West Road

WA Government / Federal Government Perth 70 53 Prospective 2020/21 2021/22 35 18

NorthLink WA - Central Section: Reid Highway to Ellenbrook


Construction 2016/17 2018/19 5 270 142

NorthLink WA - Northern Section: Ellenbrook to Muchea


Construction 2017/18 2018/19 115 60

NorthLink WA - Southern Section: Guildford Road to Reid Highway


Construction 2016/17 2017/18 75 98

Other Arterials - Gibb River Road WA Government Kimberley 97 73 Under Construction 2 6 6 6 6 5

Onslow Road Post Construction Upgrade WA Government Perth 67 51 Under Procurement 2016/17 2018/19 7 30 8

Safer Roads and Bridges Program WA Government Perth 414 332 Under Construction 2015/16 2020/21 16 24 25 27 28

Perth Stadium Transport Project - Swan River Pedestrian Bridge WA Government Perth 83 54 Under

Construction 2015/16 2017/18 20 18

Albany Ring Road - Albany Ring Road (stages 2 and 3)

WA Government / Federal Government

Great Southern 172 129 Credibly

Proposed 2021/22 48

Kununurra Heavy Vehicle Route - Kununurra Heavy Vehicle Route Stage 1 - Road component

WA Government / Federal Government Kimberly 95 76 Credibly

Proposed 2019/20 2021/22 16 36 24

Marble Bar Road - Coongan Gorge Realignment WA Government / Federal Government Pilbara 54 41 Credibly

Proposed 2017/18 2019/20 13 16 12

Perth - Bunbury Highway - Bunbury Outer Ring Road (Southern Stage)

WA Government / Federal Government South West 240 180 Credibly

Proposed 2020/21 23 60

3. WA major projects (project value >$50 million)




ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

ROADS, BRIDGES and RUNWAYS

Armadale Road - Duplication (Anstey Road to Tapper Road)


Procurement 2017/18 2019/20 30 70 2

Bussell Highway - Margaret River Perimeter Road WA Government South West 58 23 Under Construction 2017/18 2018/19 14 9

Great Northern Highway - Muchea to Wubin, Stage 2

WA Government / Federal Government Wheatbelt 347 260 Under

Construction 2015/16 2018/19 30 100 65

Mandurah Traffic Bridge - Old Mandurah Bridge Replacement

WA Government / City of Mandurah Peel 52 41 Under

Construction 2015/16 2017/18 23 7

Mitchell Freeway - Burns Beach Road to Hester Avenue


Construction 2015/16 2017/18 98 4

North West Coastal Highway - Minilya to Barradale WA Government / Federal Government Gascoyne 106 80 Under

Construction 2014/15 2016/17 3

Reid Highway dual carriageway - Altone to Swan West Road

WA Government / Federal Government Perth 70 53 Prospective 2020/21 2021/22 35 18

NorthLink WA - Central Section: Reid Highway to Ellenbrook


Construction 2016/17 2018/19 5 270 142

NorthLink WA - Northern Section: Ellenbrook to Muchea


Construction 2017/18 2018/19 115 60

NorthLink WA - Southern Section: Guildford Road to Reid Highway


Construction 2016/17 2017/18 75 98

Other Arterials - Gibb River Road WA Government Kimberley 97 73 Under Construction 2 6 6 6 6 5

Onslow Road Post Construction Upgrade WA Government Perth 67 51 Under Procurement 2016/17 2018/19 7 30 8

Safer Roads and Bridges Program WA Government Perth 414 332 Under Construction 2015/16 2020/21 16 24 25 27 28

Perth Stadium Transport Project - Swan River Pedestrian Bridge WA Government Perth 83 54 Under

Construction 2015/16 2017/18 20 18

Albany Ring Road - Albany Ring Road (stages 2 and 3)

WA Government / Federal Government

Great Southern 172 129 Credibly

Proposed 2021/22 48

Kununurra Heavy Vehicle Route - Kununurra Heavy Vehicle Route Stage 1 - Road component

WA Government / Federal Government Kimberly 95 76 Credibly

Proposed 2019/20 2021/22 16 36 24

Marble Bar Road - Coongan Gorge Realignment WA Government / Federal Government Pilbara 54 41 Credibly

Proposed 2017/18 2019/20 13 16 12

Perth - Bunbury Highway - Bunbury Outer Ring Road (Southern Stage)

WA Government / Federal Government South West 240 180 Credibly

Proposed 2020/21 23 60


WA major projects (project value >$50 million)



ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Perth Airport - New Runway Perth Airport Perth 600 540 Under Procurement 2018/19 45 117 153 144

Karratha to Tom Price Road Sealing WA Government Perth 50 38 Under Procurement 2018/19 2020/21 4 24 10

Great Northern Highway - Fitzroy Crossing to Gogo WA Government Kimberley 99 74 Credibly Proposed 2021/22 11

Bussell Highway - Margaret River Perimeter Road WA Government South West 58 23 Prospective 2017/18 2018/19 14 9

Great Northern Highway - Muchea to Wubin (Stage 2) WA Government Wheatbelt 347 260 Under Construction 2015/16 2018/19 30 100 65

Wanneroo Road - Joondalup Drive Grade Separation WA Government Perth 50 35 Prospective 2017/18 2018/19 35

Armadale Road - North Lake Road Bridge at Kwinana Freeway

WA Government / Federal Government Perth 237 178 Prospective 2018/19 2020/21 28 80 70

Leach Highway - Carrington St to Stirling Highway WA Government / Federal Government Perth 118 89 Under

Procurement 2019/20 2020/21 45 44

Wanneroo Road - Ocean Reef Road Grade Separation WA Government / Federal Government Perth 65 45 Under

Procurement 2018/19 2020/21 10 26 9

Kwinana Freeway - Roe Highway to Narrow Bridge Northbound


Procurement 2018/19 2019/20 10 25

Kwinana Freeway - Access to Murdoch Activity Centre WA Government / Federal Government Perth 113 79 Under

Construction 2017/18 2018/19 15 64

Stephenson Ave Extension WA Government / Federal Government Perth 130 90 Credibly

Proposed 2019/20 2020/21 45 45

Busselton Airport Redevelopment WA Government South West 70 55 Under Construction 2017/18 2018/19 30 25

Roe Highway and Kalamunda Road Separation WA Government / Federal Government Perth 86 65 Prospective 2019//20 2020/21 50 15

Roads and bridgesmajor projects

Funded 309 875 679 402 370 167

Not Funded 0 13 16 73 104 143

RAIL

Perth New Stadium Transport Project WA Government Perth 202 152 Under Construction 2014/15 2017/18 120 6

Forrestfield Airport Rail Link WA Government Perth 1861 1176 Under Construction 2013/14 2020/21 174 256 291 258 96

Metronet: Joondalup to Yanchep WA Government Perth 520 260 Under Procurement 2017/18 2021/22 16 53 81 72 40

Metronet: Cockburn to Thornlie line WA Government Perth 536 268 Under Procurement 2018/19 2021/22 59 78 75 57

Metronet: Level crossing removal WA Government Perth 70 35 Under Procurement 2018/19 2019/20 18 18




ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Perth Airport - New Runway Perth Airport Perth 600 540 Under Procurement 2018/19 45 117 153 144

Karratha to Tom Price Road Sealing WA Government Perth 50 38 Under Procurement 2018/19 2020/21 4 24 10

Great Northern Highway - Fitzroy Crossing to Gogo WA Government Kimberley 99 74 Credibly Proposed 2021/22 11

Bussell Highway - Margaret River Perimeter Road WA Government South West 58 23 Prospective 2017/18 2018/19 14 9

Great Northern Highway - Muchea to Wubin (Stage 2) WA Government Wheatbelt 347 260 Under Construction 2015/16 2018/19 30 100 65

Wanneroo Road - Joondalup Drive Grade Separation WA Government Perth 50 35 Prospective 2017/18 2018/19 35

Armadale Road - North Lake Road Bridge at Kwinana Freeway

WA Government / Federal Government Perth 237 178 Prospective 2018/19 2020/21 28 80 70

Leach Highway - Carrington St to Stirling Highway WA Government / Federal Government Perth 118 89 Under

Procurement 2019/20 2020/21 45 44

Wanneroo Road - Ocean Reef Road Grade Separation WA Government / Federal Government Perth 65 45 Under

Procurement 2018/19 2020/21 10 26 9

Kwinana Freeway - Roe Highway to Narrow Bridge Northbound


Procurement 2018/19 2019/20 10 25

Kwinana Freeway - Access to Murdoch Activity Centre WA Government / Federal Government Perth 113 79 Under

Construction 2017/18 2018/19 15 64

Stephenson Ave Extension WA Government / Federal Government Perth 130 90 Credibly

Proposed 2019/20 2020/21 45 45

Busselton Airport Redevelopment WA Government South West 70 55 Under Construction 2017/18 2018/19 30 25

Roe Highway and Kalamunda Road Separation WA Government / Federal Government Perth 86 65 Prospective 2019//20 2020/21 50 15

Roads and bridgesmajor projects

Funded 309 875 679 402 370 167

Not Funded 0 13 16 73 104 143

RAIL

Perth New Stadium Transport Project WA Government Perth 202 152 Under Construction 2014/15 2017/18 120 6

Forrestfield Airport Rail Link WA Government Perth 1861 1176 Under Construction 2013/14 2020/21 174 256 291 258 96

Metronet: Joondalup to Yanchep WA Government Perth 520 260 Under Procurement 2017/18 2021/22 16 53 81 72 40

Metronet: Cockburn to Thornlie line WA Government Perth 536 268 Under Procurement 2018/19 2021/22 59 78 75 57

Metronet: Level crossing removal WA Government Perth 70 35 Under Procurement 2018/19 2019/20 18 18




ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Metronet: Armadale to Byford WA Government Perth 291 146 Under Procurement 2019/20 2021/22 50 73 23

Metronet: Signalling upgrade WA Government Perth 120 36 Under Procurement 2018/19 2021/22 8 15 9 4

Metronet: Morley to Ellenbrook line WA Government Perth 863 432 Credibly Proposed 2019/20 2021/22 108 216 108

Rail major projectsFunded 294 279 429 450 252 101

Not Funded 0 0 0 158 289 131

HARBOURS / PORTS

Port Hedland Water Front Revitalisation WA Government / Federal Government Pilbara 112 61 Credibly

Proposed 2017/18 2020/21 9 21 21 9

Harbours major projectsFunded 0 9 21 21 9 0

Not Funded 0 0 0 0 0 0

WATER

Stirling Dam Pumpback to Harris Dam WA Government South West 49 24 Under Construction 2015/16 2018/19 12 12 1

Groundwater Replenishment Scheme Stage 2 WA Government Perth 262 160 Under Construction 2016/17 2019/20 10 60 80 10

Network Renewal (Regional) WA Government Statewide 250 150 Under Construction 2016/17 2020/21 50 25 20 40 15

Network Renewal (Metro) WA Government Perth 307 240 Under Construction 2016/17 2021/22 51 28 43 50 50 17

Ellenbrook Tank WA Government Perth 44 30 Under Construction 2016/17 2018/19 13 14 3

Cunderdin Storage Tank Cunderdin Council/WA Government Wheatbelt 36 22 Under

Construction 2015/16 2018/19 13 7 1

Water for Life Irrigation projects WA Government 60 35 Announced 2018/19 2021/22 6 12 12 6

Advanced Water Treatment Plant WA Government Perth 119 53 Under Construction 2012/13 2017/18 3 1

Myalup-Wellington Project WA Government/Federal South West 380 250 Credibly Proposed 2018/19 2021/22 20 100 100 30

Southern Forests Irrigation Scheme WA Government/Federal South West 80 60 Unlikely 2018/19 2020/21 20 20 20

Water major projectsFunded 151 147 147 100 65 17

Not Funded 0 0 46 132 132 36

SEWERAGE

Woodman Point WWTP Interim Upgrade WA Government Perth 196 88 Under Construction 2016/17 2019/20 7 51 17 11

Network Renewal (Metro) WA Government Perth 122 55 Under Construction 2016/17 2020/21 14 10 9 10 11





ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Metronet: Armadale to Byford WA Government Perth 291 146 Under Procurement 2019/20 2021/22 50 73 23

Metronet: Signalling upgrade WA Government Perth 120 36 Under Procurement 2018/19 2021/22 8 15 9 4

Metronet: Morley to Ellenbrook line WA Government Perth 863 432 Credibly Proposed 2019/20 2021/22 108 216 108

Rail major projectsFunded 294 279 429 450 252 101

Not Funded 0 0 0 158 289 131

HARBOURS / PORTS

Port Hedland Water Front Revitalisation WA Government / Federal Government Pilbara 112 61 Credibly

Proposed 2017/18 2020/21 9 21 21 9

Harbours major projectsFunded 0 9 21 21 9 0


WATER

Stirling Dam Pumpback to Harris Dam WA Government South West 49 24 Under Construction 2015/16 2018/19 12 12 1

Groundwater Replenishment Scheme Stage 2 WA Government Perth 262 160 Under Construction 2016/17 2019/20 10 60 80 10

Network Renewal (Regional) WA Government Statewide 250 150 Under Construction 2016/17 2020/21 50 25 20 40 15

Network Renewal (Metro) WA Government Perth 307 240 Under Construction 2016/17 2021/22 51 28 43 50 50 17

Ellenbrook Tank WA Government Perth 44 30 Under Construction 2016/17 2018/19 13 14 3

Cunderdin Storage Tank Cunderdin Council/WA Government Wheatbelt 36 22 Under

Construction 2015/16 2018/19 13 7 1

Water for Life Irrigation projects WA Government 60 35 Announced 2018/19 2021/22 6 12 12 6

Advanced Water Treatment Plant WA Government Perth 119 53 Under Construction 2012/13 2017/18 3 1

Myalup-Wellington Project WA Government/Federal South West 380 250 Credibly Proposed 2018/19 2021/22 20 100 100 30

Southern Forests Irrigation Scheme WA Government/Federal South West 80 60 Unlikely 2018/19 2020/21 20 20 20

Water major projectsFunded 151 147 147 100 65 17

Not Funded 0 0 46 132 132 36

SEWERAGE

Woodman Point WWTP Interim Upgrade WA Government Perth 196 88 Under Construction 2016/17 2019/20 7 51 17 11

Network Renewal (Metro) WA Government Perth 122 55 Under Construction 2016/17 2020/21 14 10 9 10 11




ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Harris WWTP WA Government South West 175 79 Under Procurement 2019/20 20 27 27

Sewerage major projectsFunded 21 62 27 41 38 27


ELECTRICITY

Pilbara Underground Power Project Horizon Power Pilbara 224 168 Under Construction 2010/11 2017/18 22 16

State Underground Power Program Western Power Perth 142 95 Under Procurement 2017/18 2020/21 27 37 25 6

Kwinana Waste to Energy Project (35 MW) Phoenix Energy Perth 380 200 Credibly Proposed 2017/18 2019/20 48 92 60

Manjimup Biomass Project (40 MW) WestGen / National Power South West 150 90 Credibly

Proposed 2018/19 2019/20 60 30

Cunderdin Solar Farm (100 MW) Sun Brilliance Wheatbelt 160 96 Under Procurement 2017/18 2018/19 36 60

Onslow Power Infrastructure Project Horizon Power Pilbara 100 70 Credibly Proposed 2017/18 2018/19 30 40

Badgingarra wind farm APA Wheatbelt 350 210 Under Construction 2017/18 2019/20 70 100 40

Byford Solar Farm (30 MW) Wesfarmers Energy Perth 70 42 Under Procurement 2017/18 2018/19 21 21

Emu Downs Solar Farm APA Wheatbelt 50 30 Under Construction 2017/18 2018/19 15 15

Electricity major projectsFunded 22 215 273 65 6 0

Not Funded 0 48 152 90 0 0

TELECOMMUNICATIONS

National Broadband Network Federal Government Statewide 4429 3100 Under Construction 2020/21 536 541 463 209 94

Telecommunications major projects

Funded 536 541 463 209 94 0


OIL & GAS

NWS Greater Western Flank - Phase 2 North West Shelf Consortium Pilbara 2750 1375 Under

Construction 2016/17 2018/19 525 450 400

Persephone gas field North West Shelf Consortium Pilbara 1200 600 Under

Construction 2014/15 2017/18 310 50

Lambert Deep West North West Shelf Consortium Pilbara 1250 625 Credibly

Proposed 2020/21 2023/24 150 210

Gorgon LNG - 4th Train Chevron/Texaco JV Pilbara 12000 12000 Credibly Proposed 2019/20 2024/25 100 2000 3000





ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Harris WWTP WA Government South West 175 79 Under Procurement 2019/20 20 27 27

Sewerage major projectsFunded 21 62 27 41 38 27


ELECTRICITY

Pilbara Underground Power Project Horizon Power Pilbara 224 168 Under Construction 2010/11 2017/18 22 16

State Underground Power Program Western Power Perth 142 95 Under Procurement 2017/18 2020/21 27 37 25 6

Kwinana Waste to Energy Project (35 MW) Phoenix Energy Perth 380 200 Credibly Proposed 2017/18 2019/20 48 92 60

Manjimup Biomass Project (40 MW) WestGen / National Power South West 150 90 Credibly

Proposed 2018/19 2019/20 60 30

Cunderdin Solar Farm (100 MW) Sun Brilliance Wheatbelt 160 96 Under Procurement 2017/18 2018/19 36 60

Onslow Power Infrastructure Project Horizon Power Pilbara 100 70 Credibly Proposed 2017/18 2018/19 30 40

Badgingarra wind farm APA Wheatbelt 350 210 Under Construction 2017/18 2019/20 70 100 40

Byford Solar Farm (30 MW) Wesfarmers Energy Perth 70 42 Under Procurement 2017/18 2018/19 21 21

Emu Downs Solar Farm APA Wheatbelt 50 30 Under Construction 2017/18 2018/19 15 15

Electricity major projectsFunded 22 215 273 65 6 0

Not Funded 0 48 152 90 0 0

TELECOMMUNICATIONS

National Broadband Network Federal Government Statewide 4429 3100 Under Construction 2020/21 536 541 463 209 94

Telecommunications major projects

Funded 536 541 463 209 94 0


OIL & GAS

NWS Greater Western Flank - Phase 2 North West Shelf Consortium Pilbara 2750 1375 Under

Construction 2016/17 2018/19 525 450 400

Persephone gas field North West Shelf Consortium Pilbara 1200 600 Under

Construction 2014/15 2017/18 310 50

Lambert Deep West North West Shelf Consortium Pilbara 1250 625 Credibly

Proposed 2020/21 2023/24 150 210

Gorgon LNG - 4th Train Chevron/Texaco JV Pilbara 12000 12000 Credibly Proposed 2019/20 2024/25 100 2000 3000




ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Greater Enfield Woodside / Mitsui Pilbara 2500 2500 Under Construction 2016/17 2018/19 400 1000 1100

Prelude FLNG Shell Kimberley 12600 3250 Under Construction 2013/14 2017/18 450 300

Wheatstone LNG - Gas field development Chevron/Apache/KUFPEC/Tokyo electric Pilbara 6500 6500 Under

Construction 2011/12 2017/18 550 500

Wheatstone LNG - 8.9Mtpa + Domestic gas processing facility

Chevron/Apache/KUFPEC/Tokyo electric Pilbara 38288 31750 Under

Construction 2012/13 2017/18 6000 3000

Oil & gas major projects

Funded 8235 5300 1500 100 2150 3210


OTHER MINERALS

Boddington Expansion Newmont Peel 500 375 Under Construction 2015./16 2017/18 225 75

Bullabulling Bullabulling Gold Goldfields-Esperance 346 277 Under

Construction 2018/19 2020/21 55 180 42

Greenbushes Lithium (mine) Talison Lithium & Albemarle Corporation South West 320 256 Under

Construction 2016/17 2018/19 40 196 20

Greenbushes Lithium (processing plant) Talison Lithium & Albemarle Corporation South West 400 140 Under

Construction 2016/17 2019/20 50 50 10 30

Gruyere Project Gold Road Resources and Gold Fields

Goldfields-Esperance 455 341 Under

Construction 2016/17 2018/19 100 160 81

Gwalia Extension Project St Barbara Goldfields-Esperance 100 80 Under

Procurement 2017/18 2019/20 25 25 30

Mt Morgans Gold Project Dacian Gold Goldfields-Esperance 150 113 Under

Construction 2016/17 2017/18 63 50

Wiluna uranium project (Centipede - Lake Way) Toro Energy Mid West 300 240 Prospective 2017/18 2019/20 20 180 40

Thunderbird Mineral Sands Sheffield Resources Kimberley 393 275 Credibly Proposed 2018/19 2020/21 90 148 37

Eliwana Iron Ore Mine Fortescue Metals Group Pilbara 1250 1250 Credibly Proposed 2017/18 2019/20 300 600 350

Jimblebar expansion and debottlenecking BHP Billiton Pilbara 400 400 Under Construction 2016/17 2018/19 100 200 100

Mt Gibson Range Mine Operations - Iron Hill Deposits Mount Gibson Mining Ltd Mid West 150 150 Under Construction 2016/17 2017/18 50 100

Silvergrass Rio Tinto Pilbara 338 338 Under Construction 2016/17 2017/18 120 218

Koodaideri Rio Tinto Pilbara 3500 3150 Credibly Proposed 2020/21 550 1300

South Flank BHP Billiton Pilbara 2000 1800 Prospective 2018/19 2020/21 200 1000 600

Monty copper-gold project Sandfire Resources Mid West 72 58 Under Construction 2017/18 2018/19 38 19





ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Greater Enfield Woodside / Mitsui Pilbara 2500 2500 Under Construction 2016/17 2018/19 400 1000 1100

Prelude FLNG Shell Kimberley 12600 3250 Under Construction 2013/14 2017/18 450 300

Wheatstone LNG - Gas field development Chevron/Apache/KUFPEC/Tokyo electric Pilbara 6500 6500 Under

Construction 2011/12 2017/18 550 500

Wheatstone LNG - 8.9Mtpa + Domestic gas processing facility

Chevron/Apache/KUFPEC/Tokyo electric Pilbara 38288 31750 Under

Construction 2012/13 2017/18 6000 3000

Oil & gas major projects

Funded 8235 5300 1500 100 2150 3210


OTHER MINERALS

Boddington Expansion Newmont Peel 500 375 Under Construction 2015./16 2017/18 225 75

Bullabulling Bullabulling Gold Goldfields-Esperance 346 277 Under

Construction 2018/19 2020/21 55 180 42

Greenbushes Lithium (mine) Talison Lithium & Albemarle Corporation South West 320 256 Under

Construction 2016/17 2018/19 40 196 20

Greenbushes Lithium (processing plant) Talison Lithium & Albemarle Corporation South West 400 140 Under

Construction 2016/17 2019/20 50 50 10 30

Gruyere Project Gold Road Resources and Gold Fields

Goldfields-Esperance 455 341 Under

Construction 2016/17 2018/19 100 160 81

Gwalia Extension Project St Barbara Goldfields-Esperance 100 80 Under

Procurement 2017/18 2019/20 25 25 30

Mt Morgans Gold Project Dacian Gold Goldfields-Esperance 150 113 Under

Construction 2016/17 2017/18 63 50

Wiluna uranium project (Centipede - Lake Way) Toro Energy Mid West 300 240 Prospective 2017/18 2019/20 20 180 40

Thunderbird Mineral Sands Sheffield Resources Kimberley 393 275 Credibly Proposed 2018/19 2020/21 90 148 37

Eliwana Iron Ore Mine Fortescue Metals Group Pilbara 1250 1250 Credibly Proposed 2017/18 2019/20 300 600 350

Jimblebar expansion and debottlenecking BHP Billiton Pilbara 400 400 Under Construction 2016/17 2018/19 100 200 100

Mt Gibson Range Mine Operations - Iron Hill Deposits Mount Gibson Mining Ltd Mid West 150 150 Under Construction 2016/17 2017/18 50 100

Silvergrass Rio Tinto Pilbara 338 338 Under Construction 2016/17 2017/18 120 218

Koodaideri Rio Tinto Pilbara 3500 3150 Credibly Proposed 2020/21 550 1300

South Flank BHP Billiton Pilbara 2000 1800 Prospective 2018/19 2020/21 200 1000 600

Monty copper-gold project Sandfire Resources Mid West 72 58 Under Construction 2017/18 2018/19 38 19




ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Admiral Bay zinc project Metalicity Kimberley 1000 800 Announced 2021/22 200

Pilgangoora Lithium-Tantalite Project (Pilbara Minerals) Pilbara Minerals Pilbara 234 221 Under Construction 2016/17 2017/18 20 201

Ashburton Salt project K+S Australia Pilbara 350 210 Announced 2020/21 2022/23 75 100

Browns Range Northern Minerals Gascoyne 56 39 Under Construction 2017/18 2017/18 40

Yandicoogina Oxbow Rio Tinto Pilbara 64 64 Under Construction 2016/17 2017/18 43 21

Sorby Hills KBL Mining Kimberley 70 53 Announced 2017/18 2018/19 38 15

Project Maverick Brockman Resources Pilbara 60 54 Under Procurement 2017/18 2017/18 54

Dalgaranga Gascoyne Resources Murchison 86 65 Under Construction 2016/17 2017/18 20 45

North Perth Basin Project (Boonanarring, Atlas) Image Resources Wheatbelt 64 45 Under Construction 2017/18 2017/18 45

Koolan Island redevelopment Mount Gibson Iron Kimberley 97 81 Prospective 2017/18 2018/19 56 25

Fortuna Project Bauxite Resources Wheatbelt 250 175 Credibly Proposed 2020/21 2022/23 60 85

Other minerals major projects

Funded 831 1932 1420 1778 1304 1400

Not Funded 0 0 0 0 60 285





ment dateCompletion

date2016/17

($m)2017/18

($m)2018/19

($m)2019/20

($m)2020/21

($m)2021/22

($m)

Admiral Bay zinc project Metalicity Kimberley 1000 800 Announced 2021/22 200

Pilgangoora Lithium-Tantalite Project (Pilbara Minerals) Pilbara Minerals Pilbara 234 221 Under Construction 2016/17 2017/18 20 201

Ashburton Salt project K+S Australia Pilbara 350 210 Announced 2020/21 2022/23 75 100

Browns Range Northern Minerals Gascoyne 56 39 Under Construction 2017/18 2017/18 40

Yandicoogina Oxbow Rio Tinto Pilbara 64 64 Under Construction 2016/17 2017/18 43 21

Sorby Hills KBL Mining Kimberley 70 53 Announced 2017/18 2018/19 38 15

Project Maverick Brockman Resources Pilbara 60 54 Under Procurement 2017/18 2017/18 54

Dalgaranga Gascoyne Resources Murchison 86 65 Under Construction 2016/17 2017/18 20 45

North Perth Basin Project (Boonanarring, Atlas) Image Resources Wheatbelt 64 45 Under Construction 2017/18 2017/18 45

Koolan Island redevelopment Mount Gibson Iron Kimberley 97 81 Prospective 2017/18 2018/19 56 25

Fortuna Project Bauxite Resources Wheatbelt 250 175 Credibly Proposed 2020/21 2022/23 60 85

Other minerals major projects

Funded 831 1932 1420 1778 1304 1400

Not Funded 0 0 0 0 60 285

About CCF WAThe Civil Contractors Federation is the member-based body representing the Australian civil construction industry, with branches in each State and Territory and a National Office in Canberra. Nationally, we represent more than 1,500 civil contractors and a further 700 suppliers to industry. Our members are involved in a variety of projects and activities including the development and maintenance of civil or ‘horizontal’ infrastructure such as roads, bridges, railways, sewer, water and drainage pipelines, dams, wharves, and commercial and housing land development.

CCF WA actively represents the views of the Western Australian civil construction industry to Governments at all levels, promoting our vision of a vibrant, sustainable civil construction industry building world-class infrastructure. We advocate policies that reduce red tape, provide a strong, transparent pipeline of works and ensure a level playing field with fair opportunity for all contractors.


Reid Highway Works. Photo courtesy of Georgiou

McCallum Park Causeway Underpass and Stormwater Drainage Upgrade.

Photo courtesy of MMM (WA)

2018


2018


Documents

20 WESTERN AUSTRALIAN 18 INFRASTRUCTURE …...• The challenge will be to sustain WA public infrastructure investment beyond the current wave of projects across transport and telecommunications