Growth in infrastructure construction in Australia is forecast to grow by an average annual rate of 3.4 per cent over the period between 2020 and 2030 – rivalling growth in infrastructure construction in China, according to a new global forecast.
The global construction industry is set to be a global engine for economic growth and recovery from COVID-19, propelling construction’s expansion ahead of growth in both manufacturing and services.
Rising populations and urbanisation across emerging nations and a return to urban centres after COVID-19 will combine to spur average annual growth of 3.6 per cent between now and 2030, say the authors of “Future of Construction”, a forecast produced by Oxford Economics and Marsh McLennan companies Marsh and Guy Carpenter.
Overall, the global construction output is predicted to grow by 42 per cent or $US4.5 trillion ($6.07 trillion) between 2020 and 2030 to reach $US15.2 trillion ($20.49 trillion), up from an estimated global output of $US10.7 trillion ($14.42 trillion) in 2020.
Asia-Pacific will account for $US2.5 trillion ($3.37 trillion) of growth in construction output between 2020 and 2030, up by over 50 per cent, to become a $US7.4 trillion ($9.98 trillion) market by 2030.
Growth will be concentrated in a handful of countries, with just four – China, India, US and Indonesia – accounting for some 58 per cent of projected global expansion.
China alone will account for 26.1 per cent of global growth. India is forecast to account for 14.1 per cent and the US for 11.1 per cent, while Indonesia is expected to account for 7.0 per cent of global growth – almost the same as the combined growth of Australia, UK, France, and Canada, which are the next four largest contributors.
The report also states that the UK and Australia are well positioned to accelerate infrastructure development amongst the top 10 global construction markets due to the readiness of existing pipeline of infrastructure.
Growth in infrastructure construction in the UK and Australia is forecast to grow by an average annual rate of growth of 3.7 per cent and 3.4 per cent, respectively over the period between 2020 and 2030 – rivalling growth in infrastructure construction in China averaging 3.8 per cent per annum over the same period.
The UK’s High Speed 2 project is Europe’s largest single infrastructure project along with strategic roads investments. Mega infrastructure projects give the UK a heightened growth in infrastructure over the next decade to rival rates of growth in China.
Australia’s working age population is expected to grow at an average of close to 1 per cent per annum to 2030 but in the longer-term the numbers aged over 64 years will increase the dependency ratio. Population in Australia is expected to grow by almost 5 million by 2030, with migration expected to return by mid-2022.
Within the Anglosphere (defined as US, UK, Australia, Canada and New Zealand), permanent inward migration will help to sustain population growth and construction demand. Almost a quarter of all permanent migration to OECD countries between 2010 and 2018 arrived in the Anglosphere. Migration to Germany made up 6 per cent of all OECD permanent migration.
Ability to finance infrastructure
In many markets, public-private partnerships (PPPs) are a way of developing infrastructure, using private financing with returns usually based upon receipts from government payments, which are either based upon the availability of the asset, or, less often, the volume of use.
In the UK, where the PPP model was first developed, it traditional use is now virtually nonexistent. Canada and Australia remain the most successful PPP markets, with both governments remaining firmly committed to the use of private financing for public infrastructure.
The US will remain a significant market for PPPs as high levels of government debt will constrain spending on infrastructure. Localised tax raising is one approach to raising funding needed for infrastructure spending.
Australia, Germany and Indonesia are also among the best placed economies out of the global top 10 construction markets to utilise additional public financing to support infrastructure development.
The report noted that climate change and the race to net zero are the greatest challenges for construction, and are expected to drive new deconstruction opportunities while ESG-related capital grew by 28 per cent in 2020, largely due to a flow of fundraising into sustainability-related strategies.