Australia’s infrastructure spending could fall by 20% or $14 billion, leaving construction on many of the nation’s mining projects in doubt, industry forecaster BIS Shrapnel said in a report today.
BIS analyst Damon Roast said mine construction is set to fall sharply after years of growth during the commodities boom.
“The slump in demand for resources means the next round of mining projects is in doubt, with some still-feasible projects already being delayed due to companies’ financial problems,” Roast said in the company’s Engineering Construction in Australia, 2008/09 Report.
Mine construction is the biggest contributor to engineering construction activity.
The report found that the Federal Government’s stimulus plan to increase infrastructure spending by almost $90 billion won’t halt a collapse in demand for engineering and construction work, with such spending “more than offset” by shrinking demand from State governments and privately-funded work caused by the credit crisis.
Engineering construction activity will peak this financial year with $68billion, $43 billion of which is privately funded, Roast said.
According to the BIS report, mining-intensive states Western Australia and Queensland would be the hardest hit by the collapse, with activity expected to decrease 35 and 30% respectively.
In contrast, activity is set to steadily rise in Victoria as road and rail works are being fast-tracked, and South Australia will also be supported by projects in water, sewerage, electricity and roads.
Roast said the total volume of work was expected to decline to $58 billion in the next financial year and fall to $54.5 billion in 2010-11, while private funded projects would drop to $30.5 billion in 2010-11.