Australia Infrastructure Report Q1 2008

The construction industry of Australia contributed over 10% to the country's gross domestic product (GDP) in 2006, cementing its importance in the economy. About 140,000 construction businesses operate in the industry employing more than 800,000 people. It is a very diverse industry in terms of size and scale of operation. A small number of medium-sized companies have captured the residential construction segment, while the eight largest companies in the non-residential construction segment account for nearly 27% of the industry turnover. This report forecasts the industry to grow 3.13% yearon- year (y-o-y) in 2007 to reach a value of US$86.08bn, and further to US$106.04bn by 2012.

The government is playing a very keen investor in the Australian construction industry. For instance, in 2007, the South Australian government announced a package of US$450mn for infrastructure development in the region. In West Australia (WA), the government is expected to invest in airport development. The performance of the construction industry is also augured by the nation's accommodating monetary and fiscal policies that help in attracting investments into the sector. Some of the major projects being planned in Australia include the construction of a liquefied natural gas (LNG) plant in Queensland worth US$5.82bn; a rail link from Pilbara to the Bowen Basin in Western Australia, and an upgrade of the Sydney rail network, including construction of rail lines, rail bridges and the modification of existing bridges.

Despite the promising future of the construction industry, macroeconomic variables might pose some difficulty in the medium term. There is a possibility of inflation and the current account deficit hampering the industry outlook. Again, high oil prices might put a damper on capital inflows into Australian construction activity.

Having said that, Australia's highly developed infrastructure compares with the best in the world.

Transport plays an important role in addressing the nation's economic and community needs. Moreover, its highly skilled workforce as well as its unique geographic location as a gateway to the Asia-Pacific, position Australia as a likely candidate for a modest-to-positive growth outlook.