FEATURE ARTICLE: ENGINEERING CONSTRUCTION IN SOUTH AUSTRALIA


INTRODUCTION

South Australia's value of engineering construction has exceeded the value of building construction for the first time since this measure was introduced in 1987. Engineering construction includes items such as bridges, roads, water supply and public transport infrastructure. Building construction includes houses, units and office blocks. Together, they are important indicators of economic activity.

Using data from the ABS publication Engineering Construction Activity, Australia (cat. no. 8762.0), this article considers the underlying features of the increase in engineering construction activity in South Australia. Public and private sector activity are compared and a substantial lift in public sector expenditure is noted. Employment data relating to the construction industry, drawn from Labour Force, Australian, Detailed, Quarterly (cat. no. 6291.0.55.003), is analysed and shown to respond to the activity in the public sector.


VALUE OF ENGINEERING CONSTRUCTION WORK DONE IN SOUTH AUSTRALIA

Building activity showed steady growth through 2009 while engineering construction activity, which is usually overshadowed by building activity, showed a marked upsurge. The value of engineering construction work in South Australia increased by 66% for the year (from $810m to $1,347m) and 114% since the December quarter 2007. By contrast, building construction work increased by 9% through 2009 (from $1,091m to $1,150m) and 18% since the December quarter 2007.

The marked increase in engineering construction work in South Australia, from $810m in the December quarter 2008 to $1,347m in the December quarter 2009, was the strongest in the nation. Victoria recorded the next largest increase (34%). Despite the strong growth recorded in these two states the Australian value of engineering construction grew by a modest 12% in 2009. New South Wales, Queensland and Western Australia together accounted for approximately 78% of the value of all engineering construction in the nation, hence dampening the effect of the strong growth in South Australia and Victoria.

ENGINEERING CONSTRUCTION WORK DONE BY SECTOR

Engineering construction work can be broken down by sector of ownership into private and public works and historically private engineering works has tended to be the bigger contributor. In recent times, however, this situation has been reversed with the value of public sector engineering works in the June, September and December quarters of 2009 (approximately $1,944m) exceeding the value of private sector work (approximately $1,543m) for the same period. Thus the recent surge in South Australian engineering work is being driven by increased activity in the public sector.

As noted in the graph above, the value of public sector work includes work carried out by the private sector for the public sector. The proportion of the public sector engineering construction work contracted to the private sector initially increased from 34% in the September quarter 2008 to 43% in the December quarter 2008, and thereafter steadily increased to reach 65% in the December quarter 2009.

SA PUBLIC SECTOR ENGINEERING CONSTRUCTION

Work on projects relating to transport and utilities infrastructure have dominated public sector engineering in recent times.

The value of public works on transport infrastructure rose from $146.5 million in the March quarter 2008 to $234.0 million in the June quarter 2008 (an increase of 60%) and has remained at high levels, peaking at $300.2 million for the June quarter 2009. Construction work on the Gallipoli Underpass at the intersection of South Road and ANZAC Highway, a project valued at $117.9m (DTEI 2009), was a major contributor to these higher levels of expenditure. Construction work on the underpass commenced in July 2007 and it was opened to traffic in March 2009.

In the June quarter 2009, the value of public sector engineering construction works was boosted by $380.2 million of construction for the water supply and storage (and sewerage and drainage) industry; construction works at Port Stanvac for the Adelaide Desalination Plant and construction of a water pipeline from the desalination plant to the Happy Valley reservoir commenced in May 2009. With matched funding of $228 million from the Commonwealth Government, the State Government was able to double the capacity of the Adelaide Desalination Plant to 100 gigalitres. The final estimated cost of the project is $1.8 billion (SA Water 2009).

The combined value of construction works for the transport and water industries in the December quarter 2009 was $627.6 million, made up of $286.2 million for transport infrastructure and $341.4 million for water related infrastructure. Public infrastructure works being undertaken during this time were the South Road overpass for the Glenelg tramline in the latter half of 2009 (and to continue into 2010) and the extension of the tramline from North terrace in the city to the Entertainment Centre on the Port Road from April 2009.

It is anticipated that the value of engineering construction work done will remain at higher levels into 2010 with an estimated $1,141m of work commenced but not yet completed as at the December quarter 2009. Accounting for almost three quarters of this total (73.4%) is work yet to be done in the water storage and supply, sewerage and drainage industry ($838m).


EMPLOYMENT IN CONSTRUCTION INDUSTRIES

The estimated number of people employed in South Australia's construction industry increased to 63,200 persons in the November quarter 2008, which was 16% greater than the corresponding quarter in 2007. By the November quarter 2009, the South Australian construction industry work force had increased by a further 4% but decreased slightly to about 65,000 persons in the February quarter 2010, This contrasts with the estimate for Australia's construction industry work force which was relatively flat over the corresponding period.

Engineering construction activities may have had a greater demand for workers and stimulated the increase in the industry employment levels. This is supported by the large increase in construction industry employment that occurred in the November quarter 2008, immediately preceding the large increase in the value of construction work done in the December quarter. High levels of employment have coincided with the periods of high levels of engineering construction work.


SUMMARY

The value of South Australian engineering construction work done has recently exceeded that of building construction for the first time since these measures were introduced. The upsurge in engineering construction work since December 2007 is attributable to increased public works. An increase in employment in the South Australian construction industries coincided with the period in which the engineering construction changes occurred.

The main types of public engineering works contributing to the increase related to transport (Gallipoli Underpass, tramline extension to the Entertainment Centre and tramline crossover on South Road) and water supply (Adelaide Desalination Plant and pipeline). Funding assistance from the Commonwealth Government enabled a doubling of the proposed capacity of the Adelaide Desalination Plant .


REFERENCES

ABS 2009a Building Activity, Australia, Dec 2009 (cat. no. 8752.0)

ABS 2009b Engineering Construction Activity, Australia, Dec 2009 (cat. no. 8762.0)

ABS 2010 Labour Force, Australia, Detailed, Quarterly, Feb 2010 (cat. no. 6291.0.55.003)

DTEI 2009 (Department for Transport, Energy and Infrastructure) 'Gallipoli Underpass - Construction' viewed April 22 2010 <http://www.dtei.sa.gov.au/infrastructure/completed_projects/anzac_highway/news>

SA Water 2009 '100gl desalination expansion in Public Works today' viewed April 22 2010 <http://www.waterforgood.sa.gov.au/2009/06/100gl-desalination-expansion-in-public-works-today/>