Abstract
We now believe that real growth in Australia’s construction industry
will register a contraction of -1.2%
in 2009, compared with our previous
forecast (made last quarter) of -3.2%. In 2010, we now believe that
the
sector will undergo real growth of 0.3%, before accelerating to 1.8% real
growth in 2011. This
compares favourably with our earlier forecasts of
-1.1% in 2010 and 0.9% in 2011. As such, the biggest
upward revisions
apply to 2009 and 2010, when the impact of the new infrastructure package is
likely to
be most pronounced.
Last quarter we highlighted upside and
downside risks to our forecasts. On the upside, we underlined that
our
core scenario envisaged only a modest recovery of the global economy in 2010,
and that if the
recovery proved to be more pronounced that year, then
privately generated construction activity in
Australia should be boosted
accordingly. That upside risk remains in place, even with our upwardly
revised forecasts for 2010. Additionally, the impact of the newly unveiled
budget – funded, as it is,
largely by public money, rather than
public private partnerships – may be even more pronounced than we
are currently forecasting, particularly for 2010 and 2011.
However, on the
downside, there is still the risk that the global economic downturn will last
longer than
we forecast. As such, significant downside risks for 2010 and
2011 remain in place.
Australia’s rating in our Project Finance
rankings has improved considerably over the last quarter. The
country has
moved up the rankings from sixth to third overall. Australia scores very well
for the Design
and Construction variable (with 71.7 out of 100). However,
it registers a weak score in the long-term
Commissioning and Operating
phase of infrastructure assets (56.0 out of 100). This is due to the
volatility
of the Australian dollar, in a context where many countries in
the region – including China, Malaysia,
Japan and Hong Kong –
operate fixed or highly managed exchange rates.
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