Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Sunday, 25 September 2016

When construction winds down

Value added

Australia's GDP increased to $1.67 trillion in financial year 2016, measured in seasonally adjusted Chain Volume Measures terms, now tracking at just above $420 billion per quarter.

Following on from yesterday's post, a quick look here at industry gross value added (GVA).

Having accounted for just over 5 per cent of industry GVA three decades ago, mining's share has swelled to 8.9 per cent as export volumes begin to ramp up.

Finance and insurance also now accounts for 8.9 per cent of industry GVA, up from just 4.9 per cent in 1986.

You can click on the chart to expand it (or use the touch screen, if you have one of those, of course).

On the other hand, manufacturing is shrinking as a share of the pie, declining from a share of 11.1 per cent at the beginning of this chart to just 5.8 per cent in 2016.

Construction wind-down

The latest figures show that the contribution of construction to GDP has remained solid at 7.6 per cent, tracking at around $32 billion per quarter.

A decade ago construction was contributing only $13 to $14 billion per quarter

This suggests that the planned 'hand-off' from resources to residential construction was generally a success between 2012 and 2016. 

However, this does also mean that as residential construction eventually winds down there will be quite a hole in domestic demand to be plugged by something other than rising mining export volumes.

Given the respective skill-sets of all those construction workers, tradies, and project managers, the answer should be: infrastructure and non-residential construction, as I looked at in a bit more detail here

Indeed, the unprecedented stamp duty windfall from Sydney's property boom is already funding a range of infrastructure projects in Sydney and New South Wales. 

But what about the gaping gulf left behind in the resources regions? 

Troubling, and this may be leading to an exodus of regional workers.