Pete Wargent blogspot

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

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Friday, 16 December 2016

Here comes the infrastructure boom

Sooner or later Australia will enter a residential construction downturn, ending a boom that in the circumstances has done a fine job of plugging the gap left by the drop in resources investment.

What comes next?

The only viable answer is infrastructure, as I looked at in a bit more detail here.

The good news is that infrastructure investment should now be set to take off. 

For example, there are some huge road projects in the pipeline.

Throw in rail and buildings projects that are outside the resources sector, and you get a big projected uplift in major construction projects, almost doubling to reach a forecast of $20 billion per annum by 2018. 

Source: Boral (ASX: BLD)

At its peak mining capital investment touched an even higher $24 billion per annum in 2012, since retracing to $10 billion. 

It's worth noting, however, that resources capex may not have a whole left further to decline, for the reasons discussed here previously.

As such, massive investment in roads infrastructure is expected to translate into stronger materials demand from now forth, and this forms an integral part of a broader pipeline of infrastructure and commercial construction activity.