Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
2016 Major Projects Report Adrian Hart, BIS Shrapnel QMCA Major Projects Report - 2016 Presentation Outline • Key findings of the 2016 Report • The economic environment • The investment challenge • Recommendations QMCA Major Projects Report - 2016 Key Findings • Queensland major project work fell 25% in 2014/15 • A further 50% fall in major project work is forecast over 2015/16, with the bottom expected in 2016/17 • Next upswing depends on public infrastructure investment … • … requiring sustainable processes and funding mechanisms • Implications for industry contractors and suppliers Key Findings Major Project activity continues to contract. Funded work forecast to decline. Major Projects Work Done & Workforce Demand All Segments $ Billions 20 Thousands 30 Forecast 25 15 20 10 15 10 5 5 0 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total Funded (LHS) Total Not Funded (LHS) Total Labour Demand (RHS) Total Funded Labour Demand (RHS) Key Findings Much weaker outlook compared to the 2015 Report Total Work Done Forecast 2015/16 Forecasts vs 2014/15 Forecasts $ Million $ Million 20000 20000 Forecast 17500 17500 15000 15000 12500 12500 10000 10000 7500 7500 5000 5000 2500 2500 0 0 12/13 12/13 Current Previous 13/14 13/14 Current Previous Total Not Funded -Prior 14/15 14/15 Current previous 15/16 15/16 Current Previous Total Funded - Prior 16/17 16/17 Current Previous 17/18 17/18 Current Previous Total Not Funded (Update) 18/19 18/19 Current Previous Total Funded 19/20 19/20 Current Previous Key Findings Falling mining and heavy industry Major Projects the key driver… $ Billions 15 Major Mining and Heavy Industry Projects Work Done & Workforce Demand Forecast Thousands 15 Forecast 10 10 5 5 0 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total Funded (LHS) Total Labour Demand (RHS) Total Not Funded (LHS) Total Funded Labour Demand (RHS) Key Findings … but falling public investment has magnified the downturn Public Investment and Publicly Funded Engineering Construction, Queensland 25 Percent $Billion 10% 9% 20 8% 7% 15 6% 5% 10 4% 3% 5 2% 1% Other public investment excluding asset sales Publicly funded engineering construction Public engineering construction per 10 million persons Total public investment as a % of Queensland GSP (RHS) 2015 2013 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 0% 1975 0 Public investment as a share of economy (or per capita) falling back towards historical lows Key Findings Non mining major project work expected to improve from 2016/17 . . . Billions Major Project Work Done by Sector (Excluding Mining & Heavy Industry) Major Project Work Done by Sector (Excluding Mining & Heavy Industry) 6 Forecast 5 4 3 2 1 0 2010/11 2011/12 Roads and Bridges 2012/13 2013/14 Rail & Harbours 2014/15 2015/16 Water & Sewerage 2016/17 2017/18 2018/19 Electricity, Pipeline & Telecoms 2019/20 Key Findings . . . shifting the regional location of work Major Projects Work Done - All Segments by Region (Share LHS, $Billions ) 100% 90% 0.2 1.2 80% 70% 1.5 0.7 1.8 3.4 0.6 2.2 0.3 0.2 3.0 2.1 0.3 0.4 1.0 1.2 1.4 1.4 1.5 1.4 0.2 0.1 0.3 0.1 0.6 0.1 1.9 2.3 2.6 2.4 2016/17 2017/18 2018/19 2019/20 1.1 3.4 0.7 2.3 0.4 1.4 60% 50% 40% 2.1 9.2 10.3 30% 2.0 6.4 7.7 20% 10% 2.2 2.2 0% 2010/11 2011/12 1.0 1.5 1.0 1.1 2012/13 2013/14 2014/15 South East Queensland Gladstone 0.8 0.1 2015/16 Bowen Surat Northern Queensland Key Findings Roads activity forecast to recover strongly from here – but need funding certainty $ Billions 3.0 Major Roads and Bridges Projects Work Done & Workforce Demand Forecast Thousands 6 Forecast 2.5 5 2.0 4 1.5 3 1.0 2 0.5 1 0.0 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total Funded (LHS) Total Labour Demand (RHS) Total Not Funded (LHS) Total Funded Labour Demand (RHS) Key Findings But railways and harbours major project work will fall further yet $ Billions 3.0 Major Railways and Harbours Projects Work Done & Workforce Demand Forecast Thousands 6 Forecast 5 2.0 4 3 1.0 2 1 0.0 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total Funded (LHS) Total Labour Demand (RHS) Total Not Funded (LHS) Total Funded Labour Demand (RHS) Key Findings No funded major water and sewerage projects beyond 2016/17 $ Millions 1600 Major Water and Sewerage Projects Work Done & Workforce Demand Forecast Hundreds 14 Forecast 1400 12 1200 10 1000 8 800 6 600 4 400 2 200 0 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total Funded (LHS) Total Labour Demand (RHS) Total Not Funded (LHS) Total Funded Labour Demand (RHS) Key Findings Only the NBN and North East Gas Interconnector funded in utilities major works $ Billions 2.0 Major Electricity, Pipeline and Telecom Projects Work Done & Workforce Demand Forecast Thousands 4.0 Forecast 1.8 3.5 1.5 3.0 1.3 2.5 1.0 2.0 0.8 1.5 0.5 1.0 0.3 0.5 0.0 0.0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total Funded (LHS) Total Labour Demand (RHS) Total Not Funded (LHS) Total Funded Labour Demand (RHS) Economy Global economic growth is struggling to get momentum Economic Growth, Annual Percent Change 6% Annual growth in Real GDP 4% 2% 0% 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 -2% World OECD Australia -4% Year ended December Source: BIS Shrapnel, OECD, Consensus Economy As China’s growth slows and other economies struggle 15% Annual percent growth in Real GDP 15% 12% 12% 9% 9% 6% 6% 3% 3% 0% 0% 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 -3% -6% -9% China Japan Other Asia Pacific New Zealand Year ended December Annual percent growth in Real GDP 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 -3% -6% -9% United States Germany Euro Area United Kingdom Source: BIS Shrapnel, OECD, Consensus Economy 14% Percent 20 12% 16 10% 12 8% 6% 4% 8 Annual GDP growth (%) $ Trillion, Real GDP (in constant PPP, $US 2008) 20 + 1.0 Size of Australian economy in 2015 + 1.0 (in constant PPP, $US 2008) + 1.0 + 0.9 16 + 1.0 Annual change in + 0.9 Real GDP ($T) + 0.9 + 1.0 12 + 1.0 + 0.7 + 0.7 + 1.0 + 0.8 + 0.6 + 0.5 + 0.5 + 0.4 + 0.3 8 4 2% $4.4 trillion economy in 2000 0% 00 05 10 Year ended December 4 0 15 18 $18.7 trillion economy in 2017 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: BIS Shrapnel, OECD, Consensus Thousands Yet China still represents a huge opportunity for Queensland . . . Economy . . . though services (and agriculture) may be the sectors which benefit . . . Millions (Moving Annual Total) 10 $b (constant, 2013/14 prices) 30 9 Tourism Debits (RHS) 8 27 24 7 Short Term Arrivals (LHS) Tourism Credits (RHS) 6 21 18 5 15 Education Credits (RHS) Short Term Departures (LHS) 4 12 3 9 2 6 1 97 99 Year Ended June 01 03 05 07 09 3 11 13 15 Source: BIS Shrapnel, ABS data Economy . . . as commodity prices will be too weak to underwrite new resources wave 640 Quarterly Average Prices (Log Scale) Forecast Coal, Oil and Iron Ore Prices, A$ 320 Coking Coal (A$/t) 160 Thermal Coal (A$/t) 80 40 Iron Ore (A$/t) 20 Crude Oil (Brent) (A$/bbl) 10 1994 1996 As at June 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: BIS Shrapnel, BREE data Economy Queensland is effectively in a “demand recession” as investment slumps 10% Forecast 8% 6% 4% 2% 0% 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 -2% -4% Queensland State Final Demand Australia Gross National Expenditure 16 18 QMCA Major Projects Report - 2016 Key messages • Major Project work has fallen 40% since 2012/13 peak – Another 50% decline coming through in 2015/16 alone • Stabilisation, then uptick, in work requires new funding – Governments need to commit to a long term infrastructure plan • Features of good infrastructure planning and delivery – – – – Based on sound project selection (Building Queensland a good step) Builds ahead of demand and targets biggest infrastructure gaps Is flagged to industry well in advance, and is adhered to Funded sustainably, and impervious to the economic cycle QMCA Major Projects Report - 2016 Key messages • • • • Infrastructure gaps still exist – Infrastructure Australia Challenge now is funding infrastructure requirements Political debate threatens to stall investment rollout All funding alternatives should be on the table – – – – – Capital recycling Debt financing User pays (e.g. road pricing) Beneficiary pays (value capture) Budget reforms (get back to balance / separation of capex and opex) QMCA Major Projects Report - 2016 Debunking the myths: Debt financing 0-20% of GDP 20-40% of GDP 40-75% of GDP 75%+ of GDP Rank / Country 1 Japan 3 Greece 5 Italy 7 Portugal 9 Ireland 11 Singapore 15 Spain 16 France 20 Canada 24 United Kingdom 35 Germany 39 United States 67 India 112 New Zealand 113 Switzerland 114 Australia 129 Norway 133 Indonesia 137 China 144 Chile 159 Kuwait 163 Libya 164 Saudi Arabia Net Debt as Share of GDP 227.70 227.7 174.50 174.5 134.10 134.1 131.00 131.0 118.90 118.9 106.7 106.70 97.60 97.6 95.50 95.5 92.60 92.6 86.686.60 74.7 74.70 71.2 71.20 51.30 51.3 35.335.30 34.7 34.70 34.50 34.5 29.6 29.60 23.9 23.90 22.40 22.4 16.50 16.5 6.80 6.8 2.90 2.9 1.6 1.60 Source: IMF Data Mapper, CIA World Factbook, CCF WA Infrastructure Report 2015 “Increasing public investment (financed by more borrowing rather than offsetting measures) would support aggregate demand and ensure against downside risks. It would also employ resources released by the mining sector, catalyse private investment, boost productivity, take advantage of record-low borrowing rates, and maintain the government’s net worth. Indeed, IMF research suggests that economies like Australia—with an output gap, accommodative monetary policy, and fiscal space—benefit most from debt-financed infrastructure investment, with the growth boost largely containing the impact on the (low) debt-to-GDP ratio.” – IMF (2015) QMCA Major Projects Report - 2016 Debunking the myths: User pays Road Use versus Fuel Excise Revenue Source: Productivity Commission (2014), BITRE (2014), Infrastructure Australia (2016) QMCA Major Projects Report - 2016 Implications • For Governments: an opportunity to implement “best practice” long term planning, funding and procuring for infrastructure investment • For industry: a tougher environment remains but opportunities will emerge in market segments and regions. Keep investing in skills, lock in lower costs where possible, and understand the changes coming through. QMCA Major Projects Report - 2016 Recommendations 1. Expand scope of productive infrastructure investment in 2016-17 State and Federal Budgets 2. Promptly release of a financially sustainable long run infrastructure plan to provide industry confidence 3. Develop skills strategies to sustain the Queensland construction industry in face of changing demands 4. Ensure rigorous economic analysis is undertaken (and made available) in selecting infrastructure projects QMCA Major Projects Report - 2016 Recommendations 5. Governments to follow through with reforms to procurement processes as outlined by PC2014 6. Move towards a uniform contractual frameworks with consistent contract risk allocation 7. Continue to tackle risks to productivity growth in the construction industry 8. Budget reforms to eliminate structural deficits and separate reporting of capex and opex items