Green shoots will appear for Australian construction sector
Market Insight 12 December 2023 12 December 2023
Asia Pacific, North America, UK & Europe
Predictions 2024 - Economic Risk
But potential for further subcontractor insolvencies and uncertainty over PI cover for engineers may be clouds on the horizon
Despite high interest rates and inflationary pressures, green shoots of recovery for the Australian construction sector will continue to push through in 2024.
Insolvencies in the sector – which hit an all-time high in the 2022-2023 fiscal year – will slow down in 2024, although some sub-contractors that are disproportionately affected by inflation and high interest rates may go under in the next 12 months.
While insolvencies may slow down, disputes will continue as contractors and principals look to recover lost profits through insured risks. Construction and disputes seem to go hand in hand and this is expected to continue over the next 12 months.
Despite a degree of belt-tightening on infrastructure projects at Federal Government level, the construction industry is still predicted to grow by about 3% year-on-year between 2024 and 2027, thanks to pre-existing commitments.
A growing population, which is predicted to reach about 30 million by 2032 compared with 26 million in 2022, is putting a squeeze on housing stock, prompting the need for more homes to be built across the country. Governments have committed to injecting funds to the domestic building market, to address this housing shortage.
The introduction of a new condition of registration for engineers in New South Wales, expected to come into force in 2024, may create some uncertainty about the extent to which professional indemnity policies will cover engineers in the state going forward.
The Practice Standard for Professional Engineers will be a condition of registration for engineers under the NSW Design & Building Practitioners Act 2020. Among other things, the NSW standard will require that designs are “fit for purpose.” It remains to be seen the extent to which professional indemnity policies will cover this requirement.