The new engine driving Australia’s economic development is large scale public infrastructure projects – providing record numbers of construction jobs, and representing the largest infrastructure spending in 30 years.
According to the latest data from the RBA, the Government is spending nearly $100 billion on infrastructure in the current financial year alone. This figure will continue to rise over the next five years and is expected to peak by 2020.
Larger than the mining boom
Craig James from Commsec told AFR that new infrastructure spending is likely to be comparable or larger than what was invested during the resources boom of the past 15 years.
“It’s a huge amount, one and half times the size of the mining boom, and people tend to lose sight of it because it’s scattered around Australia,” he said.
Infograph source: AFR
The infrastructure boom is considered a primary driver for the recent forecasting from the RBA for strong economic growth.
In a speech titled “The Next Chapter,” RBA Governor Dr Philip Lowe said the bank’s optimistic forecasts for both inflation and gross domestic product growth in 2018 look to be achievable.
“As things currently stand, we look to be on course to make further progress in reducing unemployment and moving towards the midpoint of the [2-3 per cent] medium-term inflation target,” Dr Lowe said.
With GDP expected to grow 3.0 per cent on year in 2018, unemployment should fall and wages should rise faster, he said.
Jobs growth has surged in amongst the infrastructure boom; 273,000 jobs have been created in the last six months across Australia. This is the strongest 6-month stretch of job creation going back at least 17 years.
Treasurer Scott Morrison said, “In the past six months, we saw the strongest gain in jobs since the Sydney Olympics; more than 250,000 Australians stepping out of the unemployment queue or setting out at the beginning of their career. In the past year, over a quarter of a million Australians gained full-time employment – the strongest annual gain in full-time employment in six and a half years. Earlier this year we saw the fastest six-month gain in full-time employment since records began 40 years ago!”
Construction jobs now account for a record share of workers. In the second quarter of 2017 alone, 64,400 jobs were created through infrastructure projects such as roads, bridges, tunnels, hospitals and schools.
Healthcare was next major area for jobs growth: producing an extra 48,000 jobs last quarter, followed by agriculture with a surge of 26,700 jobs.
The RBA noted that the scope of jobs growth is a sign that the economy has moved beyond any distortions caused by swings in the mining sector.
“We expect to see a gradual decline in the unemployment rate. This should lead to some pick-up in wage growth, although we expect this to be a gradual process,” Dr Lowe said.
If you are interested in buying investment property and would like further information about the infrastructure projects currently in development across the 5 major capital cities of Sydney, Melbourne, Brisbane, Adelaide and Perth, please contact your local Strategist to get your copy of our MyCity reports.