Is Infrastructure boom setting the next leg of growth for Australia?


While housing price crash has been in discussion these days, the other much talked about topic is to do with infrastructure boom that has been highlighted to be the next growth engine for the Aussie economy. It is being estimated that infrastructure can help have the economic growth maintained at about 3% while providing support to engineering, building and professional services companies. This space is now considered to be emerging as a highly competitive one.

Some experts had even labelled the scenario set to be witnessed as a mini-infrastructure boom since the federal government revealed its plan to spend at least $16 billion on infrastructure investment over the next few years. The total expenditure inclusive of spend by states is being expected to be about $237 billion. With major projects’ receiving funding, this number can surpass $300 billion with the spending expected to crown in 2020.

The infrastructure related developments with regards to roadwork etc. seems to be providing growth over the prevailing weakness in housing; and road infrastructure, independently, is assessed to provide a rise of 0.9 per cent of GDP to 1.5 per cent in next few years. Support is also expected from investment in telecommunications, electricity generation, and water supply at the back of activities that include NBN rollout. Therefore, investment in the sector is expected to mitigate challenges related to residential construction. Further, it has been highlighted that transport projects will play a good role in supporting the boom.

The Reserve Bank of Australia also indicated that infrastructure work is bringing private firms join hands with public sector and thus the overall investments seem to have taken a new turn. This is expected to help economy at large.

At the back of this boom, stocks in the sector are also expected to do well. Examples to cite include Boral (ASX: BLD), Lendlease (ASX: LLC), Spark Infrastructure (ASX: SKI), WorleyParsons (ASX: WOR) and Transurban Group (ASX: TCL). These groups have in fact reported healthy development pipelines in their recent financial results and signalled a rising demand for their products. For instance, there will be a rising demand for Boral’s products that include concrete, asphalt, and cement.

Overall, the next ten years might bring a changed landscape, with this sector gaining a lot of attention.


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