Australia's modular construction – a beacon of optimism amidst industry challenges

Navigating through an evolving landscape, modular innovation is positioned to lead Australia’s construction sector.

Australia’s construction sector, while navigating a landscape of challenges, stands on the cusp of a year marked by cautious optimism and potential growth, as per the AIQS’s Australia’s Construction Industry Economic Forecast 2024.

Built Offsite industry alliance partner, The Australian Institute of Quantity Surveyors (AIQS) provides an annual insight into the expected state of the industry, and the forecast for 2024 points towards an economic environment ripe with opportunities amidst prevailing challenges.

The report was co-authored by AIQS Vice President’s Simon Squire FAIQS, CQS and Fiona Doherty FAIQS, CQS.

In the broader economic context, Australia anticipates a continued downward trend in inflation, thanks to easing supply constraints and a reduction in domestic activity pressures. The robust labour market and sustained investments from the public and business sectors, alongside the recuperating international student and tourism industries, are expected to counterbalance the frailties in the household sector, projecting a modest uptick in GDP growth against the 2023–24 Budget projections.

Specifically, in the construction industry, the outlook is predominantly positive. According to the report, the industry is set to benefit from a confluence of supportive factors. The economy’s moderate growth pace is expected to bolster the construction sector. Significant infrastructure investments by the federal government, particularly in transportation, renewable energy, and social infrastructure, alongside policies aimed at mitigating the housing affordability crisis, are poised to spur the demand for new housing construction. Furthermore, state governments are streamlining their planning and approval processes to expedite the development process and minimise delays.

The residential construction sectors are expected to reap the benefits of Australia’s projected population growth, creating a heightened demand for new housing, infrastructure, and commercial spaces. Technological adoption in the construction industry, particularly the shift towards prefabrication, modular construction, and digital twins, is anticipated to enhance efficiency and productivity, driving growth in specific industry segments.

However, the industry also confronts several specific challenges. Labour costs continue to impose pricing pressures, especially in regions where capacity outstrips demand, impacting project budgets and profitability. The complexities of complying with varied national and state regulations present a significant burden, especially for smaller construction firms. The construction landscape is also riddled with risks of project overruns, particularly in regions with an imbalance between capacity and demand, such as Queensland, and in the context of significant upcoming events like the Olympics.

Challenges extend to the necessity of adapting to climate change by constructing more resilient infrastructure, meeting the escalating requirements to curtail embodied carbon and other sustainability imperatives, and addressing the significant shortage of skilled workers across trades like carpentry, plumbing, and electrical. This shortage is exacerbated by an ageing workforce, inadequate training programs, and competition from other industries, driving up wages and making talent retention increasingly difficult.

Despite these challenges, the forecast suggests that 2024 will be a period of cautious growth and optimism, positioning modular construction and technological innovation at the forefront of driving a more robust and sustainable future for Australia’s construction industry.

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