Strong demand for resources-based construction and major infrastructure projects is expected to drive an upturn in the construction sector over the course of 2010/11 and 2011/12. According to the latest Australian Industry Group/Australian Constructors Association Construction Outlook survey, the total value of construction work will rise 5.9 per cent (current dollars) during the 2010/11 financial year and then 7.9 per cent in 2011/12. This is up from a 1.5 per cent growth in 2009/10.

Engineering construction is anticipated to expand the fastest with a revenue lift of 7.3 per cent expected this year and 9.7 per cent in 2011/12. This is largely in response to the many mining and infrastructure projects in the pipeline together with support from oil and gas processing, telecommunications, power generation and water supply work. This includes expected expansion in both road (7.7 per cent) and rail projects (7.6 per cent) during 2010/11, in line with a range of large-scale government transport initiatives either underway or in the pipeline.

This expected boost in investment will likely result in jobs growth with employment forecast to rise 6.2 per cent across construction this financial year. However, supply constraints are re-emerging as a significant issue with sourcing of skilled workers expected to impact on the delivery of future projects.

It is anticipated the positive outlook for engineering construction will be strong enough to offset the subdued prospects for non-residential work (2.2 per cent in 2010/11) and the weak apartment building sector (-1.0 per cent in 2010/11 and 4.1 per cent in 2011/12).

Australian Industry Group Chief Executive, Heather Ridout, said: "There are a number of important positives in the survey findings including the forecast growth in the infrastructure market supported by large rail, road, telecommunications and utilities projects. The pick-up in infrastructure projects is also a welcome sign that the important national task of adding to our productive potential is gaining critical momentum. The benefits of many of these projects will be widespread. It is, however, critical that recovery in the commercial and engineering construction sectors is supported by sensible immigration policy that will help relieve the stresses on a labour market already stretched by the demands of the resources sector. Skilled labour shortages have the potential to inhibit growth and it will take the collective action by employers and governments to address this issue," Mrs Ridout said.

Australian Constructors Association (ACA) President, Wal King AO, said: "The survey confirms that Australia's non-residential construction industry is poised for a period of stronger growth, driven by significant planned infrastructure work and a solid pipeline of mining and heavy industrial construction projects.

Mr King also highlighted the risk to the industry from skill shortages. "Despite this positive outlook, it is clear from the findings that a key risk centres on labour and capital supply shortages. In particular, we are seeing the emergence of critical skilled labour bottlenecks, due largely to rising demand requirements in the resources sector.

"These supply constraints are already being reflected in the emergence of upward pressures on costs and have the potential to adversely impact on project commencements, and the industry's growth potential," Mr King said.