AUSTRALASIA CONSTRUCTION INSIGHT

September 2013

Willis Construction is pleased to bring to you our Australasia Construction Insight. Given the pace of business today, it is extremely difficult to be across the myriad of items and articles of interest that focus on the Australian and New Zealand building and construction industry. To assist you in this regard, Willis Construction will draw upon our expansive regional network and will combine this information together into one electronic document for distribution to our customer base, on a regular basis. We trust you will find our offering useful. From all of us at Willis Construction, happy reading! Best regards Michael Walshe Practice Leader - Sales Telephone: + 61 3 8681 9707 [email protected]

CONTENTS Industry News Articles – Australia ................................................................................ 1 Business Welcomes Abbott as PM .................................................................................................. 1 Australia’s Competitiveness Slips .................................................................................................... 2 Building Approvals, Construction Profits Surge ............................................................................... 3 Factory To Turn Greenhouse into Construction Materials ............................................................... 4 Productivity Lift From ABCC Return ................................................................................................ 4

State Updates: WA Construction Industry .................................................................... 5 State Updates: SA Construction Industry ..................................................................... 6 Industry News Articles – New Zealand ......................................................................... 7 Construction On NZ$60 Million Data Centre At Takanini To Begin.................................................. 7 Rebuild Strips Wellington of Tradesmen.......................................................................................... 7 National Repercussions for Christchurch Rebuild ............................................................................ 8

Industry News Articles – Australia BUSINESS WELCOMES ABBOTT AS PM 9 September 2013

THE business community has welcomed Tony Abbott as the 28th Australian Prime Minister following Saturday’s election, saying the Coalition’s agenda will restore business confidence and grow the economy. On Saturday the nation voted for an agenda comprising productivity promises to return the budget to surplus, rid the nation of the carbon and mining taxes, reduce red tape burden on business, invest more in skills and infrastructure and address business concerns about the Fair Work Act. The election result was largely welcomed by business and industry bodies, with most looking forward to working with the new PM – starting with the Australian Industry Group. “The Australian Industry Group congratulates Tony Abbott and the Coalition on a convincing election victory,” Ai Group chief executive Innes Willox said. “The election outcome has the potential to deliver a much-needed period of political stability and certainty and lay the groundwork for strong gains in productivity and competitiveness. “Tony Abbott won broad community support for the Coalition’s ambitious agenda and … we look forward to working with the new government and wish it every success.” The same enthusiasm was shared by the Business Council of Australia, with President Tony Shepherd saying the result was a clear mandate to support growth, jobs and productivity. “The Coalition has rightly acknowledged business is at the heart of continuing to grow the economy and jobs,” Shepherd said. “Its commitment to return to proper process in government will go a long way to restoring predictability and confidence, which in turn will foster a growing economy. “The Business Council of Australia is looking forward to working with the government to deliver the meaningful change that’s long overdue. “Restoring good policy process as it embarks on these important reforms will be vital to lift business and consumer confidence.” Infrastructure Partnership Australia also welcomed the news and the prospect of working with the self-declared “infrastructure prime minister”. “Every business in the country will be breathing a sigh of relief that there is now a government with a clear majority and a committed program to invest in major projects,” Infrastructure Partnership Australia CEO Brendan Lyon said. “The firm dollar commitments to a suite of major motorways across the country are important, because it gets real projects out into the market and begins the complex and long-term task of re-engineering the domestic economy to face the challenges ahead. “It is pleasing that the prime minister-elect is seeking to leave a legacy of great infrastructure and Australia’s states and the business sector will be looking to Mr Abbott for the policy leadership and national reform process that will get us there.” The Coalition’s infrastructure promises focus on roads, including major investments such as $1.3 billion for Western Australian roads, $1.5 billion in Melbourne's East West Link, a $1.5 billion funding boost for Sydney’s WestConnex project and $6.7 billion for finishing Queensland’s Bruce Highway upgrade. No promises were made for urban public transport, leaving prospects for the Melbourne Metro rail, Perth light rail and Brisbane Cross River rail projects uncertain. Link: http://www.constructionindustrynews.net/storyview.asp?storyid=801573341

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AUSTRALIA’S COMPETITIVENESS SLIPS 6 September 2013 Resources employer group the Australian Mines and Metals Association has called for better support for business after Australia dropped out of the top 20 in the World Economic Forum’s Global Competitiveness Report 2013-14. Australia dropped out of the top 20 for the first time, falling one spot to 21st. Switzerland, Finland, Singapore, Germany and the US took the top five spots respectively. The WEF said highly innovative countries with strong institutions continued to top international competitiveness rankings. “Australia delivers a consistent – and essentially unchanged – performance across the board, the highlight of which is its seventh rank in the financial market development pillar, the only pillar where it features in the top 10,” WEF said. The report also put Australia in 15th place for higher education and training and 25th for its macroeconomic situation due to low deficit, inflation and debt-to gross domestic product ratio. “The main area of concern for Australia is the rigidity of its labour market (54th, down 12), where the situation has deteriorated further,” the report said. “Australia ranks 137th for the rigidity of the hiring and firing practices and 135th for the rigidity of wage setting. “The quality of Australia’s public institutions is excellent except when it comes to the burden of government regulation, where the country ranks a poor 128th. “Indeed, the business community cites labour regulations and bureaucratic red tape as being, respectively, the first and second most problematic factor for doing business in their country.” AMMA CEO Steve Knott said the results showed that whichever party won Saturday’s election would have to urgently provide better support for doing business in Australia. "In 2007, Australia's resource industry was the first sector to raise serious concerns that Labor's plans to re-regulate the national workplace system would lead to excessive cost pressures, productivity stagnation and an erosion of our international competitiveness," he said. "Today, the WEF Global Competitiveness Report 2013-2014 ranks Australia just 21st in the world, behind New Zealand at 18th, Canada (14th) and the United Kingdom (10th). "Whenever the Kiwis or Brits belt Australia at rugby and cricket, our nation calls for heads to roll, yet our government is effectively ignoring that 20 countries are now better placed to do business than Australia." Knott said it was unacceptable that Australia’s labour market efficiency had fallen 41 spots to 54th in just two years. "This is extraordinarily poor and should ring real alarm bells for those overseeing our economy and labour market,” he said. “It also destroys the claim that Australia's current workplace relations system has the balance 'about right'.” Knott called for the next government to take up a range of legislative and non-legislative initiatives as outlined in AMMA’s productivity discussion paper. "There has been a lot of talk about productivity in this election campaign with both parties claiming to have the answers," Knott said. "Whoever is sitting in the chair on Monday has to do better and deliver concrete policies, especially labour market policies, that actually support investment, competitiveness and the ability to successfully do business in this country." Link: http://www.constructionindustrynews.net/storyview.asp?storyid=801573241

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BUILDING APPROVALS, CONSTRUCTION PROFITS SURGE 3 September 2013 In a positive sign for the building industry in Australia, the number of new homes approved for construction surged in July 2013 amid a spike in multi-residential approvals. In what comes as somewhat of a surprise, the latest figures from the Australian Bureau of Statistics (ABS) also show construction industry profits hitting all-time quarterly highs – albeit with that figure subject to some question in a generally subdued business environment. Following two months of significant declines, the seasonally adjusted number of dwelling units approved for construction throughout Australia jumped 10.8% in July to come in at 14,304 approvals.

Master Builders Australia chief economist Peter Jones describes the latest data as a positive sign that a sustained recovery may be taking hold but cautioned approvals remain well below levels sufficient to meet long-term housing needs. Link: http://sourceable.net/building-approvals-construction-profits-surge-abs/

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FACTORY TO TURN GREENHOUSE INTO CONSTRUCTION MATERIALS 28 August 2013 A groundbreaking facility to be built in Australia will pilot a new technology that converts carbon emission into bricks for the construction industry. The technology, the first in the world, turns carbon dioxide emissions into solid carbonate that can be disposed safely in the future or used to create green building materials. The pilot plant is the result of over six years of study by The University of Newcastle, the chemical company Orica, and carbon innovation company GreenMag Group. The facility will be built at the Newcastle Institute for Energy and Resources and will use CO 2 from Orica’s Kooragang Island manufacturing facility in Newcastle. The plant will be managed by Mineral Carbonation International (MCI), which will receive A$9 million in funding over the next four years. MCI will undertake research into mineral carbonation technology and study the viability of the technology in terms of largescale and commercial projects. If successful, the facility could not only help lessen the air pollution that industrial plants release into the air but also create a new way for storing carbon emissions into a usable and environment friendly material. Link: http://www.psfk.com/2013/08/greenhouse-gas-construction-materials.html

PRODUCTIVITY LIFT FROM ABCC RETURN 27 August 2013 Failure to fully restore the Australian Building and Construction Commission (ABCC 1) by the next Australian government may put A$7.5 billion per annum productivity gains at risk. The Labor government abolished ABCC in 2012, replacing it with an industry inspectorate within Fair Work Australia. As per the research commissioned by Master Builders Australia, from 2005 to 2012 under the eye of the ABCC, productivity grew by 9.4% through improved workplace relations practices on the nation's construction sites. Wilhem Harnisch, chief executive of Master Builders stated that, “every industry is dependent on the building and construction sector. Increased productivity in the industry will generate productivity gains across the economy, reducing costs that flow on to households through lower prices.” He further stated, restoration of the ABCC was essential to generate vital growth in productivity and employment as the economy transitions from a fading resources investment boom. Link: http://www.theaustralian.com.au/news/breaking-news/productivity-lift-from-abcc-return-report/story-fn3dxiwe1226705149536

On 1st June 2012, the Office of the Australian Building and Construction Commissioner concluded its operations. A new specialist regulator for the building and construction industry, known as Fair Work Building & Construction (FWBC), has now commenced operations. FWBC may take enforcement action to ensure a fair and productive industry for all building industry participants. 1

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State Updates: WA Construction Industry Industry forecasts by Australian Construction Industry Forum (ACIF) indicate: Building and construction demand in Western Australia remains optimistic, with all sectors set to enjoy positive growth. The flow of demand across all sectors continues in this state, driven by a resource construction boom now passing its peak. Increased industry and population requires a built environment to work rest and play all of which needs to be designed, built and maintained by construction industry. The chart below shows the relatively strong outlook for the Western Australia engineering construction sector. Source: www.acif.com.au

List of WA Construction Projects that would be completed in 2013-2014 Stage

Value of Project (A$ million)

Construction Start

Construction End

Under Construction

100 - 250

Q3 (Jul-Sep) 2012

Q3 (Jul-Sep) 2013

Planning

100 - 250

12-Jun

13-Sep

Planning

100 - 250

12-Aug

13-Jun

Planning

100 - 250

13-Feb

14-Jun

Project Name New Rectangular Stadium Hedland South Waste Water Treatment - Relocation Pt. Hedland (CS01901) West Pilbara Bungaroo Integration Stage 1 (CW01300) Kwinana Freeway Managed Freeways Pilot Project

Source: National Infrastructure Construction Schedule (NICS)

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State Updates: SA Construction Industry Industry forecasts by Australian Construction Industry Forum (ACIF) indicate: The South Australian Construction industry comprises of three sectors: residential, commercial building, and civil construction. Supporting services such as design and documentation, project management, land and geotechnical surveying are incorporated in these sectors. Currently, the industry is the fifth largest employer of South Australians, and contributes A$4,045 Million (6.2%) to the Gross State Product (GSP). Residential Construction- Housing Industry Association (HIA) is expecting the dollar value of investment in additions and alterations to come in at A$1.806 billion in the current financial year – lower than at any other time over the past decade. Commercial Property- Positive growth is expected in the retirement living sector. Non-residential Construction- The greatest area of opportunity is expected to be in the industrial sector, where projects such as the Torrens Island Power Station Expansion, Cherokee Power Station, Woakwine Wind Farm Development and Lucky Bay Common User Export Facility should provide some work. Engineering Construction- After surging from A$2.773 billion in 2006/07 to almost A$4.7 billion in 2009/10 on the back of strong activity in transport, pipelines and electricity, water and sewerage and, in later years, heavy industry and recreation, the annual value of work done in the engineering construction sector in South Australia has now leveled off. Source: www.acif.com.au, www.designbuildsource.com.au and South Australian Construction Industry Workforce Action Plan (2009 – 2014)

List of SA Construction Projects that would be completed in 2013-2014 Project Name

Stage

Goodwood and Torrens Rail Junctions Upgrade SA Government Radio Network The Queen Elizabeth Hospital Redevelopment – Stage 3A

Committed with Forward Estimates Committed with Forward Estimates Committed with Forward Estimates

Value of Project (A$ million)

Construction Start

Construction End

250-500

Q3 (Jul-Sep) 2012

Q2 (Apr-Jun) 2014

100-250

Q4 (Oct-Dec) 2013

Q2 (Apr-Jun) 2015

100-250

Q1 (Jan-Mar) 2017

Q2 (Apr-Jun) 2018

Source: National Infrastructure Construction Schedule (NICS)

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Industry News Articles – New Zealand CONSTRUCTION ON NZ$60 MILLION DATA CENTRE AT TAKANINI TO BEGIN 2 September 2013 Gen-i parent, Telecom, has signed a development agreement with Retail Holdings Limited, which has engaged Hawkins Construction and AECOM to design and build the new facility. Construction of Gen-i and Revera’s NZ$60 million greenfields datacentre at Takanini will begin by the end of September, 2013. The new Tier 3 data centre will be one of New Zealand’s largest, housing up to 1200 racks. It will be of modular Performance Optimized Datacenter (POD) construction with 4 x 100 rack data halls in each POD and a strong focus on sustainability and energy efficiency. Tim Miles, CEO of Gen-I stated, “the Takanini data centre will be an important addition to Gen-i and Revera’s combined fleet of 20 data centres nationwide. This is in addition to their recently opened NZ$10.5 million Christchurch data centre, planned expansion of Revera’s Wellington data centre, and a NZ$2 million expansion to our Dunedin site.” Completion of the build is expected in the second half of 2014. Link: http://www.computerworld.co.nz/article/525236/construction_60_million_data_centre_takanini_begin/

REBUILD STRIPS WELLINGTON OF TRADESMEN 29 August 2013 The Wellington Chamber of Commerce and the Building and Construction Industry Training Organisation (BCITO) have confirmed that some construction businesses were already facing recruitment problems as demand for tradesmen outstripped supply. As per Raewyn Bleakley, Chamber chief executive, Wellington businesses are facing recruitment problems in constructionrelated sectors, not due to tradesmen moving to Canterbury to work on the rebuild, but since more of them are working on projects to earthquake-proof Wellington buildings. Statistics New Zealand data indicated building consents issued in Wellington have declined from 7408 in June 2006 to 5474 in June 2013 - a drop of 26%. In Christchurch, they have risen by 36% since the earthquakes. At the end of July 2013; 177 new apprentices enrolled in the trades, compared with 157 to July 2012. Link: http://www.stuff.co.nz/dominion-post/news/9104579/Rebuild-strips-Wellington-of-tradesmen

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NATIONAL REPERCUSSIONS FOR CHRISTCHURCH REBUILD 26 August 2013 The contractors are hungry at present as they have geared up for the Christchurch rebuild and that work is not yet flowing. As the construction market is going to be extremely hot, the contractors may start declining to participate in traditional tendering methods with their high bid costs and no guarantee of success. BIS Shrapnel is projecting a NZ$46 billion building boom in New Zealand over the next 5 years. Contributing factors include:

  

High immigration of both foreign and locals into Auckland. Earthquake strengthening work in other population centres, notably in Wellington. Repairs to leaky buildings (Auckland, Wellington and Tauranga).

A major obstacle to progress was removed in June, 2013 when the Government and the Christchurch City Council agreed the cost sharing arrangements for the NZ$4.8 billion spend on anchor projects in the Christchurch Central Recovery Plan and for the repair and replacement of the city’s horizontal infrastructure. And, the Council’s competency and accreditation issues apart, NZ$940 million of consented works were in the pipeline at March 2013, up 50% on the previous six months. The cost of the total rebuilding effort – involving both public and private investment – has now been raised from NZ$30 billion to NZ$40 billion. Link: http://www.lawfuel.co.nz/news/970/national-repercussions-for-christchurch-rebuild

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