An infrastructure boom often signals growth in the economy, which is good for jobs and business activity. Yet the increased demand for construction materials often has a detrimental effect on construction prices.
In Australia, rising building activity will put pressure on steel and concrete prices. A recent report showed that tender prices for civil infrastructure projects may increase by up to five percent this year, while prices for building projects may climb up to four percent.
New South Wales and Victoria account for a large portion of work from the nationwide construction boom, according to the report. Housing development also fuels the growth in building activity. These factors will contribute to an increase in prices for labour and materials, aside from the availability of workers.
Some experts believe that the current cost pressures on construction materials and labour have not been this high over the last four decades. Peter Clack, Australian Institute of Quantity Surveyors’ former president, said that tender prices by the end of this year may even rise by six percent. Despite higher prices, the country will still spend a record amount for road infrastructure development.
Despite an expected up tick in prices, the spending will reach a record-high this year, according to BIS Oxford Economics’ forecast. The Australian government plans to spend more than $20 billion for road infrastructure work; this means that as well as raw materials, other construction consumables, site equipment and protective products, such as water stops for concrete joints, will be more in-demand this year. Therefore, contractors will need to spend more time shopping around for reliable construction material, tool and product suppliers.
Infrastructure contractors need to take advantage of this anticipated trend. The forecast predicts that after this financial year, an increase in spending for road construction is unlikely as the government turns its attention to railway infrastructure.