The latest forecasts released by Master Builders Australia (MBA) for the building and construction industry reveal a mixed outlook across the residential building, commercial and industrial construction, and engineering construction sectors.

Over the three-year forecast period to 2016-17, the three major sectors of the industry are at different stages of the cycle, affecting the overall industry outlook.

While the industry is looking positive after a long period of weakness, the subdued prospects in the non-residential construction segment, weigh heavily on the building and construction industry.

Residential Building

The 2013-14 period experienced a strong pick-up and the value of residential building work done is set to grow strongly over the next three years from $51 billion in 2013-14 to $68 billion in 2016-17.

Dwelling starts are predicted to exceed 200,000 during the forecast timeframe, assuming the interest rates will remain at low levels. The forecast indicates New South Wales, Queensland, South Australia and Tasmania to be among the stronger performing states.

However, this upturn in residential building remains in its early stages and the challenge for policy makers is to address the housing undersupply by tackling inefficiencies and impediments that are causing the shortfall.

Non-Residential Building

Non-residential building bounced back in 2013-14 after three years with growth estimated at 5.9 per cent in real terms.

With different non-residential construction sub-sectors positioned at different stages of the growth cycle, this segment overall may not lift appreciably over the next three years due to weakness in some construction sub-sectors offsetting growth in others.

Commercial and industrial construction sub-sectors will experience growth while decline will be observed in education and institution related building, and engineering construction will continue to feel the effects of fading resources related infrastructure investment.

The value of total non-residential work done over the period 2016-17 is expected to lift from the 2014-15 period to around $36 billion, which is higher than pre-GFC levels but below the stimulus driven peak in 2010-11. New South Wales is predicted to lead the way in non-residential construction with growth areas including industrial, retail, office and accommodation building. Tasmania will also see positive growth, with its non-residential construction sector beginning to bounce back after the lows of previous years.

Engineering Construction

The decade long resources boom is abating as seen in the six per cent decline in the engineering construction sector in 2013-14. Engineering construction is predicted to fall by nearly 20 per cent in real terms over the next three years, from $122 billion in 2012-13 to $102 billion in 2015-16.

However, the forecasted fall back in activity in the Northern Territory, Western Australia and Queensland follows boom conditions and will remain at high levels. New South Wales, Victoria and Tasmania will benefit from stronger spending in infrastructure development.