Oct 14 2020
Despite the overall negative economic effects of the COVID-19 pandemic, revenue and profitability are expected to grow in Australia’s Railway Track Construction and Road and Bridge Construction industries in the current year. These growth trends are expected to stem mainly from continuing work on large-scale PPP-funded projects. In the current year, public sector funding is expected to contribute approximately two-thirds of Road and Bridge Construction industry funding. Industry revenue is expected to increase by 6.6% in 2020-21, to total $35.0 billion.
Demand from rail passenger transport is expected to increase in 2020-21 as state governments continue investing in rail line expansions to ease congestion in major cities. In addition, restrictions on international travel are encouraging Australians to travel domestically and locally instead, which can boost train usage. Consequently, revenue for the Railway Track Construction industry is expected to rise by 2.2% in 2020-21, to total $8.1 billion. In addition, the domestic price of iron and steel is expected to fall during the current year, making key inputs for railway track construction comparatively cheaper, boosting profitability.
Significant railway track construction projects include:
- Sydney Metro City & Southwest (Sydney)
- Metro Tunnel (Melbourne)
- Cross River Rail (Brisbane)
- Gawler Railway Electrification (Adelaide)
- METRONET Forrestfield-Airport Link (Perth)
Employment in the Railway Track Construction industry is expected to rise at an annualised 19.5% over the five years through 2020-21, to approximately 15,150 employees. Industry firms also use a high number of temporary subcontractors on a project basis. The number of industry enterprises has also increased over the past five years, with most of these firms focusing on urban passenger rail expansion projects. Over the next five years, revenue for the Railway Track Construction is forecast to decline due to the completion of significant projects.
Unlike passenger transport, demand from the Rail Freight Transport industry is expected to fall in the current year due to the COVID-19 pandemic. Industry revenue is expected to decline by 4.1% in 2020-21 to $6.4 billion, due to a decline in the total mass of exports by sea. Unlike the Railway Track Construction industry, the Rail Freight Transport industry is not directly supported by government funding. However, publicly funded infrastructure expansions indirectly benefit the industry.
The Mining division is the largest market for the Rail Freight Transport industry, accounting for slightly less than 60% of industry revenue. Consequently, declining demand from this sector in the current year due to falling commodity prices is expected to negatively affect industry profitability, as exporters seek to negotiate lower prices. A fall in the world price of crude oil in the current year is expected to slightly reduce industry purchase costs, thereby lessening the strain on profit margins. However, this trend is also expected to decrease the industry’s ability to compete with the Road Freight Transport industry. Rail freight transport is more fuel efficient, and therefore maintains a competitive advantage over road freight when fuel prices are high. However, rising public environmental consciousness and government initiatives to increase the share of freight transported by rail are projected to benefit the industry over the next five years.
IBISWorld industry reports used in this release: