Australia's next boom has barely started
Australia is on the cusp of the biggest wave of public infrastructure spending in at least three decades and has already ensured a record proportion of construction workers have found jobs.
In a shift that has been overlooked amid the focus on negatives such as high household debt, weak consumer sentiment and low wages growth, research published this week shows almost $100 billion in local, state and federal government spending will hit the economy this financial year alone.
According to a chart presented by Reserve Bank of Australia governor Philip Lowe in a speech in Perth this week, public infrastructure work "yet to be done" will be just under 6 per cent on nominal gross domestic product in 2017.
That figure is set to keep rising, with transport projects alone set to boom for much of the next five years, and peak three years from now in 2020, according to research by economic consultancy Macromonitor.
Craig James from Commsec says that while bad news about the economy draws people's attention, new infrastructure spending is likely to be comparable or larger than what was invested during the resources boom of the past 15 years.
"It's a huge amount, one and a half times the size of the mining boom, and people tend to lose sight of it because it's scattered around Australia," he said.
Mr James predicts the project boom is a key reason the Reserve Bank's forecasts for economic growth of 3 per cent will become reality. "We'll see tightening in the jobs market and wages will creep higher - which we're already seeing in some elements of the construction sector."
Data published by the Australian Bureau of Statistics this week confirms that construction is Australia's hottest job creation sector.
The labour market has just gone through its strongest six month stretch of job creation - with employment rising by 273,000 - in records going back almost 33 years.
Construction jobs devoted to new roads, bridges, tunnels, hospitals and schools rose by 64,400 in the second quarter, and now accounts for a record share or workers, just shy of one-in-10.
healthcare is next, producing an extra 48,000 jobs last quarter, followed by a 26,700 job surge in agriculture.
While there are always major risks to the outlook, the figures support Dr Lowe's argument this week that the economy not only looks to be improving but that Labour market conditions will stay positive in coming months.
Frustrated by the tendency to focus on negatives, Mr James said Australia would move on from its current malaise.
"What's been constraining us in recent years are still by-products of the global financial crisis, and people are focused on keeping their costs down.
"But we will move forward from this. I don't think all the laws of economics have been suspended. It's just that we're moving into new times and there's an adjustment that occurs."
That said, Mr James cautioned against those demanding higher wages without productivity gains.
"It we price ourselves out of the job market there are people in Asia willing to do those jobs cheaper and perhaps more efficiently, so we need to keep our costs down."
He added that wages growth is at a slow pace because inflation is low.