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BIG ISSUESAUSTRALIA’S PROPERTY AND CONSTRUCTION FUTURE

Michael SkeltonAustralia & New Zealand Research Manager

Facts, Fiction and the Future

Population Growth

Infrastructure Investment Forecast

Labour Force Demand

Projected Cost Escalation

‘Competitive’ Immigration...

WHERE WE WERE...

WHERE WE ARE...

WHERE WE NEED TO BE...

HOW DO WE GET THERE?

The Population Debate

How much is enough?

Australia - Today

million22.5

Australia @ 2050

million30 ?

Australia @ 2050

million35 ?

Australia @ 2050

million40 ?

Australia @ 2050

More??

DECIPHERING THE POPULATION DEBATE

0

2

4

6

8

10

12

14

16

18

Under 15 y/o 15-65 y/o 65+

The Most Dangerous Idea! – A Static Population

Million

Today 2050 Projection

+146%

-40%

+5%

Minor Allowance of Growth from 22.5 million to 25 million

Population Projections

South Australia

20

22

24

26

28

30

32

34

36

38

40

2006

2010

2014

2018

2022

2026

2030

2034

2038

2042

2046

2050

Million

High Projection

Medium

Low Projection

Currently1.6 million

2.2 million

20

22

24

26

28

30

32

34

36

38

40

2006

2010

2014

2018

2022

2026

2030

2034

2038

2042

2046

2050

Million

High Projection

Medium

Low Projection

National

39.4m

33.9m

30.2m

High Projection Scenario75% Increase

High Projection Scenario38% Increase

The Irreversible Truth – Ageing Population

0%

5%

10%

15%

20%

25%

Australia UK US

% of GDP devoted to Age-Related Spending by 2050

0%

5%

10%

15%

20%

25%

1970 1990 2010 2030 2050

85 and over 65 to 84

Proportion of Population Aged 65+

New research was needed…

INFRASTRUCTURE AND LABOUR FORCE

Infrastructure Labour Force Growth - Historical

80

100

120

140

160

180

200

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Index

Source: ABS 6291.0.55.003, Davis Langdon Research

Index = 100 at 1987

Infrastructure Labour Force

Total Labour Force

Index = 100 in 1987

Infrastructure Investment (per capita) - Historical

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

High Projection

Medium Projection

Low Projection

2050 – REQUIRED Infrastructure Labour Force

Population Projections

Low Medium High

Infrastructure InvestmentProjection Scenarios

Low Projection 907,000 1,021,000 1,191,000

Medium Projection 1,568,000 1,765,000 2,058,000

High Projection 2,229,000 2,508,000 2,925,000

Current infrastructure labour force: 738,000

Ratio of Infrastructure Labour Force to Total Population

2.50%

3.50%

4.50%

5.50%

6.50%

7.50%

8.50%

1984

1987

1989

1992

1994

1997

1999

2002

2004

2007

2009

2012

2014

2017

2019

2022

2024

2027

2029

2032

2034

2037

2039

2042

2044

2047

2049

RATIO OF INFRASTRUCTURE LABOUR FORCE : TOTAL POPULATION

High Projection

Low Projection

2050 – REQUIRED Infrastructure Labour Force

Infrastructure labour force contribution will grow to 7.5% of the total population from a long term average of 3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2007 2050

Construction Productivity

NSW VIC QLD SA WA Australia

Residential & Non-Residential Work Done

16.7 10.6 13.9 14.2 11.6 13.1

Total Work Done (Including Engineering)

8.3 7.3 6.3 6.8 3.5 6.3

Proportion of Engineering Work Done

50% 31% 55% 52% 70% 52%

Job Required per $1million

COST ESCALATION

Unemployment Rate

Rec

essio

n

Rec

essio

n

GFC

0%

2%

4%

6%

8%

10%

12%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Considerably less spare labour capacity this time around

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

1.3

1.4

1.5

1.6

(billion/month, LHS)(millions, RHS)

Hours WorkedTotal Jobs

Why did the Labour Force Remain Tight?

Employers chose to reduce hours rather than reduce staff

Hours Worked

(billion hours/Month)Total Jobs

(millions)

Comparative International Construction Costs

US $0

US $500

US $1,000

US $1,500

US $2,000

US $2,500

US $3,000

US $3,500

US $4,000

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US $0

US $500

US $1,000

US $1,500

US $2,000

US $2,500

US $3,000

US $3,500

US $4,000

US $4,500

US $5,000

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US $0

US $500

US $1,000

US $1,500

US $2,000

US $2,500

US $3,000

US $3,500

US $4,000

US $4,500

US $5,000

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5 Star Luxury

3 Star Budget

Office High-Rise Apartments Hotels

National Housing Deficit Worsening

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2.20%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Australia Population Growth (annual) Australia New Dwellings Growth (annual)

Deficit

‘COMPETITIVE’ MIGRATION

Circular Migration – Competition for Skills

Circular Migration – Competition for Skills

Historical Net Migration

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (e)

2011 (f)

2012 (f)

This would achieve 42 million by 2050

Australia – Still one of the most ‘liveable’ countries?

In recent years Australia’s ranking as one of the world’s most liveable countries & its business investment ranking have fallen

A Prosperous and High Liveability ‘Big’ Australia

Never Been Employed in Any Capacity

Percentage of People in Prison that have...

Completed Secondary School or Trade

7%36%

Connectivity

Productivity ImprovementsHigh Speed Rail

High Speed InternetRemote Training and Education

Remote Health Care Treatment

Remote Workplaces

Australia is reaching the trigger points…

New Economically Viable Cities

Metro Rail Systems

Renewable Energy Leaders (not Laggards)

HOW DO WE GET THERE?

Migration policy to manage projected demand – not reactionary

Connectivity

in technology

in high speed rail

World class education

Renewable energy technology

A sustainable housing strategy

And lastly… more people…

Thank you

Michael SkeltonAustralia & New Zealand Research Managermskelton@davislangdon.com.au

Delivering solutions that enhance and sustain the world’s built, natural andsocial environments