Despite a deflating residential industry, the construction sector is still showing signs of vigour in the non-residential industry, which is benefiting from strong office construction, and the engineering construction industry, which includes construction for oil and gas production.
Solid price increases in 2006 are expected to result in overall revenue growth of 3.4 per cent this year—the fastest rate of growth since 1998. But mounting material input costs mean total costs will rise slightly faster than revenues. Therefore, the sector's profit margin will slip slightly to 2 per cent, down just 0.1 per cent from the seven-year high it reached last year. In dollar terms, profits will edge down to $2.04 billion.
Rising costs will cause margins to slip further in the coming years, preventing profits from returning to their 2005 peak. Profits will range between $1.4 billion and $2 billion through to 2010.