Construction spend data shows relative strength of business investment
August 26, 2009
Today’s release of ABS data on construction spending has again allayed fears that business investment would ‘fall off a cliff’ despite a noticeable decline in residential bulding.
The value of construction work fell a mere 0.1 per cent in the June quarter to a seasonally adjusted $35 billion, surpassing estimates of a 3 per cent decline. A boost in engineering investment largely offset declines of 2.6 per cent in residential building and 9.7 per cent in non-residential building.
The Housing Industry Association, Australia’s largest building industry organisation, expects housing construction activity to pick up later in the year given the more bullish outlook on the economy.
“Low interest rates, the First Home Owner Boost, and Federal programs such as the Social Housing Initiative will all contribute to a much needed recovery in new home construction in 2009/10 following a five year trend decline,” HIA Chief Economist, Dr Harley Dale, explained. “It is clear, however that residential projects are getting bogged down in the approvals process - the rate of increase in building approvals in 2009 to date is lagging considerably behind the strong surge we have seen in new home lending.”
“That suggests the new home building recovery will be very modest to begin with and will not show up in earnest for construction work done until 2010,” he advised.
Queensland (-13.5%) and New South Wales (-2.1%) were the primary laggards when it came to residential building, while shapr rises were seen in Victoria (6.6%), Tasmania (8.6%) and the ACT (29%).