Australia | Aug 26 2009
By Chris Shaw
Expectations for Australian construction work done in the June quarter centred on a fall of around 3% from the March quarter, but the actual figure released earlier today proved stronger than expected, revealing a decline of just 0.1%.
Driving the number was a 5.7% increase in engineering activity, while building activity declined by a similar percentage. The fall in the latter occured in both the residential and non-residential sectors, but the non-residential sector was by far the weaker, registering a fall of 9.5%.
Private non-residential work fell by 11%. Westpac senior economist Matthew Hassan notes falls in this measure were greatest in Western Australia, New South Wales, South Australia and Queensland. But when public works activity is included, the respective overall performances of the states was somewhat different as total construction activity rose in Western Australia, South Australia and Victoria, but fell in Queensland and New South Wales.
Looking forward Hassan expects residential building activity will continue to improve given low interest rates and the boost offered by the first home buyers scheme, while private non-residential activity levels are tipped to fall further given a shrinking pipeline of private infrastructure work.
With respect to any potential impact on monetary policy, ANZ Banking Group economist Riki Polygenis suggests the figures indicate business investment may not be as big a drag on growth as had been expected as anecdotal evidence suggests businesses are now revising up their investment plans.
This implies some upside risk to the bank’s June quarter GDP growth forecast of 0.7%. This leads Polygenis to suggest forecasts for growth in the December half may also be revised higher. If this happens she suggests it could bring forward expectations of hikes to official interest rates, which had been pushed back by the data of recent weeks.
