Australia | Aug 25 2010
By Greg Peel
Today's economic data release showed that Australian construction work done increased by 3.5% in the June quarter, ahead of consensus expectation of 3.0%. Significantly, the March quarter result of 1.9% growth was revised up to 4.2%.
Construction is now growing at an annualised rate of 8.3%. Today's result breaks down into a 7.7% increase in residential construction, 2.6% in non-residential, and 1.5% in engineering. But most encouragingly, economists agree, the private sector accounted for 4.9% growth and the public sector just 0.4%.
This is indicative of not only a waning of government stimulus impact, such as the schools program, but also of a private sector now picking up the ball and running with it post stimulus. The jump in residential construction was the biggest surprise and has caused economists to rethink their second quarter GDP forecasts, albeit consensus expectation still points to 1% growth. There are further data releases due before the GDP release next week.
New residential construction is sorely needed in Australia, albeit economists expect growth to now slow in the face of increased interest rates. However, the trend in non-residential construction is positive and growth will offset what may be lost residentially. The massive Gorgon project's ramp-up will soon become very evident in the numbers, economists note.
No prizes for guessing that the bulk of construction growth was attributable to the mining states.
These numbers provide a case for a higher RBA cash rate, but the GDP result itself will be most influential. However, with economic growth apparently stalling elsewhere, particularly in the US, there seems very little chance the RBA will hike on September 7.