Construction work done rose in the September 2009 quarter, boosted by government stimulus spending which is mitigating the effects of the credit crunch and economic downturn, according to Master Builders Australia (MBA).
Peter Jones, MBA’s chief economist said, “Government programs such as building the education revolution and the social housing initiative are beginning to kick in, cushioning building and construction from the fallout associated with financial constraints and a weak economy.”
Government stimulus measures are certainly working to help cushion the blow, but they will not be enough to prevent a downturn in construction over the next 12 months. A public private divide is opening up, with construction for the private sector, particularly non-residential building, well down on levels achieved a year ago as commercial builders suffer the effects of tough lending criteria imposed by financial institutions.
The industry is playing a vital role in the Government’s countercyclical fiscal policy and construction for the public sector was up a massive 17.6 per cent in the September quarter and by nearly 40 per cent through the year. Residential building activity is beginning to show signs of recovery as lower interest rates, the first home owner ‘boost’ and social housing initiatives help drive an upturn.
Weak investor activity, the end of the ‘boost’ scheme, and higher interest rates mean dwelling investment is unlikely to significantly contribute to economic growth until well into 2010. Engineering construction rose in the September quarter and the pipeline of resources-related work yet to be done and government infrastructure spending should cushion the impending fall.
The key to the outlook for the construction industry will be whether an upswing in the residential sector can offset the decline in non-residential building and weaker engineering activity. Seasonally adjusted, the chain volume of construction work done in the September quarter rose by 2.2 per cent to $39.6 billion to be 6.9 per cent above levels in September quarter 2008.
The chain volume of building work done in the September quarter rose by 2.6 per cent to $18.7 billion, to be down 4.0 per cent on the previous September quarter. Work done on residential building rose by 2.8 per cent to $10.6 billion, to be down 5.0 per cent on the corresponding figure a year earlier.
Non-residential building rose by 2.3 per cent to $8.1 billion, to be down 2.6 per cent on September quarter 2008. Engineering construction work done rose by 1.8 per cent to $21.0 billion to be up 18.9 per cent on the previous September quarter level.
