17th March, 2014

Mixed fortunes for Australia’s construction industry

Australia’s construction industry experienced a mixed bag of results last month, with new data showing performance varied across industry segments.

The Australian Industry Group (Ai Group) PCI Construction index fell four points to 44.2 in February – anything below 50 indicates contraction.

However, there was positive news for house building, which continued to expand during the month, reaching 52.2 points. Commercial construction was also a standout performer, enjoying a strong lift to 59.9.

These results were offset by engineering construction slumping to 39.7 and apartment building dropping to 46.6. Ai Group director of public policy Peter Burn said the index reflects the wider state of the Australian economy.

“House building remains healthy and should gain greater traction if there is a reasonable conversion of strong building approvals into new activity,” he stated.

“Most encouragingly, commercial construction activity surged in February to its highest level since April 2010.”

Input costs remained high (66.4), although selling prices suffered another fall last month (44.7). With such high costs, tradesmen may want to ensure they have adequate construction insurance to ensure they are covered in worst-case scenarios.

Maintaining growth

The Ai Group data was recently backed up by Australian Bureau of Statistics figures that showed there was a 5.8 per cent increase in the construction of dwellings in January.

CEO of Master Builders Australia Wilhelm Harnisch said the improvement was largely caused by low interest rates. The Reserve Bank of Australia maintained the key cash rate at 2.5 per cent this month, but they remain at record lows.

“It is important that the Reserve Bank maintain current rate settings if it (the growth) is not to be killed off,” he stated.

“It is equally important that the May Budget sets out a clear strategy to underpin business and consumer confidence to maintain the momentum of the housing recovery.”

Author: Murray Bruce