Storm cloud hovers over Australian construction

AUSTRALIAN construction activity contracted again in June as the residential and commercial sectors continued to weigh heavily on the industry.
Storm cloud hovers over Australian construction Storm cloud hovers over Australian construction Storm cloud hovers over Australian construction Storm cloud hovers over Australian construction Storm cloud hovers over Australian construction

 

Jon Cuthbert

The Australian Industry Group, in conjunction with the Housing Industry Association, last Friday released its Australian performance of construction index findings highlighting a sector failing to gain traction following the global financial crisis.

The PCI showed construction activity recording its lowest level since February 2009, with apartment building the weakest performing sub-sector.

Engineering construction was the strongest performer thanks to the mining boom but overall the picture remained bleak.

"The residential and commercial construction sub-sectors continue to be a drag on overall business activity, with lack of demand and access to finance both holding these important sub-sectors back,” AIG public policy director Dr Peter Burn said.

“Engineering construction is stronger particularly due to mining-related projects but the overall construction sector continues to languish."

HIA chief economist Harley Dale said the market could expect further bad news as the year progressed.

“Further weak updates for residential construction in the June Australian PCI, including a steeper contraction in new orders for detached houses and apartments, unfortunately confirm that new home building conditions will deteriorate further in the second half of 2012,” he said.

“Residential construction activity looks set to trough at GFC-equivalent levels and yet we’re not in the midst of the GFC.”

Dale warned that the trend was concerning and policy makers should heed it as a clear signal for policy action.

This article first appeared in ILN's sister publication ConstructionIndustryNews.net.

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