Australia’s construction industry continues to contract, with the latest AiG/HIA Australian Performance of Construction index at 43.2 for the month of August.
Australian Industry Group/Housing Industry Association Australian Performance of Construction Index was relatively unchanged in August down 0.1 points from July to 43.2, indicating contraction, with the index below the 50 points indicate a contraction in activity.
Construction is suffering from a lack of demand, a fall off in the Building the Education Revolution federal government stimulus package together with intense competition to secure existing contracts. All major sectors remained in the red in August, with house building falling to 38.4, the lowest reading in 16 months.
Australian Industry Group Director Public Policy, Dr Peter Burn, said the decline in housing construction is of particular concern raising questions over whether the RBA’s interest rate increases this year are putting jobs at risk.
“The disappointing results for the Australian PCI in August suggest that the construction sector is yet to bounce back from a distinct decline in performance since May.”
“The industry remains hampered by the failure of private demand to take up the slack left by the dwindling number of new public sector projects and the withdrawal of additional support for first home buyers.” Dr Burn said.
Housing Industry Association Chief Economist, Harley Dale, attributes the drop off in demand for new home construction to the withdrawal of stimulus for first home buyers.
“As the positive impact from fiscal and monetary policy stimulus has unwound, it has become increasingly apparent that a first stage new home building recovery will not morph into a more sustainable housing up-cycle. This situation is particularly evidenced by the further deterioration in August of the house building sub index of the Australian PCI “.
“Rising interest rates earlier in the year played a role in dampening demand, while the on-going lack of available finance for development is showing no material sign of improvement and is a major obstacle to a sustained recovery.” Mr Dale said.