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Sun June 13 2021

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Growth in Australian construction accelerates

8 Jun 17 Latest figures show that Australia’s construction industry has expanded for a fourth consecutive month, with new apartments leading the growth.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) increasing by 4.8 points in May to 56.7 – its fastest pace of growth since September 2014. Readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase.

Ai Group chief economist Julie Toth said: "Much of the construction industry was seeing stronger activity in May, reflecting the very high building approvals numbers we have seen of late. Although housing activity was down this month, the gap was more than filled by apartment and multi-unit dwelling construction. Building approvals trends plus the forward orders series in the Australian PCI suggest this boom in apartment construction activity still has some way to run. In the engineering and commercial construction sectors, a stronger flow of work from big transport infrastructure projects and from commercial projects relating to tourism, healthcare and manufacturing seems to be countering the down-swing in mining-related projects. These are extremely positive developments that should add to wider business productivity and capacity.”

HIA senior economist Shane Garrett said: "Today's report provides further evidence that the strength of apartment building is holding up for considerably longer than most of us expected. A record number of new apartments were commenced across Australia during 2016 and work on these will continue to support on-the-ground activity in residential building for much of this year. There are already signs that the large volume of newly-built apartments becoming available for occupation in Sydney and Melbourne is taking some of the edge out of dwelling price inflation in Australia's two largest cities – good news from an affordability perspective.”

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Across the four construction sub-sectors, apartment building activity drove growth in industry conditions in May, expanding at its steepest pace since November 2015 (up 13.2 points to 68.5), but house building activity weakened, slipping back into contraction after four months of growth (down 7.4 points to 45.6).

Engineering construction recorded its strongest rate of growth in 9.5 years on the back of increased levels of non-mining infrastructure work (up 4.3 points to 59.9). Commercial construction also returned to growth in May, increasing by a solid 12.0 points to 55.2.

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