This article is from the Australian Property Journal archive
CONTRACTION across the weakened construction industry continued throughout July, albeit at a slower pace, but the new lockdown measures in Victoria are expected to have a heavy impact on activity and employment.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index rose by a 7.2 points from record falls in previous months to 42.7 points in July. It is now back to around the same mildly negative level as in February.
Scores below 50 indicate contraction.
Activity was at 45.6, with a slower rates of contractions seen in house building (up 7.4 to 47.0), commercial construction (by 15.4 to 42.0), and engineering (by 13.5 to 45.5). Apartment building activity dropped 10.9 to 33.0.
The new orders index improved but remains negative at 43.5. House building increased their reading by 15.7 points to 47.9, apartments by 4.5 to 41.1, commercial construction by 15.2 to 43.6 and engineering by 10.0 to 42.5.
Australian Industry Group head of policy, Peter Burn, said it was encouraging sign that the pace of contraction slowed markedly overall.
However, employment fell again, up 1.0 to 41.4, despite reports from some respondents about the role JobKeeper was playing in slowing the loss of jobs.
“The sudden tightening of restrictions on Victorian construction projects will have a material impact at a national level in the coming period and will have particularly severe consequences for activity, employment and on the many businesses that supply into the construction sector in Victoria,” Burn said.
On site teams in Melbourne will be reduced to 25% capacity over the second six-week lockdown phase.
“Even before the new restrictions were announced, the immediate outlook for the sector was weak with new orders falling again in July. Further policy measures will be required to stem a longer wave of job losses and business closures,” Burn said.
The wages index extended a rare foray into negative territory, up 3.1 to 47.4, while input prices continued to rise, although at a very modest pace, down 4.4 to 58.3.
Selling prices remained weak, falling 4.4 to 35.8.
HIA economist, Angela Lillicrap said the data shows that “confidence in the housing market has improved with the easing of restrictions and the Australian governments’ HomeBuilder grant which has led to some new orders for homes”.
Residential building approvals were held up to a small degree by an 11.4% jump in the value of renovations and extensions, according to the Australian Bureau of Statistics.
Lillicrap said the market remains suppressed well below levels experienced prior to COVID-19.
There are over 130,000 multi-unit dwellings under construction, Lillicrap said, and if no new projects enter the pipeline, then once these projects reach completion there will be a significant decline in employment in the sector which will weigh on the wider economy.
