Released 31 May 2012



Preliminary Australian Bureau of Statistics figures released yesterday (30 May 2012) provide a disappointing update for residential construction in the March 2012 quarter, according to the said Housing Industry Association (HIA).

HIA Senior Economist Andrew Harvey said the total value of residential building work done fell by 2.0 per cent in the March quarter with new dwellings down by 1.4 per cent and renovations down by a sizeable 5.3 per cent.
 
“The result is a concern as it suggests not only that dwelling investment will again detract from GDP growth in the March 2012 quarter, but also that the renovations side of the residential building industry is now also facing headwinds.

Master Builders Australia Chief Economist Peter Jones said another decline in building work done provides a backdrop to recent collapses of long term construction companies that will only have negative consequences for the supply chain and the wider economy.

“The commercial building industry is caught on the wrong side of the two speed economy and the aftermath of the global financial crisis.”

He said the industry is concerned that future prospects remain poor, with few projects in the pipeline. This does not augur well for employment going forward.

“It is imperative that the Government and the Reserve Bank set the policy levers to arrest the severe decline and to help rebuild confidence in such a crucial sector of the economy.

“The Government and the Reserve Bank cannot simply rely on the mining sector to underpin economic activity and jobs.”

In annual terms, major renovations (alterations and additions) activity is down by 5.1 per cent over the year, while new housing is down by 8.8 per cent.

HIA's Harvey said renovations have been the positive news story for the residential building industry with the value of total work holding up relatively well, but there are now mounting signs that this side of the industry is slowing.

"The data is just another piece of evidence that current policy settings need to be amended. The official GDP growth forecasts remain too optimistic, interest rates need to be cut again next week and governments need to quickly support the domestic non-resources industry, including residential building and manufacturing so that the nation is well-placed to grow in the longer-term.”