Material supply and lower migration dented the construction sector in June, but it remains as robust as ever
Australia’s construction industry continues to be strong, but its growth rate declined in June, according to a monthly national performance index.
The Australian Performance of Construction Index, which is created by the Australian Industry Group and Housing Industry Association, fell from 58.3 points in May to a seasonally-adjusted 55.5 in June after hitting record highs in March this year.
The news is not all bad, though, as any measurement above 50 in the index means the industry is still expanding, albeit the June figures mean it is doing so at a reduced rate.
Housing, engineering and apartment building all had declining growth rates in June, with the latter dropping below 50 on the index, indicating an overall decline, while commercial construction was the star performer and had an increased rate of growth.
Capacity constraints and rising input prices are the reasons for the declining growth, according to the Ai Group’s head of policy Peter Burn, who says labour shortages will need to be addressed.
“New orders were at very healthy levels indicating further expansion in the months ahead, however, lag times are extending with capacity already stretched,” he says.
“It will be critical for governments, their agencies, and industry to work together to ensure that sufficient labour is available to deliver on the full range of infrastructure projects in the pipeline.”
HIA economist Tom Devitt says the decline in apartment building is due to constraints on migration to Australia reducing demand, with apartments having fuelled economic activity in Sydney and Melbourne during the past decade.
He also says price and access to materials were hampering building.
“Constraints on the supply of building materials are flowing through as higher prices especially for detached housing,” he says.
“The pressure on materials prices and availability will ease as building product manufacturers continue to increase output of key materials including timber.”
Other findings of the index were that both selling and input prices hit record highs, as did construction capacity utilisation, the employment index had slowed from its record high in May, while there was also an increase in the wages index.