Construction activity plummets over June quarter

New data has revealed that construction work fell sharply in the second quarter of the year due to the unwinding of the record surge in mining investment.

ANZ’s latest Quick Reaction highlighted that total construction declined by 3.7 per cent in Q2, which is the largest fall since the third quarter of 2015 and 11 per cent lower than a year ago.

ANZ noted that this decline was driven by a large fall in private engineering construction, which decreased by 14 per cent in Q2, the largest decrease since the early 1980s recession.

“The fall reflects the unwinding of the record boom in mining investment, where we estimate that the maximum drag on GDP is under way and that most of the adjustment will be over by mid-next year,” ANZ said.

Meanwhile, although total construction fell over the June quarter, residential construction rose solidly in Q2 according to the bank.

“We estimate that total construction rose by 2 per cent in Q2 after a 2.4 per cent gain in Q1,” ANZ said.

The bank added that construction in the residential sector has lifted by 8 per cent over the past year and it expects activity to be supported over the rest of 2016 by a high level of building approvals and a record backlog of work remaining.

Non-residential building also dipped in Q2. Construction in this sector fell by 0.5 per cent, with activity now 3 per cent lower than a year earlier.

“Non-residential building approvals suggest that construction will remain weak,” ANZ said.

[Related: Unit developments ‘on verge of being mothballed’]

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Francesca Krakue

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