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Record home building and NSW constructionEngineering inflation at 7-year highConstruction work done; Skilled vacancies
Construction activity: Construction work done rose by 1.6 per cent in the June quarter – the sixth increase in seven quarters – but is down by 0.1 per cent on a year ago. And work done was revised-up to 2.4 per cent (from a previously reported +0.2 per cent) in the March quarter.
Construction inflation: Construction costs rose by 1.2 per cent in the June quarter with building costs up 0.6 per cent. On the year, construction costs were up 3.3 per cent (decade average +2.2 per cent) – just below 9-year highs.
Engineering inflation: Engineering costs rose by 1.8 per cent in the June quarter. Over the year, engineering costs rose by 4.2 per cent (decade average +2.6 per cent) – a seven year high.
Skilled vacancies: The Internet Vacancy Index rose by 0.2 per cent in July after decreasing for three consecutive months. The index is 4.7 per cent higher than a year ago. 
What does it all mean?
The construction boom continues across Australia, especially in the growth engines of New South Wales and Victoria. Strong population growth and government spending are supporting a humungous pipeline of building activity. Construction work done in both states are at record highs. And the ‘cherry on top’ was the strong rebound in new home building. After residential work declined last year from peaks in 2016, a new summit has been reached.
And it appears that the surge in construction activity and public transport-related infrastructure spending are generating price pressures. Construction inflation is just below the highest level in nine years and engineering costs are the highest in seven years.
Certainly there is increasing demand for workers and skills shortages emerging in the engineering and construction sectors. Skilled vacancies for construction managers are at the highest level in seven years.
What do the figures show?Construction Work
Construction work done rose by 1.6 per cent in real (inflation-adjusted) terms in the June quarter – the sixth gain in seven quarters. But work done is down by 0.1 per cent on a year ago. And work done was revised-up to 2.4 per cent (from a previously reported +0.2 per cent) in the March quarter.
Public sector construction work rose by 2.5 per cent in the quarter and private sector activity lifted by 1.3 per cent.
Construction work rose in five of the states and territories in the June quarter. Leading the gains were South Australia (up by 10.4 per cent); Tasmania (up by 5.3 per cent); Victoria (up by 3.9 per cent); NSW (up by 2.9 per cent); ACT (up by 1.8 per cent). 
Construction fell in Northern Territory (down by 12.5 per cent); Queensland (down by 3.9 per cent); and Western Australia (down by 1.4 per cent).
Engineering work rose by 0.4 per cent in the June quarter, but is down 7.2 per cent over the year.
Commercial (non-residential) building rose by 1.3 per cent in the June quarter and was up by 8.2 per cent on the year.
Residential building rose by 3.1 per cent in the June quarter and was up by 5.6 per cent over the year. But alterations & additions fell by 3.1 per cent in the quarter, while new residential work rose by 3.9 per cent.
Construction costs rose by 1.2 per cent in the June quarter, with building costs up 0.6 per cent. On the year, construction costs were up 3.3 per cent (decade average +2.2 per cent), up from 2.8 per cent in the March quarter and 2.8 per cent in the December quarter. Building inflation was 2.5 per cent and engineering inflation was 1.8 per cent.
Skilled Vacancies
The Department of Jobs and Small Business Internet Vacancy Index rose by 0.2 per cent in July 2018 after three consecutive months of declines. The index is up by 4.7 per cent over the year to July.
Job vacancies rose in three of the eight occupational groups in July. Increases were recorded for Professionals (up by 0.3 per cent), Clerical and Administrative Workers (up by 0.1 per cent) and Labourers (up by 0.1 per cent). Vacancies were steady for Managers and Community & Personal Service Workers, but fell for Machinery Operators (down by 0.4 per cent), Sales Workers (down by 0.3 per cent) and Technicians & Trade
Workers (down by 0.1 per cent).
Job vacancies increased in three of the states and territories in July: Tasmania (up by 1.0 per cent), Victoria and Western Australia (up by 0.4 per cent) and ACT (up by 0.2 per cent). But fell in the Northern Territory (down by 1.1 per cent), South Australia (down by 0.2 per cent), Queensland (down by 0.1 per cent) and New South Wales (down by 0.1 per cent).
Over the year to July 2018, job advertisements rose in six of the eight occupational groups, with the strongest gains recorded for Professionals (up by 9.6 per cent), Managers (up by 7.6 per cent) and Technicians and Trades Workers (up by 7.0 per cent). A decrease in job advertisements was recorded for Sales Workers (down by 6.6 per cent) and Labourers (down by 4.4 per cent).
Over the year to July 2018, job advertisements increased in five states and the ACT, with Western Australia recording the strongest rise (up by 16.3 per cent), followed by Tasmania (up by 13.5 per cent) and Victoria (up by 8.7 per cent). Decreases in job advertisements were recorded in South Australia (down by 2.7 per cent) and the Northern Territory (down by 0.3 per cent).
What is the importance of the economic data?
The Bureau of Statistics releases quarterly estimates of Construction work done. The estimates are based on a survey and cover around 85 per cent of the construction work done in the period. Revised estimates will be released in coming months. The data is useful largely for historical purposes but the work yet to be done estimates provide an early warning signal of future activity. The residential work figures give a good early guide to the strength of residential investment in the national accounts.
The Department of Jobs & Small Business releases a monthly Internet Vacancy Index. The index is based on a count of online job advertisements newly lodged on three main job boards (SEEK, CareerOne and Australian JobSearch) during the month. The index is the only publicly available source of detailed data for online vacancies, including around 350 occupations (at all skill levels), as well as for all states/territories and 37 regions.
What are the implications for interest rates and investors?
According to surveyor Rider, Levett and Bucknall, a total of 684 cranes were hoisted above our major cities in the June quarter, reflecting the continuing strength of the construction sector within the Australian economy. Around 346 cranes are located in Sydney, followed by 158 in Melbourne and 100 in South-East Queensland.
Construction companies such as Lend Lease, Thiess, Brookfield Multiplex, BGC and Leighton have their signage plastered all over our major cities. They have plenty of work and are hoovering up highly skilled engineers, project managers and construction workers.
In the past quarter engineering construction work done was almost $24 billion with residential building at $17 billion and commercial building around $11 billion. In the June quarter building approvals totalled $30 billion, potentially adding to new work. And according to Cordell, $30 billion of new projects were added to the construction pipeline in May and June alone.
Examples of major new projects around Australia include: Dexus’ Lakes Business Park South near Sydney Airport; Boyuan Group’s Northern Gateway development at Badgerys Creek in  Sydney; the $1 billion Republic Precinct in Belconnen, Canberra; the Wemen Solar Farm in Victoria; Aurrum Aged Care facility in Toowong, Brisbane; the 45-storey tower approved for Adelaide’s King William Street; the new Bridgewater Bridge in Hobart; Landcorp on the Park’s development in Western Australia and the HomeBuild tenders in the Northern Territory.
CommSec expects official interest rates to remain stable until late 2019.
Published by Ryan Felsman, Senior Economist, CommSec