The construction industry appears to have turned a corner, buoyed by house building and less pronounced declines in apartment and engineering works.
The latest construction figures are a further sign of economic recovery from recession, a rebound the Reserve Bank of Australia wants to encourage using a broad spectrum of monetary tools.
The Australian Industry Group/Housing Industry Association performance of construction index rose 7.5 points in October to 52.7, indicating a mild expansion in the sector.
The index has breached the 50-point mark for the first time since 2018.
“With activity restrictions in Victoria now easing and new orders rising strongly across the country, the near-term outlook is encouraging,” Ai Group head of policy Peter Burn said.
HIA executive director Geordan Murray said low interest rates, government grants and other fiscal stimulus measures were helping to lift demand for detached housing.
“These are positive signs that policy settings are working to generate employment throughout the initial phase of the economic recovery,” Mr Murray said.
Getting Australians back into work was a key factor behind the reserve bank cutting rates and embracing a growing arsenal of monetary tools in a low interest environment.
RBA governor Philip Lowe said the central bank would do what it could to help reduce unemployment levels.
“With Australia facing a period of high unemployment, the reserve bank is committed to doing what it can to support the creation of jobs,” Dr Lowe said.
The RBA cut the cash rate to a record low 0.1 per cent from 0.25 per cent at Tuesday’s monthly board meeting, a monthly saving of more than $30 on a $400,000 mortgage if passed on in full by retail banks.
It also reduced its three-year bond yield target rate and its term funding facility rate for banks by the same amount, while entering into a $100 billion program to buy government bonds, otherwise known as quantitative easing.
Dr Lowe said the combination of the RBA’s bond purchases and lower interest rates would improve financing costs for borrowers and contribute to a lower exchange rate.
Former prime minister Paul Keating, who has previously criticised the central bank for a lack of action, said it had finally arisen from its monetary slumber.
The rate cut comes at a time of rising consumer confidence and on top of personal income tax cuts, providing a potential boost to retail spending.
The Australian Bureau of Statistics will release its final retail spending figures for September on Wednesday.
Preliminary figures showed spending fell by $448.6 million, or 1.5 per cent, which followed a four per cent drop in August.
The ABS will also release its weekly payrolls data, a special series to give a more frequent update on the labour market during the pandemic.