CANBERRA, AAP – Construction work rebounded in the first three months of the year, buoyed by strong residential building activity on the back of government initiatives and ultra-low interest rates.
Total construction work in the March quarter grew at a slightly faster pace than economists had expected, rising 2.4 per cent to $51.97 billion, although was still down 1.1 per cent on the year.
Total building work rose 2.5 per cent to $30.19 billion, led by a 5.1 per cent jump in residential building to $18.96 billion.
BIS Oxford Economics senior economist Nicholas Fearnley expects the federal government’s now-concluded HomeBuilder program will continue to provide a major boost to detached house construction and renovation work over the coming year.
“With both labour and material capacity constraints in play, project delays and cost overruns can be expected,” he said.
“The considerable backlog of work that has developed should sustain an elevated level of activity for home builders deep into 2022.”
However, the Australian Bureau of Statistics said non-residential work fell 1.6 per cent to $11.23 billion and now stands 10.4 per cent down over the year.
Engineering rose 2.2 per cent to $21.78 billion.
The data feeds into the March quarter national accounts that are due on June 2, which will contain Australia’s latest economic growth forecasts.
Economists will fine-tune their growth forecasts over the coming week with further quarterly reports due.
Data on capital expenditure and forward business investment plans are released on Thursday.
International trade, business profits and inventories, and government spending for the March quarter are issued on Tuesday.
What is also known so far for the March quarter, retail spending will be a modest drag on growth, after declining 0.5 per cent, following a relatively large 2.4 per cent increase in the December quarter.
In the second half of last year, and for the first time in at least 60 years, the economy grew by more than three per cent in two consecutive quarters after rebounding from recession.
Looking further forward, the latest Westpac-Melbourne Institute leading index for April suggests this strong economic growth recovery looks set to extend over 2021 and into 2022.
The index, which indicates the likely pace of economic activity growth three to nine months into the future, continues to point to above-trend annual growth at around 2.8 per cent.
“The signal is consistent with Westpac’s growth forecasts for the Australian economy,” Westpac senior economist Matthew Hassan said.
The bank expects a very strong growth rate of 4.5 per cent in 2021 and then moderating marginally to a four per cent pace in the first half of 2022 even as the impact from the end of last year’s COVID-19 lockdowns unwinds.
“With initial reopening rebounds now largely complete, other drivers are set to take over with upbeat, cashed-up households and booming housing markets setting what will still be a strong pace for growth,” Mr Hassan said.