SYDNEY, AAP – Coronavirus-related restrictions on the construction sector in NSW and Victoria resulted in a further contraction in activity in the sector in August.

The AiGroup and Housing Industry Association Performance of Construction Index fell 10.3 index points to 38.4 points in August, its second straight month of contraction.

The index fell 6.8 points to 48.7 in July, the first time it had slipped below the 50-point mark since September 2020.

A reading below 50 index points indicates a contraction in activity, with lower results pointing to a faster rate of contraction.

Extended virus lockdowns in the nation’s two biggest states have taken their toll on the industry in the past two months, ending a nine-month robust expansion.

“Australia’s construction sector has shifted from healthy expansion to steep contraction in a flash as restrictions in the face of COVID-19 outbreaks have closed sites and disrupted supply chains,” Ai Group’s Chief Policy Advisor, Peter Burn, said.

Border closures by other states also contributed to supply chain disruptions and prevented the movement of construction personnel.

However, so far the impact on the sector has been concentrated in the southeastern corner of the country.

Activity indexes for all four sectors were well under the 50-point level in August, indicating contraction.

The biggest drops were in the housing (down 14.4 points to 36.4) and commercial construction (down 11.6 points to 31.3) activity indexes.

Although the apartment building activity index rose by 13.3 points to 32.1 the sector is still in a contraction phase in the absence of activity amongst overseas migrants, students and tourists.

The index for new orders slid 13.1 points to 36.4, with builders reporting lower enquiries from potential customers and less interest in joining waitlists.

“The industry was not permitted to operate like it did during previous lockdowns, despite its exceptional record of operating safely throughout the pandemic, consistent with COVID safety measures,” HIA Chief Economist Tim Reardon said.

While this does stretch out the HomeBuilder boom for longer, it carries with it significant costs, he said.

“Builders can’t work from home. Households that can’t move into their incomplete new homes are saddled with the financial stress of ongoing rent or mortgage payments. Government coffers and the broader economy also suffer from the loss of this very valuable activity,” he added.