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Construction index makes scant recovery but still in the red


The Australian Industry Group’s (Ai Group) Performance of Construction Index (Australian PCI) has revealed the nation’s construction industry continued to wear thin in May after bearing more damage from COVID-19.

After sinking to a record low of 21.6 in April, the Australian PCI saw an incremental rise to 24.9 points in May.

While the construction industry remains in uncharted waters, the small boost suggests a slower rate of decline is occurring.

The report suggested widespread concern in the industry about COVID-19, with many survey participants crediting the JobKeeper scheme for keeping their businesses and workforce together in May.

Activity across the all four construction sectors – housing, apartments, engineering construction and commercial construction – all continued to place well below the 50-point-mark of the index.

Engineering construction reached a record low of 23.8 points in May, while housing (20.2), apartments (15.8) and commercial activity (18.1) all saw marginal increases that signals a slower contraction rate.

The report found that construction business operators are blaming activity restrictions, travel and delivery restrictions for a ramp down in activity. Health and safety requirements have also affected construction business activity due to on-site distancing and delivery times for required PPE equipment.

Commercial construction orders have been revived, moving up 24.1 points to 36.4 points in May, after a score of just 12.3 points was recorded in April.

Government and private investment

The federal and state governments are attempting to buffer the recent decline in construction activity. Most recently, the Federal Government announced its HomeBuilder scheme iwould offer $25,000 cash grants to homeowners to renovate or build homes. The scheme’s total cost is uncapped but is forecast to cost taxpayers $688 million.

The Australian Government is aiming to boost activity in the construction industry through the scheme, with Prime Minister Scott Morrison stating it will support more than a million workers across building, plumbing and painting in the next nine months.

Meanwhile, with state and federal government support expected to boost construction industry activity in the coming months, billionaire Kerry Stokes’ Seven Group has quietly acquired a 10 per cent stake in construction materials giant Boral.

Seven Group is no stranger to the construction materials industry, as it also owns WesTrac, the equipment dealer for Caterpillar in Western Australia, New South Wales and the Australian Capital Territory.

Boral’s shares have faced a hot and cold trajectory in the past year, reaching $5.70 last July, and dropping to $1.80 on 24 March during the initial impacts of COVID-19. Boral’s outgoing chief executive officer Mike Kane is also expected to soon part ways with the company.

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