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Past growth causing future delays, reports latest PCI

Australian PCI, June 2021

 

Australia’s construction growth continued to slow in June as constraints on building supplies pushed prices higher, according to the Australian Performance of Construction Index (PCI), from the Ai Group and HIA.

The overall PCI dropped 2.8 points to 55.5, where scores above 50 indicate growth, with activity in apartment construction (48.9) the only sector falling into decline.

New orders and commercial activity were the only growers for the month, up marginally to 56.1 and 56.8, respectively.

Ai Group head of policy Peter Burn said growth levels had been slowly fading as the HomeBuilder grant fell further into the past.

“Australia’s construction industry continued its run of strong growth in June, but the pace of expansion is slipping as it faces capacity constraints and rising input prices,” Burn said.

Even as the PCI hit record highs in March, the demand for new materials was strained by an influx in new orders.

Burn said this had led to delays across the industry.

“New orders were at very healthy levels indicating further expansion in the months ahead. However, lag times are extending with capacity already stretched,” he said.

“It will be critical for governments, their agencies, and industry to work together to ensure that sufficient labour is available to deliver on the full range of infrastructure projects in the pipeline.”

Housing activity growth dropped 2.3 points in June, the most of any of the four sectors (housing, apartments, commercial and engineering) rated under the PCI.

Despite this, it still held the highest rating for the month at 59.6 points.

HIA economist Tom Devitt said the decline in apartment growth was unlike anything seen for years in Australia’s capital cities.

“The exception (to the continued growth) is the apartment sector where constraints on migration are hampering demand. This sector has been central to economic activity in Sydney and Melbourne for much of the past decade,” Devitt said.

He concurred with Burn that materials constraints and price hikes would continue to affect the industry as recent orders were fulfilled.

 

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