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Construction feels first contraction in nine months

Construction

 

The Australian construction industry has fallen into decline for the first time since September 2020, following COVID-19 lockdowns in Victoria and New South Wales.

The Performance of Constriction Index by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA) dropped 6.8 points to 48.7 seasonally adjusted (where scores above 50 indicate growth) in July, as the euphoric growth from the HomeBuilder grant came to an abrupt halt.

Ai Group head of policy Peter Burn said the lockdowns were the primary reason for the contraction.

“With Australia’s two largest states affected by COVID-19 outbreaks and associated restrictions, the construction industry slipped into contraction in July after a robust nine-month expansion,” Burn said.

“The negative national result masked continued growth outside of NSW and Victoria and further expansions in both house building and commercial construction.”

Overall activity dropped 14.4 points – down to 40.4 – as apartments were the hardest hit of the four sectors, down 5.3 points to 35.

The Index report stated that many construction businesses reported workers having to take leave, be stood down or be temporarily moved off-site while the lull in activity took hold.

HIA chief economist Tim Reardon said the pain would hopefully be short-lived as COVID-19 restrictions eased, but the return to growth would be slow.

“Lockdowns in other cities have also impaired activity and new orders,” Reardon said. “Despite these lockdowns, there remains a record volume of new detached home building and renovation work to be undertaken, when restrictions ease.

“For builders in other regions, their main challenge remains keeping up with the large volume of work. Capacity constraints will remain a major challenge for at least the rest of this year.

“The exception to this is apartment construction, which continues to feel the adverse impact of constraints on migration,”

As a bitter-sweet result of the lockdowns and restrictions, employment was the only segment of the Index to trend upward, adding 2.5 points for a score of 60.8.

This result came as more builders nationwide sought skilled workers.

 

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