The Australian Performance of Construction Index from Ai Group and the Housing Industry Association has recorded the worst results in a year after all construction segments fell into decline.
The negative response came in the wake of strict COVID-19 restrictions for the Victorian and New South Wales construction sectors, also hampering confidence in sales and delivery around the nation.
Ai Group’s chief policy advisor Peter Burn said the results were a stark contrast to the beginning of 2021.
“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,” Burn said.
The PCI fell 10.3 points to 38.4, seasonally adjusted – where scores below 50 indicate a decline in growth.
The three metrics of activity, employment and new orders all fell significantly, with new orders the biggest drop – down 13.1 points to 36.4.
Housing Industry Association chief economist Tim Reardon said even the usual sources of growth were struggling against the restrictions.
“Lockdowns have brought the industry to a standstill and are eroding builders’ confidence,” he said.
“The Australian PCI was dragged even further into negative territory in August after activity began contracting in July.
“Even activity in home building specifically started going backwards in August for the first time in almost a year.”
Reardon said these lockdowns were much unlike previous instances where the construction sector was exempt from restrictions.
“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,” he said.
The only upside, if any, according to Reardon was the the HomeBuilder program may allow the sector to rebound more effectively in the long-term.
“While this does stretch out the HomeBuilder boom for longer, it carries with it significant costs,” Reardon 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.”