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Australian Construction Industry Not Faring Too Badly In Downturn

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Signs Indicate a Slow Down In The Housing Boom

But The Construction Industry Is Faring OK

There have been some signs that the construction industry in Australia is facing a downturn as the housing boom slows, but new statistics show that house and apartment construction is actually increasing.

Although new home construction statistics have shown that a dive in Australian construction may occur soon, the Australian construction industry is still growing.

The Australian Industry Group and Housing Industry Association's Performance of Construction Index (PCI) is at 51.9 for last month (September), which is a little lower than August. However, being in the 50 point level means that the industry is still expanding.

The slight drop in the index was influenced instead by a lowering in the engineering work in Australia, which is a reflection on the drop in resource projects throughout the country. The index for engineering alone fell by 9.3 points.

Another area for construction to fall in Australia recently was in commercial construction. This dropped 6.5 points and has now moved in to negative territory, at 48.1 points.

But house building still looks promising, rising to 56.8 points – up 2.4 points – and showing a definite sector expansion.

The construction industry in Australia – the facts

Australia’s construction industry is big business. It is the fourth biggest industry to contribute to gross domestic product (GDP) in the country and it plays a big part in determining our economic growth.Office building

Previously, Australia had a boom period of seven years and in 2009 nearly 10% of the Australian workforce was employed in the industry. This also made it Australia’s biggest industry.

However, after this period, the global financial crisis hit and some of these employees were made redundant as the industry shrunk. The government increased infrastructure funding to deter any negative effects and to help stimulate economic growth. In particular, the government began investing heavily in residential and educational building construction throughout the country.

Australia’s construction sectors

There are three main construction areas in Australia – residential, non-residential and engineering construction. Different economic factors, such as the growth of population, interest rates and inflation, can influence any of these construction sectors at different times.

Forecasts for the Australian construction industry

The global economic outlook is influencing the construction industry in Australia. China’s construction is slowing down and showing problems and this, coupled with economic problems in the Eurozone, could influence Australia’s economy.

There has been a drop in worldwide commodity prices and this could influence Australia, especially in the areas where we export our resources – mainly mining.

A drop in these exports can lead to slower economic growth and this could influence the construction industry. Some are also concerned that the housing market in Sydney is overinflated and this could cause a housing crisis.

However, throughout the 2013-2014 financial year, $233 billion was still spent on construction. The bad news is that this is expected to fall a little in this financial year, to about $215 billion.

The end of the mining boom will see a slowdown in the construction of engineering projects such as bridges, harbours and pipelines. With this drop, spending could decrease by more than $80 billion by 2017/18.

Positive outlook

It’s not all doom and gloom for Australia’s construction industry. Recent employment figures have shown that employment is growing and is stronger now than it has been in past years. Wages also increased by 0.5% over the past year – it’s not much but it's still growth.

Although the number of people working in the mining sector shrunk by more than 33,000 over the May 2014 – May 2015 period, the number of people working in the construction industry actually grew by more than 23,000.

The outlook is that the unemployment rate is expected to stay the same in the near future, a good sign for the construction industry in Australia.

  • construction
  • housing boom
  • economic slow down

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