Construction expenditure increased rapidly in Australia in the early part of this decade. A large portion of the increase came from the commissioning of new liquid natural gas projects and the expansion of existing mining projects to exploit a tripling in price of Australia’s mining exports in the previous decade. The return to “normal” investment levels is still continuing.
According to the latest construction figures published by the ABS, the value of construction work has fallen for a fifth consecutive quarter. Total construction in the September quarter fell by 0.4%, a smaller fall than the 1.0% contraction which had been expected and more than the revised 2.8% fall of the June quarter. On an annual basis, the growth rate improved from June’s revised figure of -9.8% to -7.0%.
ANZ senior economist Catherine Birch took a semi-optimistic view of the figures. “Overall, this was a much better result than Q2 [the June quarter]. Construction activity will be less of a drag on GDP growth in Q3.” Westpac senior economist Andrew Hanlan was less enthused. “The construction sector is in a cyclical downturn led by the housing sector, where conditions have swung from boom to bust.”
Commonwealth Government bond yields finished the day significantly lower, with lower US Treasury yields and a forecast of quantitative easing by Westpac’s chief economist adding to pressure for lower domestic yields. By the end of the day, the 3-year ACGB yield had dropped by 8bps to 0.65% while 10-year and 20-year yields had each shed 6bps to 1.02% and 1.42% respectively.