What was that GDP blip?
Economists and market forecasters (including one Scott Hochgesang) Australia-wide took a deep breath recently with the announcement of 0.5 % contraction of GDP in the September 2016 quarter.
Housing unexpectedly bites
According to Geordan Murray, Housing Industry Australia’s Economist, a key contributing factor was a dip in residential building investments which declined by 1.4% in the September quarter. No need to panic though, as it remains 7.2 % higher than this time last year.
“Quarter by quarter fluctuations are expected and poor weather has been blamed for the weak result for the residential construction sector in the September 2016 quarter. The latest quarterly decline is not likely to herald the turning point for residential investment just yet. There is still a significant volume of work that remains to be done on projects at various stages of construction which will see the level of investment remain at a historically high level over the next few quarters.”
“Looking at private sector investment, results continue to be mixed. On the positive side, investment in machinery and equipment increased and the agricultural sector made a strong contribution to growth. However, this was outweighed by quite a significant drop in new non-residential building along with the modest reduction in residential building investment. In addition, the widely anticipated contraction in mining related engineering investment continues to weigh on growth,” concluded Geordan Murray.
Look up : – )
In contrast to the hand wringing response to the GDP blip, it seems things really are looking up for the construction industry
Geordan Murray, ACI Economist said “the forecast decline in non-residential building and construction work in 2016/17 should see activity in the industry drop to around $127 billion marking the bottom of the mining investment dominated slowdown.
“Mining related activity may still decline further beyond 2016/17, however the prospects for other parts of the construction industry are improving and growth in these sectors is expected to outweigh any further contraction in mining related work by that stage.
“Progress on the NBN rollout has meant that the construction of telecommunications infrastructure was a big positive during the year, and so too was work on construction of road infrastructure. A large share of this work relates to the major transport infrastructure projects underway in NSW and Victoria, while work on infrastructure supporting residential subdivisions in the east coast housing markets also played a role.
“The pipeline of public sector infrastructure projects has benefited from growth in stamp duty revenue and resource royalties in the larger states. While public sector investment is never going to fully fill the void as mining construction continues to recede, it is set to play a bigger role in rebalancing the economy over the years ahead.
“The soft spot in the outlook is private sector investment, but the boost in public sector investment should foster more positive expectations amongst businesses and provide the foundation for a more significant uplift in private sector investment down the track.
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Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. A licensed real estate agent, Debra also holds a Bachelor of Commerce and Master of Business.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.
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