- Craig James, CommSec chief economist
Construction activity in Australia dropped at the fastest pace in almost four years last quarter after increasing for the first time in more than a year in the second quarter. The total value of construction activity, including building and engineering work, plunged by 3.6% to $49.04 billion in the three months through September, compared with economists' projections of a 2% decline. The main driver for the negative result was the precipitous drop in engineering work, including mines, roads and bridges, which plummeted 7.3% in the reported period. Measured on an annual basis, the amount of construction work done was down 3.7%. Over the past year engineering work plunged 11.7%, as mining investment wanes. The data signalled that there was still plenty of momentum in housing construction, yet the sharp decline in engineering work meant construction was a drag on the Australian economy growth last quarter.
The Reserve Bank of Australia might add further stimulus by slashing interest rates again if the nation's economy starts deteriorating. However, recent strength in business conditions and robust employment growth suggest that the central bank may remain in a wait-and-see mode for some time.
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