- Coronavirus-related constraints on the construction sector in New South Wales and Victoria resulted in a further drop in building activity in August
- The report noted that construction businesses are continuing to report ongoing supply shortages, delivery delays and price hikes for materials and inputs
- Ai Group head of policy Peter Burn says Australia’s construction industry has shifted from healthy expansion to steep contraction in a flash
- HIA chief economist Tim Reardon says lockdowns have brought the industry to a standstill and are eroding builder’s confidence
Coronavirus-related limitations on the construction sector in New South Wales and Victoria have led to a further decrease in construction activity in August.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index fell 10.3 points to 38.4 in August, marking the second and more severe month of contraction following a substantial drop in July.
Readings below 50 indicate contraction in activity, with lower results indicating a stronger pace of contraction.
The Australian PCI indices for activity, new orders, and supplier deliveries contracted sharply in August, owing to tight activity limitations in the construction sector in Victoria and NSW, as well as state border closures hurting the industry’s supply chains nationally.
The report noted that construction businesses are continuing to report ongoing supply shortages, delivery delays and price hikes for materials and inputs.
Ai Group head of policy Peter Burn said Australia’s construction industry has shifted from healthy expansion to steep contraction in a flash.
“The impacts were concentrated in the south-east corner of the country although border closures by other states also contributed to supply chain disruptions and prevented the movement of construction personnel,” he said.
“Nevertheless, beyond the south-east corner aggregate construction activity avoided contraction.”
Nationally, all four construction sectors saw a decline in activity in August, with house building joining apartment building, commercial and engineering construction in the red.
Employment slipped slightly, with builders and construction companies cautious to lay off workers in August, owing to previous problems in filling vacancies.
“Input price pressures continued into August although the pace of increase eased with lower levels of activity,” Dr Burn said.
“New orders fell precipitously – a pattern evident across the four construction sectors and, in combination with continuing restrictions, pointing to the likelihood of further contraction in September and October.”
HIA chief economist Tim Reardon said lockdowns have brought the industry to a standstill and are eroding builder’s confidence.
“Even activity in home building specifically, started going backwards in August for the first time in almost a year,” he said.
“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.”
While this does extend the HomeBuilder boom for a longer period of time, it comes at a high cost, Mr Reardon said.
“Builders can’t work from home,” he said.
“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. Apartment activity is also still contracting in the absence of overseas migrants, students and tourists.”