Home building activity declines for third month

by Julia Corderoy09 Mar 2015
Home building has declined for a third consecutive month, which may send a distressing signal about the state of the Australian economy which has been relying heavily on the strength in the property market.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index revealed that home building declined for a third consecutive month in February, albeit at a slower rate than January – the index moved up 4.5 points to 45.4. Index readings below 50 points indicate a contraction in activity, with the distance from 50 indicating the rate of the contraction.

Ai Group Director of Public Policy Peter Burn said levels like these mean the housing sector may not be able to prop up the economy as it adjusts post-mining boom.

“While house building is retreating from relatively healthy levels, it is no longer offsetting the well-entrenched decline in mining-related engineering construction activity. The near-term outlook for the sector is for continuing declines in activity, as suggested by the low level of new orders revealed by survey respondents.”

HIA chief economist Harley Dale said the result should send a strong message to the government about the importance of housing policy reform – especially after the release of the Intergenerational Report.

“A front and centre focus on housing policy reform would lift economic growth but also deliver important productivity gains, the latter of which should form a cornerstone of any accurate discussion of yesterday's IGR [Intergenerational Report],” he said.