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Feb 03, 2021

Construction sector recovery riding high

Construction sector recovery riding high

The Australian construction industry is having its strongest growth spurt since mid-2017, according to a new report.

The Australian Performance of Construction Index (Australian PCI) improved by a further 2.3 points to 57.6 in December 2020 and January 2021.

This indicates four consecutive months of positive conditions and is the strongest result since July 2017 (readings above 50 indicate expansion in activity, with higher results indicating a faster expansion).

Australian Industry Group head of policy Peter Burn said the stronger performance in the past two months was further evidence of the extension of the recovery from the depths of the COVID-19 crisis.

“House building remained strong and the pace of improvement accelerated among the commercial builders,” he said.

“Engineering construction maintained a gentler expansion and apartment building, which has lagged for some time, continued to do so although the pace of decline was arrested.

“Across the construction sector, activity, employment and new orders all lifted on November levels. The strong rise in new orders is particularly encouraging and points to the likelihood that coming months will see the recovery continue.”

However he warned that with immigration on hold, there would be limited opportunity for residential construction, and particularly the apartment sector, over the course of 2021.

The latest Australian PCI findings came as new Australian Bureau of Statistics figures showed a record high in building approvals for detached houses.

Housing Industry Association economist Angela Lillicrap said ABS Building Approvals data for detached houses rose for the sixth consecutive month in December, to reach the largest number of approvals since the series began in 1983.

“Detached house approvals increased in the December 2020 quarter to be 43.7 per cent higher than at the same time the previous year. Detached approvals finished 13.9 per cent higher for the 2020 calendar year than in 2019,” she said.

The surge in the number of building approvals had continued each month since the announcement of HomeBuilder stimulus measures in June, she said.

In seasonally adjusted terms, the number of detached dwelling approvals during the December 2020 quarter compared to the same time last year, saw the largest increases in Western Australia (+111.0 per cent), Tasmania (+51.9 per cent), and Queensland (+51.2 per cent).

The number of multi-unit approvals increased in Western Australia (+73.8 per cent), New South Wales (+15.3 per cent) and Queensland (+5.7 per cent), but declined in other areas.

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