Construction hit by $1 billion slump
The Australian Bureau of Statistics reports that seasonally adjusted construction activity in Australia shrank by 2 per cent in the first quarter of 2013, wiping out almost all its growth over the past year.
Private engineering construction, mostly in mining investment, fell by 1.1 per cent, its second consecutive quarterly decline. After a decade of rapid growth, quarterly private engineering construction shrank by $1 billion, or 4 per cent, in the six months to March.
Engineering activity fell in every state except Queensland. The cauldron of the mining investment boom, Western Australia, experienced 13 per cent less engineering construction work in the March quarter than it had a year earlier.
Victoria also took a big hit, with engineering construction slumping 11 per cent year-on-year as the state government fell far short of its infrastructure spending target. In NSW and the ACT, engineering work shrank 1 per cent year-on-year.
Residential construction took an unexpected step back, falling 1 per cent in the quarter. The fall would have been steeper without WA, where a sharp rebound suggests construction workers might have moved back from mining to housing.
Residential construction activity slumped 7.4 per cent in Victoria to hit a two-year low.
That was good compared with South Australia and Tasmania, where it slumped to a 10-year low. NSW escaped with a 1.7 per cent fall.
Total construction in the March quarter was just 0.2 per cent higher than a year ago. It shrank by a huge 11 per cent in WA, 16 per cent in the ACT, 3 per cent in Victoria, and 6 per cent in South Australia. That was offset by growth of 13 per cent in Queensland and 4 per cent in NSW.
The figures add to signs that mining investment might have peaked already. The bureau says that in the six months to March, imports of construction machinery, mostly for mining projects, plunged 44 per cent from a year earlier.
Construction contributes 14 per cent of Australia's economic output. The latest slump will cut 0.3 percentage points off the bureau's estimate of March-quarter GDP, to be released on June 5.
On Thursday the bureau will release the keenly awaited results of its March-quarter capital expenditure survey. The market's main interest is in companies' plans for 2013-14. The December survey implied a fall of investment, and some fear companies' plans might have shrunk more since.
Tim Colebatch is The Age economics editor.
Frequently Asked Questions about this Article…
An unexpected slump in construction activity — particularly private engineering construction tied to mining investment — wiped about $1 billion off Australia’s GDP in the March quarter. The Australian Bureau of Statistics reported seasonally adjusted construction activity fell 2% in the first quarter of 2013, erasing almost all growth from the prior year.
Private engineering construction fell 1.1% in the quarter, marking a second consecutive quarterly decline. Over the six months to March it shrank by roughly $1 billion (about 4%). This matters because much of that engineering work is mining-related, and construction accounts for about 14% of Australia’s economic output — so falls can meaningfully affect economic growth and company investment plans.
Engineering activity fell in every state except Queensland. Western Australia saw a 13% year‑on‑year drop in engineering construction and total construction in WA fell 11% in the quarter. The ACT’s total construction plunged 16%, Victoria’s total construction was down 3% and South Australia down 6%. Offsets came from Queensland, where construction grew 13%, and from NSW where total construction rose about 4% despite a 1% fall in engineering work.
Yes. Residential construction unexpectedly fell 1% in the quarter. The decline was particularly severe in some states: Victoria’s residential activity slumped 7.4% to a two‑year low, while South Australia and Tasmania hit 10‑year lows. NSW recorded a smaller residential fall of 1.7%. Western Australia’s sharp rebound in housing helped prevent a larger national drop.
The ABS data add to signs that mining investment might have peaked. One striking indicator is that imports of construction machinery — mostly for mining projects — plunged 44% in the six months to March compared with a year earlier, suggesting a slowdown in new mining project activity.
Construction makes up about 14% of Australia’s economic output. The latest slump was expected to knock 0.3 percentage points off the ABS estimate of March‑quarter GDP, with the bureau’s full March‑quarter GDP figures scheduled for release on June 5.
Investors should focus on companies’ capital expenditure plans for 2013–14, which the ABS will publish in its March‑quarter capital expenditure survey. The December survey had already implied a fall in investment, and the market is watching to see whether company plans have been reduced further since then.
Yes. The article notes a sharp residential rebound in WA, which suggests some construction workers may have moved back from mining projects into housing. That kind of labour shift can boost local residential construction even while mining‑related engineering work slows, creating regional variations in housing supply and construction activity.
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