Activity in Australia’s construction industry is expanding at its fastest pace in nine years, with house building leading the way.
The Australian Industry Group/Housing Industry Association Performance of Construction Index rose 4.1 points to 59.1 points in September, its third consecutive month showing a rise.
It was the fourth straight month the index has remained above the 50 level that separates expansion from contraction.
Housing Industry Association chief economist Dr Harley Dale said residential construction should further strengthen for the remainder of the 2014/15 financial year.
“The commercial construction sector finally appears to be following the lead of new residential construction, which is another pleasing outcome,” he said.
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Dale said an increase in the supply of housing might keep a lid on housing prices which have been driven higher by an influx of investors buying existing homes.
In September, Reserve Bank of Australia governor Glenn Stevens raised the possibility of changing regulations to curb risky lending to property investors, which could pose a risk to banking stability and to the economy.
“It will be important for the broader economy that evidence of strong performance in residential and improving performance in commercial construction presents itself throughout 2014 and into next year,” Dale said.
“The current elevated focus and uncertainty around the potential implementation of restrictive lending practices, and sweeping generalisations on this subject, are not helpful.”
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In other data released today consumer confidence suffered its first setback in three weeks, sparked by concerns about household finances.
The ANZ/Roy Morgan weekly consumer confidence index fell one per cent to 112.5 points in the first week of October.
However, the index has been broadly steady for eight consecutive weeks, sitting around its long-run average.
ANZ chief economist Warren Hogan remains confident that consumer sentiment is bouncing back, which will help boost spending.
“Stable consumer confidence, combined with a lower Australian dollar and a gradual strengthening in labour demand, as indicated by yesterday’s September ANZ job ads, should provide some support to retail sales in coming months,” he said.
“However, continuing consumer caution and soft income growth will remain headwinds to the household sector.”
Hogan said the relatively modest growth in consumer spending should keep the Reserve Bank of Australia’s cash rate unchanged until the second quarter of 2015.
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