Australian residential building activity likely to flat-line, non-residential activity to rise strongly

Australia’s headline construction work done rose strongly on a sequential basis in the third quarter. Construction work done grew 15.7 percent in the September quarter, as compared with the rise of 9.8 percent in the prior quarter. The headline figure was stimulated by the inclusion of several LNG platforms. However, the underlying details have come in soft.

The LNG platforms are expected to have been imported in the September quarter for the Ichthys and Prelude plants, which are quite close to completion, stated ANZ in a research report. Excluding these, construction work done was broadly flat.

The boom in public infrastructure is now underpinning engineering construction. Excluding the LNG platforms, engineering construction are likely to have risen modestly, with particular robustness in NSW and Victoria.

Meanwhile, order details came in weak. Housing construction recorded a decline of 0.3 percent quarter-on-quarter. Private housing activity also dropped in the quarter by 2 percent. The softness was driven by the east coast cities with Victoria recording the largest fall of 3.1 percent.

“We continue to expect residential activity to flat-line at a relatively elevated level given the amount of work in the pipeline, before gradually declining next year”, said ANZ.

In the third quarter, non-residential building was also a bit weaker than anticipated. Private sector activity grew moderately by 1 percent, driven by NSW and Victoria. Given solid growth in approvals, non-residential building activity is expected to rise strongly in the next few years and drive the non-mining business investment recovery.

Public construction work done carried on with its strength, rising 3.3 percent, which is in line with the strong infrastructure pipeline.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was bullish at 96.1955, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -23.9425. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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