Independent Australian and global macro analysis

Tuesday, February 22, 2022

Preview: Construction work done Q4

The December quarter update of Australian construction work done is due to be released this morning by the ABS at 11:30am (AEDT). A strong upswing in the construction cycle was paused in Q3 amid state lockdowns during the Delta wave and from capacity constraints. Eased restrictions should see a Q4 rebound in activity across the sector.  
   
As it stands | Construction Work Done

Construction activity held up better than expected during a disrupted Q3 with the Delta lockdowns in place in New South Wales, Victoria and the ACT. In the quarter, construction activity declined by 0.3% against a 3% fall expected.  


Public sector activity contracted by 2.7% in the quarter compared to a 0.5% rise in the private sector. Site restrictions hit public building work (-9.7%), driving a 2.2% fall in total non-residential work. This weakness was centred in New South Wales where the temporary shutdown of the construction sector saw non-residential work plunge by 11.3%.   


Private sector residential construction activity stalled over Q2 (0%) and Q3 (0.1%) amid capacity constraints and lockdown disruptions. In Q3, a 0.8% decline in new home building was offset by a 6% rise in alteration work, with the latter benefitting from the pandemic-related shift for the desire for more space and from the HomeBuilder grants program.       


There is a large volume of government infrastructure projects in the pipeline, but as highlighted above public sector work fell in Q3 (-2.7%). Engineering activity lifted slightly (0.5%) but could not offset the lockdown-related fall in building work (-9.7%). 


Market expectations | Construction Work Done 

The easing of lockdowns is expected to drive a rebound in activity, with construction work done forecast to rise by 2.1% on the quarter (range: 1% to 3%). The headwinds to that forecast are from labour and materials shortages holding back progress.   

What to watch | Construction Work Done

Today's report should confirm the resumption of the upswing from the first half of 2021 where there was broad-based momentum in construction activity. In particular, watch activity in the residential segment where there is a very large pipeline of work to be done on the back of the Covid stimulus response.