Australian construction activity was broadly flat in the June quarter (0.1%), disappointing expectations for a modest rebound (0.5%) following a 2% fall in the March quarter. That left construction activity down 1.9% across the first half of the year, unable to press on from the 3.1% rise seen through the back half of 2023.
The uplift in construction activity seen from the second half of 2022 onwards lost momentum as strength in non-residential and engineering work faded in the first half of 2024 and the residential segment - mired by a number of headwinds - remained weak. In the June quarter, construction activity lifted by just 0.1% as a 0.5% expansion in engineering work was largely offset by a 0.3% fall in building work.
The divergence between the private and public sectors remains intact, with strength in the latter picking up the slack left from weakness in the former. Public sector work lifted by 1%q/q to be up by 7% through the year, driven by the ongoing rollout of a large infrastructure pipeline. This compares to private sector work, which declined by 0.3%q/q and 1%Y/Y.
Looking more closely at the private sector, the weak result for Q2 (-0.3%) was centred mainly in the engineering component (-0.7%). Building work was flat overall, with non-residential work up 0.2% and the residential segment easing 0.1%.
Private residential work remains weak, with activity contracting by 3% through the year. Higher interest rates, elevated building costs, weak sentiment from rising insolvencies in the sector and capacity constraints have all been factors. New home building was down 0.2%q/q and 2.8%Y/Y. Alterations stabilised in Q2 (0.3%) but have been unwinding from their elevated levels seen during the Covid period when this activity was supported by rate cuts and construction subsidies.
From their Covid low in early 2021, non-residential work by the private sector surged by 25% to peak in Q4 2023. Activity has subsequently eased back but still remains at high levels.
In the public sector, activity has started to show signs of levelling off, albeit at very elevated levels. Engineering work has advanced almost 11% over the past year reflecting progress in the infrastructure pipeline rollout by the federal and state governments.
