Australian construction activity outperformed expectations with a 3.4% rise in the December quarter, multiples of the 0.8% consensus. In fact, this was the strongest quarter the sector has put together in three years, though the series is often subject to significant revisions. Growth accelerated from 3.2% to 6.3% through the year. Much of the strength in this result for the March quarter was concentrated in the engineering segment (6.9%), most notably in mining powerhouse of Western Australia (43%). Building work saw only a modest rise (0.6%).
Construction activity increased by 3.4% in the March quarter, its strongest quarterly rise since the start of 2023, to be up by 6.3% through the year. That signals an acceleration after a flat back half last year (0.1%). The key movements behind the headline result were: a 6.9% rise in engineering work (strongest since Q1 2023) and a 0.6% lift in building work, incorporating a 2.5% increase in non-residential construction and a 0.6% decline in residential building.
By sector, activity continued to diverge. Private sector construction jumped 5.6% in the quarter, its fastest rise since 2017, for annual growth of 10%. That compares to a 2.4% fall in the public sector, its second consecutive fall. Output was down 3.1% for the year, likely reflecting the earlier completion of major projects, after growth peaked in late 2023 at nearly 16%.
Engineering work lifted 6.9% in the quarter but was up only by 4.7% through the year. Work done in this segment captures projects in the mining sector as well as utilities (such as energy) and infrastructure. As noted above, the strong result from Western Australia is a likely indicator that this was driven by the mining sector.
Total building work rose 0.6% quarter-on-quarter, a moderate result after lifting by 6.6% in the second half of last year. The strength was driven entirely by the non-residential segment, up 2.5% in the quarter and 11.2% through the year, with data centres playing a key role. By contrast, strength in residential construction came off (-0.6%q/q), slowing annual growth from 8.4% to 5.6%. Private new housing construction declined 1.3%q/q, a weak lead for March quarter GDP.
