Via Michael Bleby | AFR
The rapid pace of growth in Australian construction is crimping capacity, with a monthly industry survey recording its fastest-ever growth in employment and pressures growing in wages and materials costs.
Hiring in May’s Performance of Construction Index rose 5.2 points to 64.4, the highest in the 16-year history of the index tracking activity. Separate indices for input prices and selling prices also rose to record highs, the report released on Thursday showed.
Overall activity moderated slightly, as the monthly index based on the survey responses of construction industry purchasing managers ticked down 0.8 points to58.3. A reading above 50 indicates growth and a reading below it shows contraction. The further from the 50 median, the faster the pace of expansion or decline.
But even though the pace of growth pulled back, there are fears the boom fuelled by HomeBuilder and low rates is setting up Australian construction – a notoriously cyclical industry – for another bust.
“Respondents reported difficulty finding new skilled staff in building trades, sales, materials estimation and procurement,” the report produced by Ai Group and the Housing Industry Association said.
“Several respondents voiced concerns about future demand once the current house-building boom has run its course.”
Australia’s home-building pipeline is likely to remain full and boost economic growth even as the sugar hit of the government’s HomeBuilder stimulus drops out of the system,
economists said this week economists said this week economists week, after new dwelling approvals dropped 8.6per cent in April, in line with expectations.
“The pace of employment growth across the construction sector was the highest recorded since the Australian PCI commenced in 2005 and this fuelled a further increase in reports of difficulties in filling positions,” Ai Group policy head Peter Burn said.
“The heat in the market is also evident in the extent of input cost acceleration ,wage rises and price increases.”
Activity in all four sectors of construction tracked by the survey – housing, apartments, non-residential commercial and infrastructure – expanded further last month, albeit at a slower pace of gain in the first three sectors. Engineering accelerated, with that sector sub-index rising 1.7 points to 64.3.
Despite the April extension given to HomeBuilder projects extension given to HomeBuilder projects extension projects, allowing them a further12 months to start construction, prices are being pushed up by demand for immediate commencements and disrupted supplies of materials and components, the report said.
“Builders report that demand is still being supported by HomeBuilder, low interest rates, redirected consumer spending and ‘local FOMO’ in popular locations,” the report said.
“Some respondents said that slow loan approvals and the combination of high prices, delivery delays and disruptions are starting to prompt more clients to wait.“
