Construction work spikes in June quarter

Prashant Mehra
(Australian Associated Press)

Construction work in Australia spiked in the three months to June, raising hopes of a boost to economic growth.

However some economists expect the one-off surge to be offset by other factors when national accounts for the quarter are released next week.

The value of construction work done jumped 9.3 per cent in the quarter to $51.7 billion, far ahead of market expectations of a one per cent increase.

Total building work done on homes and non-residential buildings rose just 0.1 per cent to $27 billion, while engineering work done, including mines, roads and bridges, surged 21.5 per cent to $24.7 billion.

“Outside of engineering work, the remaining details of today’s release were disappointing,” JP Morgan economist Tom Kennedy said.

Economists attributed the jump in engineering work to projects in Western Australia.

Australian Bureau of Statistics figures showed private infrastructure work jumped 32 per cent, or $4 billion, in the June quarter, nearly matching a $4.1 billion increase in construction work in WA.

Westpac economist Andrew Hanlan said the numbers were likely inflated by the importation of the Prelude floating LNG platform, which set sail for WA from a South Korean shipyard on June 28.

“We had expected the ABS to amortise the value of the platform over the time that it was constructed,” Mr Hanlan said.

“This would see a relatively smooth rise in investment and in imports.”

Economists said improved construction work in the June quarter was a positive for economic growth, but the likelihood of an offsetting import adjustment would mean the volatility will not be mirrored in the national accounts.

Mr Kennedy said there is now upside to JP Morgan’s second quarter gross domestic product forecast of 0.5 per cent, but it would not be changing its tracking estimate.


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