June quarter GDP may not be so rosy | Wellington Hours
Much of the recent attention among the fraternity of economists has been on Australia’s economic performance during the September quarter, and whether an expected contraction will last until the December quarter.
But new construction figures released on Wednesday suggest that economic growth in the June quarter may also have been pretty bad, if not negative.
National accounts for the June quarter are due September 1.
Total construction completed in the June quarter – which will fuel the growth equation – rose 0.8% far less than expected, with the residential construction sector falling surprisingly.
Economists expected a 2.8% increase in the quarter.
Total construction reached $ 52.9 billion in the June quarter, up 0.4% on the year.
National Australia Bank economist Taylor Nugent said this posed a downside risk to his bank’s overall growth forecast for the June quarter of 0.2%, which could now turn out to be a flat, even negative result.
A series of other quarterly data is expected next week.
Total building construction rose 0.1% to $ 30.6 billion, but residential construction fell 0.1% in the quarter to $ 19 billion.
Economists expected another solid result for home construction, given ultra-low interest rates and the lingering impact of the federal government’s HomeBuilder program.
“The drop in activity during the June quarter indicates that supply chain issues are weighing heavily on the industry,” said Nicholas Fearnley, economist at BIS Oxford Economics.
“With labor and material capacity constraints at play, significant project delays and cost overruns can be expected, especially given the high volume of work stemming from the now concluded HomeBuilder incentive. “
Non-residential construction rose 0.3 percent in the June quarter to $ 11.5 billion, while engineering work rose 1.8 percent to $ 22.3 billion .
The Treasury and economists are forecasting a two to four percent slowdown in the September quarter due to widespread virus lockdowns.
Two quarters of the economic contraction is classified as a technical recession.
Treasurer Josh Frydenberg continues to base his hopes on a rapid recovery from the slowdown in the September quarter.
“As for the December quarter, I hope it bounces strongly with the easing of restrictions,” Frydenberg told Seven Network on Wednesday.
“We know from our experiences in the economy last year, we have rebounded strongly.”
But he says the key is to stick to the national plan to ease COVID-19 restrictions once vaccination rates reach 70% and 80% of the population over 16.
Just over 30% of Australians are currently fully vaccinated.
Australian Industry Group chief executive Innes Willox believes the point has already been reached for governments to seriously consider opening borders and removing barriers to business travelers more quickly.
“Employers across the country have suspended their investments for too long,” Willox said in a statement.
“They are losing business opportunities to their foreign competitors whose economies and countries are open for business, while Australia is locked like a drum.”
Associated Australian Press