The nation’s building sector may be expected to recover over coming years but for now, levels of home building and non-residential construction activity in Australia are continuing to decline according to the latest figures from the Australian Bureau of Statistics (ABS).
On a seasonally adjusted basis, the overall dollar value of building construction work done throughout Australia dropped by 1.9 per cent in the June quarter and was down 5.2 per cent compared to the same quarter last year, the ABS says in its quarterly Construction Work Done report.
Housing was the worst hit sector. Residential building dropped by 2.4 per cent in the last quarter (seasonally adjusted) and was down 7.9 per cent down compared to the same time last year. Non-residential building, meanwhile, dropped 1.2 per cent to be down by that same percentage from last year.
Indeed, the fall in building activity meant that despite the massive dollar value projects going on in mining – engineering construction was up 0.9 per cent – the overall dollar value of construction work done throughout the nation contracted by 0.2 per cent during the quarter on a seasonally adjusted basis.
While frequent reports from the Performance of Construction Index, a monthly snapshot of the industry based on surveys of major construction firms, has shown construction activity levels declining consistently for the past 26 months, the June quarter marks the first quarter in two years in which the actual dollar value of work has fallen. This is because underlying weakness in building construction has been masked in previous ABS quarterly reports by the huge dollar values going into mining construction projects.
The latest figures come amid increasing fears that the building recession will lead to more insolvencies and financial difficulty for firms operating in the sector.
Industry profit margins are under enormous pressure as selling prices continue to fall amid weak selling conditions even as costs continue to rise.
As the number of high profile bankruptcies, including Reed Constructions, Hastie Group, Kell & Rigby and St Hilliers, continues to rise, Leighton Contractors commercial manager Collette Burke has warned that more pain is likely in the short term.
Burke says insolvency experts are being inundated with building industry-linked firms seeking help in dealing with creditors trying to recover funds.
In New South Wales alone, where the state government is conducting an inquiry into the industry, Finance Minister Greg Pearce says ‘hundreds of companies’ have collapsed over the past three years, with those companies owing billions of dollars and leaving up to 24,000 creditors including sub-contractors out of pocket.
The fall in activity also comes amid increasing evidence of a continued decline in the pace at which new building work is coming in. On Tuesday, new home sales data revealed that the seasonally adjusted number of new homes sold throughout Australia in July registered its second lowest level for at least the past three years.