Construction activity has fallen in October – a month out of today’s expected interest rate rise, according to the Australian Industry Group – Housing Industry Association Performance of Construction Index.
In October, construction activity fell 3.9 points to 49.2.
Ai Group’s chief executive Heather Ridout said today’s expected announcement that the Reserve Bank would yet again lift interest rates would be another blow to growth in the construction sector.
“The Australian PCI™ result suggests that the upturn in housing approvals in September, seen in ABS figures this week, did not carry through into October home building activity, as higher and projected interest rates started to bite.
“With each hike in interest rates the risks to the economy intensify. It would be difficult to mount a case for higher interest rates based on the state of the Australian construction sector, particularly the levels of housing and apartment activity. Clearly these sectors have already been impacted by the rate rise and further increases will magnify the pressure.” Ridout said.
HIA’s executive director of housing and economics Simon Tennent said higher interest rates in 2006 have clearly dented both owner/occupier and investor demand for new housing, and this situation is beginning to flow through into lower levels of new home building.
By Adam Parsons
