Construction Industry Took A Hit Despite Economic Growth

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Since the pandemic, the re-opening of domestic and international borders has allowed the Australian economy to grow. The economy grew by 3.9% over 2021-2022, the most robust year-on-year growth since 2011-2012.

GDP Growth Australia

Following the 0.7% growth in March 2022, the first full quarter of business-as-usual, the Gross Domestic Product (GDP) rose to 0.9% this quarter. The increase in economic output was due to a significant increase in domestic spending, exports, returning international students, and income from tourists.

Domestic demand contributed 1.0 percentage points to the overall GDP growth, followed by increased spending on discretionary services. 1.1 percentage points was from the exports of goods and services sector, where rural and mining goods and service exports are the top contributors. International students returning to Australia also provided a 13.7% increase in service exports concerning education-related travels.

The income produced by most sectors improved overall, excluding construction, manufacturing, dwelling investment and new engineering construction. According to Jim Chalmers, Treasurer of Australia, the construction sector showed a weaker performance which was surprising given the number of projects lined up. “This was a bit weaker than expected … but it does reflect the fact that we’ve got quite acute labour and supply chain pressures,” Chalmers added.

Rises Material Costs

One vital factor contributing to the decline in the construction sector’s performance is the significant spike in building supplies prices the nation has seen in the previous months. Timber, board and joinery prices rose significantly by 24.2%, while metal-based supplies increased by 18.4% over the 2021-2022 financial year.

Another contributing factor to the decline of the construction sector is decreased output of mining projects, contributing to a -2.7% growth in the Heavy and Civil Engineering Construction sector. 

Despite the poor performance of construction this quarter, the country’s overall economic output improved for the third quarter. The sector is expected to rebound in the future, following the completion of significant projects geared towards renewable and clean energy.

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