Home building rides to the rescue

The Federal government keeps pounding away about threats to the economy and how the country must get its budgetary position back in the black. The only problem is no one is listening.

There is no doubt that the country is living beyond its means and the budget must be balanced, but most economic figures indicate that while interest rates stay low, consumers and business are becoming more optimistic about the future.

The only dark spot is the unemployment number, which is more likely to increase before improving, particularly in Victoria.

So the construction numbers released this week gave the doomsayers some more ammunition for their dire scenarios. On the surface construction work done in the June quarter fell by 1.2 per cent – the third straight decline.Work done is down by 0.6 per cent on a year ago. Public sector construction work fell by 6.4 per cent in the quarter while private sector activity fell by less than 0.1 per cent.

The numbers are not that bad considering they are coming off all-time highs.

Counter-balancing those numbers to a certain extent was record home building as the housing industry raced to catch up with demand, fuelled by those low interest rates and increasing confident home buyers.

The real value of new home building was up 2.9 per cent to a record $11.66 billion in the June quarter. New home building has recorded the best back-to-back growth in four years.

Residential building rose by 2.2 per cent (private sector up 2.5 per cent) and was up by 9.6 per cent over the year. New residential work rose by 2.9 per cent.

As pointed out previously the mining construction boom is drawing to a close and is being replaced by a long-awaited surge in home building and to a lesser extent renewed activity in the commercial building sector.

The main worry is whether this activity is enough to replace economic activity from the waning mining boom. At the moment it probably isn’t, but new building and finance approvals are still rising and the construction figures referred to above should be regarded as historic.

Prime Minister Tony Abbott keeps pushing the line that his government is committed to building new infrastructure, particularly in Sydney and Melbourne. These major projects need to be fast-tracked just in case some external force derail the housing industry.

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