Australia’s Construction Sector Post Modest Gains

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By Esther Tanquintic-Misa | December 7, 2012 1:44 PM EST

Australia's construction sector in November, despite enjoying lower interest rates, continued to remain sluggish--a trend foreseen to hover until 2013. 

In the latest survey of the Australian Industry Group (Ai Group) and Housing Industry Association (HIA) Australian Performance of Construction Index, Australia's construction sector improved in November by 1.2 points to 37, from 35.8 the previous month of October.

However, it continued to reflect a subdued activity for the sector because it is still below 50. November's reading is the 30th straight month that the index has contracted.

"Lower interest rates may have helped stem the pace of decline but have not lifted the sector out of the doldrums to date,'' Peter Burn, Ai Group's director of public policy, said.

Harley Dale, HIA chief economist, seconded the analysis, saying that while the figures may hint of an improvement in Australia's residential construction sector, there is still not enough evidence this could sustain well into the duration of the entire year 2013.

"The residential sector and the wider construction industry has a vital role to play in filling the void that will be left by a decline in mining related investment activity,'' Mr Dale said.

According to the survey, new orders of home units dropped 2.5 points to 34.3, indicative that construction activity will remain low in the coming months.

Mr Dale asked the federal government to reconsider its priority of achieving a budget surplus.

"Governments, led at the federal level, need to engage in meaningful taxation reform and other policies that will enhance productivity performance," Mr Dale said.

"The federal government also needs to soften its stance on a move back to surplus at all costs in 2012/13 as this goal is damaging the prospects of a construction recovery and a successful rebalancing of growth in the Australian economy from 2013."

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