Bloomberg News

Australian Construction Contracts at Slower Pace on Resources

January 09, 2012

Jan. 9 (Bloomberg) -- Australia’s construction industry contracted at a slower pace last month as work related to the nation’s resource boom partly offset weakness in residential building, a private report showed.

The construction performance index was 41 in December from 39.6 a month earlier, a survey by the Australian Industry Group and the Housing Industry Association released in Sydney today showed. The result was the 19th consecutive month under 50, the dividing line between expansion and contraction.

“The easing of the pace of contraction in overall activity and in new orders across all sub-sectors serve as a glimmer of hope that 2012 may see a return to more balanced growth across the industry,” Peter Burn, director of public policy at the Australian Industry Group, said in a statement.

Reserve Bank of Australia Governor Glenn Stevens and his board lowered benchmark borrowing costs by a quarter percentage point on Nov. 1 and again on Dec. 6 as inflation pressures eased and risks to global growth increased. Employment in Australia weakened last year as the currency’s climb hurt non-resource companies and consumers saved cash.

Today’s report showed new orders rose 3.9 points to 42.5, and a gauge of employment slid 2.7 points to 39.2 last month. Construction of houses slumped 5.7 points to 32.9, while apartments gained 9.9 points to 33.3, it showed.

Engineering surged 5.7 points to 51.3, a return to positive territory, according to the report.

Investors are betting Stevens is likely to lower rates again at the RBA’s next meeting in February to 4 percent, interbank cash-rate futures show.

The Australian dollar, the world’s fifth-most traded currency, has weakened about 8 percent from $1.1081 on July 27, the strongest since exchange controls were scrapped in 1983, as Europe’s debt crisis intensified.

--Editors: Brendan Murray, Benjamin Purvis

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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