Slow down bites into GDP

HIA senior economist Shane Garrett has said the sharp drop in the quarterly investment in housing this quarter confirmed housing activity had passed its peak.

“Investment in new housing fell by 4.4 per cent in the March quarter 2017 which brings the sector down from record high investment in December 2016 and back to levels similar to those experienced at the start of 2016,” Mr Garrett said.

“A decline in investment in housing last quarter is consistent with other indicators that activity is decelerating in the sector,” he said. “This trend is not consistent across the economy as some regions, particularly metropolitan areas, continue to show strong activity.

“Quarter by quarter fluctuations are expected and poor weather did contribute to the weak result in the March 2017 quarter.”

Mr Garrett said there was still a significant volume of work that remains to be done on projects at various stages of construction which is expected to see the level of investment remain close to a historically high level over the next few quarters.

“In the context of the residential building cycle cooling off a record high, investment in apartment building is holding up with a record number of new apartments still being constructed,” he said.

“This is helping to meet the strong demand in the housing market.

“Residential construction, augmented by the substantial multiplier impact of industry activity through to the broader domestic economy, has been a mainstay of Australia’s economic growth during the last four years.” Mr Garrett believes it had been a strong driver for economic growth.

“In seasonally-adjusted terms, GDP increased by 0.3% during the March 2017 quarter and was 1.7% higher than the same period a year earlier.”