With the federal budget about to be brought down on May 14, the federal government could do far worse than foster an economic environment to make economic conditions more conducive to construction activities. Any austerity measures affecting construction activity will only serve to cut off the nose to spite the face.
A leading indicator of construction conditions throughout Australia has dropped to 7 month lows. Overall construction conditions deteriorated last month for the 35th consecutive month and more alarmingly, the pace of that contraction has sped up.
According to the Performance of Construction Index report published by Australian Industry Group (Ai Group) and Housing Industry Association (HIA), in April, the Performance of Construction Index contracted by 3.6 points to 35.2.
In terms of individual sectors, engineering and housing led the decline, while commercial and apartments construction remained in negative territory frustrated by very tight credit conditions, large taxes and stiffingly high regulation. All of this coupled with weak demand resulting from a weak economy and historically high debt does little to stimulate further investment.