From Andrew Hanlan, Senior Economist at Westpac:
The ABS quarterly survey “Building Activity” provides detail on the non-residential building sector. Here we reassess conditions and prospects for the sector, with a greater focus on the private segment, which accounts for 70% of activity. Hereafter ‘building’ refers to ‘non-residential building’.
In the September quarter, conditions began to turn. Activity advanced further, supported by a sizeable pipeline of work. However, commencements were soft, as foreshadowed by a correction in approvals, following recent strength.
Approvals weakened materially during 2014, led lower by the mining states of WA and Qld, and in particular, by the office sector. For the six months to November, private building approvals were 15% below the six months to January 2014, a figure that we expect to rise in December as a strong June result falls out of the calculation.
Activity: The total level of building activity advanced a little in the September quarter, increasing by 0.9% to be 1.3% higher than a year ago. That continued an upward trend, with a cumulative increase of 11% from the low of two years ago, September 2012.
Private building work increased by 7.4% in the year to September quarter 2013, followed by a further 7.4% rise over the year to September quarter 2014, including a 2.3% lift in the most recent quarter.
Public works weakened during 2014, reversing a brief lift over the second half of 2013. Activity in the segment fell by 2.8% in the September quarter and fell by almost 13% over the past year.
Some progress is now being made in reducing the sizeable pipeline of work on private projects. The private work pipeline, having trended higher from a low of $11.4bn at the start of 2011, moderated to $19.1bn in the September quarter, down from $20.8bn in June, but still 6% higher than a year ago.
The pipeline of total work, including the public sector, declined in the September quarter, reversing the increase of the past two quarters. The pipeline now stands at $24.6bn, 4% below the level of a year ago.
