Construction activity collapses due to Omicron | The Transcontinental
Australia’s construction industry suffered a slump in December and January due to the impact of the Omicron variant, continuing the sector’s volatile run over the past six months.
The Australian Industry Group/Housing Industry Association’s construction index fell 11.1 points to 45.9 in December and January, cutting short a recovery in November.
This is the weakest index result since August last year with a reading below 50 indicating the sector is in contraction.
“This latest slowdown was caused by disruptions in labor supply, material supply and business and household confidence associated with the rapid spread of the Omicron strain,” said Peter. Burn, chief political adviser of the Ai group.
“Builders and builders are hoping that the reductions in COVID-19 infections evident over the past two weeks will ease some of the additional strains evident over the past two months, but they, like everyone else, are prepared for more uncertainty and volatility.”
HIA economist Tom Devitt expects continued demand as shifting buyer preferences toward more space and greater amenities will keep builders busy through 2023 .
However, Reserve Bank of Australia Governor Philip Lowe has warned that a rise in the exchange rate later this year is “plausible”.
“The RBA’s first cash rate hike should officially mark the end of the current boom,” Devitt said.
Dr Lowe told the National Press Club on Wednesday that the economy was closer to full employment and meeting the inflation target than he had previously expected.
But he wants wage growth to pick up from its current low of 2.2% to ensure inflation stays within the 2-3% target for a long time.
The RBA, which will publish its full set of forecasts in its quarterly monetary policy statement on Friday, does not expect wages to rise by more than 3% through 2023.
“To their credit, the Reserve Bank and the governor have been saying for a long time — even before the pandemic — that this is one of the defining challenges we have,” shadow treasurer Jim Chalmers told ABC radio.
“We’ve had this stagnant wage growth, the reason we have it is because job insecurity is undermining the foundation of that wage growth.”
Meanwhile, the Australian Bureau of Statistics will release building approvals figures for December on Thursday.
Economists’ forecasts point to a 1% decline in the month, resuming the downward trend evident since government stimulus began to be rolled back early last year, and after a 3.6% rise. % in November.
The ABS will also release international trade figures for December, where forecasts focus on a surplus of $9.9 billion, a modest improvement from November’s record surplus of $9.4 billion.
The surplus has narrowed since the $13.7 billion posted in July, with the price of iron ore well below its peak and imports rising as the economy recovers from COVID-19 lockdowns.
Australian Associated Press