Australia Construction to Drop More Than 10% a Year to June 2022

(Bloomberg) -- Australia’s commercial construction activity will collapse as the impact of Covid-19 wipes out private demand for new building works, a national industry body said.

Master Builders Australia expects commercial building activity to be 15.7% lower in the fiscal year to June 30, 2021, than it previously was forecasting, according to an e-mailed statement from the body. The group predicts a decline of 11.5% from prior estimates for the 12 months ending mid-2022.

“The lockdown has obliterated private sector demand in the economy and a gradual easing of restrictions is not going to replace that demand, so governments need to act,” said Denita Wawn, CEO of Master Builders Australia. “Logical areas where government stimulus can help build the bridge to recovery are where the public sector dominates, such as in education, health and defense.”

Australia reported a record 594,000 jobs were lost in April, underscoring the Reserve Bank of Australia’s forecast that the economy is likely to shrink about 10% in the first half of this year. A construction industry gauge dropped in April to a record 21.6, smashing the December 2008 nadir of 29.2. The index has been under 50, indicating the industry is in contraction, since September 2018.

The country is deploying fiscal and monetary stimulus exceeding A$320 billion ($205 billion), or 16% of gross domestic product. Those measures are overwhelmingly aimed at keeping businesses afloat to limit employment losses, or at offering greater support than usual to individuals who are out of work. Much of the public-infrastructure spending in Australia is carried out by state and territory governments, which have boosted borrowings since the RBA started buying federal and provincial government bonds in late March to hold down yields.

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