Amid a relatively weak building sector (particularly for residential buildings), engineering construction continues to provide growth support for the broader construction industry. While growth continues to normalize from recent peaks, the most recent engineering construction work done data (for the June quarter of 2024) shows some strength remains.
Oxford Economics Australia conducted a comprehensive analysis of the Australian property market and later stage property ownership, providing key insights to support the client’s strategic decisions regarding their entry into the lifetime mortgage market.
While recent data has come in close to guidance, with net overseas migration (NOM) estimated to total 485,000 for FY2024, the near-term outlook for overseas migration has softened.
Australia’s GDP growth was broadly in line with our expectations in Q2 at a meagre 0.2% q/q. The
economy is lacking a clear engine of growth and the private sector is clearly struggling against
restrictive policy settings.
Stress among home loan borrowers has risen due to higher interest rates, broad cost-of-living pressures, and the gradual slackening of the labour market.
The Australian engineering construction industry is characterised by booms and busts of activity, not only by subsector and state but by regions within states and territories.
It was fantastic to welcome our esteemed clients and guests to our economic forecasting conference in Sydney, Melbourne and online.
It was fantastic to welcome our esteemed clients and guests to our construction conference in Sydney, Melbourne and online.
Stress among home loan borrowers has risen due to higher interest rates, broad cost-of-living pressures, and the gradual slackening of the labour market.
Following hawkish comments from the Reserve Bank of Australia and a rise in monthly CPI indicator readings in the last two months, markets are pricing in a higher probability that the RBA will hike interest rates at its next meeting in August. We think this speculation is overblown.
As expected, the RBA kept rates on hold in August. The cash rate has now been unchanged at 4.35% since November last year. The August meeting looked set to be a close-run decision before the release of the Q2 CPI, which surprised slightly to the downside. The RBA’s statement remains vigilant against upside risks to inflation. But once again, the cautious and hawkish messaging has not been backed up with any action.
Employment growth has outstripped economic activity over the past 18 months to an unsustainable extent. Accordingly, the Australian economy has been facing a big question of when the labour market will slacken further, reflective of the substantial and well entrenched slowdown in the real economy.
Market conditions for the retirement living sector in Australia are robust, with occupancy rates having surged to 95% in 2023 – near the effective rate of full occupancy. This reflects a mix of strong demand drivers and lagging supply.
Higher interest rates have pushed up the risk premium required from prime commercial property. Yields have softened as interest rates and bond yields moved higher, resulting in falling capital values.
Oxford Economics Australia supplied the economic figures for the AustCyber’s Australia’s Cyber Security Sector Competitiveness Plan.
Following a strong FY2023, the past year has proven more difficult for the build-to-rent (BTR) sector. Unit commencements fell 19% to 5,290 in FY2024, with financing issues the core driver of this lull. Borrowing costs remain high, while institutional capital (particularly from overseas) has been harder to access given uncertainty around key policy tweaks.
The national total number of owner-occupier loans for dwellings (excluding refinancing) fell 2% in May to 26,880 loans in seasonally adjusted terms.
Following hawkish comments from the Reserve Bank of Australia and a rise in CPI inflation readings in the last two months, markets have increased their bets on the probability that the RBA will hike interest rates at its next meeting in August. We think this speculation is overblown.
With the current weakness in residential building and key commercial and industrial segments of non-residential building, growth in engineering construction has been a support for the construction industry and – given the multipliers involved – the broader economy. (Engineering construction covers transport, utilities and mining and heavy industry construction.)
Construction cost escalation has slowed from the unprecedented inflationary spike experienced by the sector in 2022 and 2023. The recent surge in construction costs was primarily driven by supply-side factors; commodity market volatility and the energy cost crisis has shifted up manufacturing and transport costs, compounded by supply-chain disruptions from the lingering impacts of the pandemic.
