GDP fall exacerbated by housing

Adam Smith 8 December 2016 NEWS

house graph fluctuatingHousing has proven a drag on GDP, as Australia’s economy contracted for the first quarter since 2011.

Gross Domestic Product (GDP) contracted 0.5% over the September quarter, for the first quarterly decline since 2011 and only the third in the last decade. While the Housing Industry Association (HIA said the decline in GDP was expected, it said the magnitude of the decline deserved close scrutiny.

“The value of investment in residential building declined by 1.4% in the quarter, however it remains 7.2% higher than in the September quarter a year earlier. In the context of the residential building cycle reaching a record high, the decline in investment in the sector and the role that it played in the overall contraction in GDP is likely to be a point of discussion,” HIA economist Geordan Murray said.

Murray said the decline in aggregate investment in residential building consisted of a 1.6% decline in dwelling construction and a 1% fall in renovations activity, previously touted by the HIA as an area of strength for residential building activity.

“Quarter by quarter fluctuations are expected, and poor weather has been blamed for the weak result for the construction sector in the September 2016 quarter. The latest quarterly decline is not likely to herald the turning point for residential investment just yet. There is still a significant volume of work that remains to be done on projects at various stages of construction which will see the level of investment remain at a historically high level over the next few quarters,” Murray said.

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