Housing crisis keeping inflation rate above target while civil construction keeps economy afloat

Responding to monthly inflation data and civil and engineering December quarter activity data released by the Australian Bureau of Statistics.

Master Builders Australia CEO Denita Wawn said the annual inflation rate rose to 3.4 per cent for the third consecutive month and was still above the Reserve Bank’s target.

“Housing costs remain one of the central sources of inflationary pressure across the economy.

“Rental inflation accelerated to 7.6 per cent during February due to a lack of rental housing supply.

“The price of new dwellings for owner-occupiers is 4.9 percent up from a year ago. This is partly due to cost pressures in the new home building market.

“It’s further evidence that if we are to win the battle against inflation, we need to pull out all stops to build new homes.

“Building approvals are too low, meaning more must be done to encourage new housing supply.

“Whether it’s detached housing or higher density, the same constraints apply, including planning restrictions, lack of capacity to undertake critical infrastructure so land is home-building ready, high taxes and charges, slow approval processes, and workforce shortages,” Ms Wawn said.

Master Builders Chief Economist Shane Garrett said civil and engineering construction is one of the strongest performing areas of the Australian economy.

“During the December 2023 quarter, the volume of work done here expanded by another 4.1 per cent.

“This means that the civil and engineering construction market is 17.1 per cent bigger than a year ago.

“During 2023, a total of $133.3 billion worth of civil and engineering construction work was done across Australia.

“Not surprisingly, projects done for the public sector are seeing the fastest growth with a 21.2 per cent uplift over the past year. However, private sector-driven project work is also performing well.

“During the December 2023 quarter, the volume of work done here was 13.8 per cent larger than a year earlier.

“Economic growth in Australia is weak right now. If it were not for the strong performance of civil and engineering construction, the economy would be even worse.

“Construction in this area is vitally supporting economic demand at a time when it really needs it.

“Infrastructure investment will also provide significant long-term benefits to the economy.

“More infrastructure expands the range of activities our economy can perform over time.

“A larger collection of infrastructure will also help defray inflationary pressures over the long term because better infrastructure helps reduce the cost of doing business and makes it less expensive to transport the products we need,” Mr Garrett said.

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