The strength of Victoria’s construction activity spared the nation from a rockier recovery, economists say

The strength of Victoria’s construction activity spared the nation from a rockier recovery, economists say
Photo: iStock/Drazen_
  • Australia’s third-quarter construction results show Victoria’s activity outpaced the rest of the nation.  
  • More than $15 billion worth of work was conducted between July and September, despite reduced capacities and protest disruptions. 
  • The strength of the sector may have contributed to the swift national recovery, economists say.
  • Visit Business Insider Australia’s homepage for more stories.

Victoria overcame the worst effects of its sixth lockdown on the back of the construction sector, according to the latest data, and is now leading the nation in activity. 

Results measuring the sector’s third quarter results show more than $15 billion worth of work was conducted between July and September.

Economists say the state’s building industry — which remained open over the course of the lockdowns and faced intense scrutiny for large scale protests against the state’s mandatory vaccination policies for the sector — may have protected the national economy from a rockier recovery in the September quarter. 

The state’s 5.8% growth in construction came against sharper falls in the other two Australian states that joined Victoria in extended lockdowns.

Total construction work done fell in NSW, WA and the ACT, while all other states and territories rose.

Building in NSW went backwards by more than 8% to $14.9 billion. Even harder hit was the ACT, down 15.5% to $778 million, according to ABS results released on Wednesday. 

Victoria’s strong result was driven by growth in infrastructure building of nearly 12% to more than $5 billion in the quarter, despite Melbourne being locked down for a month of that period with construction working at reduced capacity for most of the lockdown and shut completely for two weeks in September and October.

Residential building in the state, including renovations and conversions, recorded some growth in the quarter — 2.6% and 3.2% respectively — but Victoria’s huge infrastructure program dominated output. 

Nationally total construction work done in Australia fell by 0.3% on quarter-on-quarter seasonally-adjusted terms in the three months to September 2021, following a 0.8% rise in the second quarter.

The fall was driven by a 0.9% decrease in building work done in the September quarter, in turn was driven by a 2.2% drop in non-residential building work done in the same quarter. 

Despite the national contraction, economists said the figures indicated the hit to the national economy from the latest wave of COVID-19 lockdowns that will be reported next week, will not be as hard as feared. 

Catherine Birch, senior economist at ANZ said the sector had been accelerating since the 2020 lockdowns. 

“On the infrastructure side, Victoria – along with NSW – has a very big pipeline of projects to work on and one of [Victoria’s] focuses did seem to be catching up on some of the activity they couldn’t get done last year,” Birch said.

The strong recent performance strengthened the outlook for the national economy, she said. 

“I wasn’t expecting such a significant gain in Victoria, with overall construction work done up almost 6 per cent in the state,” she said, adding she felt this was a key factor that meant “national work done didn’t fall as much as we were expecting.”

David Hayward, economics professor at RMIT, said the strong performance of the local building sector was very good news for state Treasurer Tim Pallas, who had argued the Victorian economy was in a better position than expected. 

Hayward said he expected construction would continue to play a central role in the economic recovery as other sectors got back up and running.

“It’s still a steam train, and now they’ve taken the constraints off, it’ll pick up again and the other sectors, hospitality and everything, will start booming again as people go back to cafes and restaurants and pubs,” he said.