According to the Reserve Bank of Australia, commercial construction will likely give a boost to the country’s economic growth by the end of 2018.
While non-mining business investment has failed to patch problems caused by the declining mining investment, the central bank stated that business investment would continue to gain momentum. It said that non-mining business investment has increased and recent data on approvals for commercial construction indicate future growth. In a recent meeting, its minutes stated:
“While non-residential building construction was likely to remain subdued in coming quarters, the increase in approvals over the past year across the range of sectors suggested that non-residential building construction would contribute to GDP growth towards the latter part of the forecast period.”
The bank also said that household consumption growth would remain subdued, as consumers perceive their own finances at an average level. Also, another factor that will drive this trend is the spare capacity in the labor market, which weighs on wages as well. “Any increase in uncertainty that households have about their future income growth could lead to lower consumption growth, particularly for those households servicing sizeable debts,” the bank stated.
Moreover, the bank revealed that increased supply and low population growth are weighing on apartment prices and rents in Perth and Brisbane, while housing market conditions are getting better in Sydney and Melbourne.