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Australian construction lending falls


Monday, September 14th, 2009

Lending for construction in Australia slowed in July, raising concerns about the strength of the economic recovery and the effectiveness of the Federal Government’s economic stimulus in encouraging business activity.

Figures released by the Australian Bureau of Statistics showed construction borrowing fell by 66 per cent year on year to $A984 million in July.  Wholesale finance and borrowing for plant and equipment held up but refinancing fell by 13 per cent year on year to $1.7 billion.

The figures pointing to a decline in private investment in infrastructure and other commercial building were borne out by research released by the economic forecasting group BIS Shrapnel which found engineering construction activity is set to decline by 15 per cent over the next two years.
In an update to its report: Engineering Construction in Australia, 2008/09 – 2022/23,  the forecaster found the fall in work done will be driven by a 25 per cent decline in privately funded work over the next two years.

Senior manager of the company’s infrastructure and mining unit, Adrian Hart, said that in 2008/09 the private sector funded nearly two-thirds of all civil construction
activity, worth around $44 billion in constant 2006/07 prices, so declining activity in the sector would have a substantial impact on overall activity.

BIS Shrapnel expects a sustained recovery in privately-funded engineering construction activity from 2012, if credit problems are resolved and global economic growth improves.