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Construction work up 0.2% in March qtr

Jason Cadden
Construction work done in the March quarter rose by 0.2 per cent, helped by government projects

The amount of construction work done in the March quarter rose by only 0.2 per cent, with a surge in public infrastructure projects barely enough to offset a decline in completed building projects.

Completed engineering projects, which includes mines, roads and bridges, rose 1.5 per cent in the quarter, driven by a 3.1 per cent gain in public sector engineering construction, Australian Bureau of Statistics figures show.

Total building work done on homes and non-residential buildings such as offices and shops fell 0.7 per cent in the quarter, with residential work up 0.4 per cent, and non-residential down 2.6 per cent.

Commonwealth Bank senior economist Belinda Allen said the amount of completed public sector engineering work reached a record high in the first three months of the year, driven by state and federal transport infrastructure projects.

"The recent federal budget dedicated an additional $24.5 billion in infrastructure plans, much of this in transport infrastructure projects," she said.

"This will continue to support construction work done and the economy, both in a growth and productivity sense."

Ms Allen said leading indicators such as home building approvals indicate residential construction should strengthen in the coming months.

"Demand conditions through strong population growth have helped," she said.

"There are risks that tightening lending standards and dwelling price falls could accelerate a slowdown in approvals from current elevated levels."

JP Morgan economist Tom Kennedy said the fall non-residential building work should not affect the expected outcome for gross domestic product figures due out in a fortnight.

"Non-residential building work, the main drag today, has maintained only a very loose correlation with the national accounts definition of building/investment, so we are cautious in mapping the weakness into the growth numbers," he said.

JP Morgan is maintaining its forecast of economic growth of 0.8 per cent in the March quarter, while Ms Allen said Commonwealth Bank's forecast is between 0.5 per cent and 0.75 per cent.

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