Construction activity has shrunk for a third straight month with a sharp decline in home building offsetting expansion in other areas
The Performance of Construction Index slumped 0.2 points to 46.1 in February, remaining below the 50-point level separating expansion from contraction.
Ai Group head of policy Peter Burn said rebounding apartment and commercial building only partially offset a big drop in home building and the continuing contraction of engineering construction, related to mining, over the month.
He warned that a forth consecutive monthly decline in new orders also indicated construction activity would shrink even further in coming months.
"With housing approvals slipping in recent months, unless we see a period of sustained growth in commercial construction and a pick-up in infrastructure investment, it is unlikely that the construction industry will be a source of growth for the economy or jobs in coming months," Mr Burn said.
Housing Industry Association chief economist Harley Dale said the decline in detached home building was due to the insufficient availability of shovel-ready land and excessive user-pays charges for residential infrastructure.
He forecast residential construction to maintain very healthy levels of activity, but said it would not generate further growth in the overall sector.
"The sharp decline in house building in February is a concern and we hope to see a decent recovery in March," Dr Dale said.