Australian Construction at its Strongest in 9 Years

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Activity in Australia’s construction industry is expanding at its fastest pace in nine years, with house building leading the way.

The Australian Industry Group/Housing Industry Association Performance of Construction Index rose 4.1 points to 59.1 points in September, its third consecutive month showing a rise.

It was the fourth straight month the index has remained above the 50 level that separates expansion from contraction.

Housing Industry Association chief economist Harley Dale said residential construction should further strengthen for the remainder of the 2014/15 financial year.

“The commercial construction sector finally appears to be following the lead of new residential construction, which is another pleasing outcome,” he said.

Dr Dale said an increase in the supply of housing might keep a lid on housing prices which have been driven higher by an influx of investors buying existing homes.

In September, Reserve Bank of Australia governor Glenn Stevens raised the possibility of changing regulations to curb risky lending to property investors, which could pose a risk to banking stability and to the economy.

“It will be important for the broader economy that evidence of strong performance in residential and improving performance in commercial construction presents itself throughout 2014 and into next year,” Dr Dales said.

“The current elevated focus and uncertainty around the potential implementation of restrictive lending practices, and sweeping generalisations on this subject, are not helpful.”

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