Almost $2.7 billion has been wiped from the construction sector’s contribution toward Australia’s economic output, the latest data shows.

On a seasonally adjusted basis, data from the Australian Bureau of Statistics reveals that the Australian economy contacted by 7.0 percent in the June quarter – the largest contraction on record.

This follows an 0.3 percent fall in GDP in the March quarter and confirms that Australia is now technically in recession – defined by many economists two consecutive quarters of negative growth.

For construction specially, the data reveals that ‘Gross Value Added (GVA)’ – the value which construction added to the economy – fell from $32.948 billion in the March quarter to $30.249 billion in the June quarter (seasonally adjusted).

This represents a decline of $2.699 billion or 8.2 percent.

Most of the contraction occurred in construction services, where GVA plummeted by $2.390 billion or 12.9 percent from $18.543 billion to $16.153 billion.

GVA of building construction also fell by $432 million or 5.5 percent from $7.905 billion to $7.458 billion.

But engineering construction bucked the trend, with GVA rising by 2.0 percent from $6.514 billion to $6.638 billion.

Housing Industry Association Chief Economist Tim Reardon said the numbers reflect a combination of COVID restrictions and a previously commenced slowdown in activity.

Prior to COVID, Reardon said HIA had expected the low point of the home-building cycle to occur in April and thus for the June quarter to be a slow period of activity.

This was further compounded when COVID impacted site access, approaches toward construction and supply chains.

“We had forecast April as being the bottom of the cycle,” Reardon said. “Therefore, a slowdown was likely in that quarter anyway.

“Of course, (added to that) with the restrictions on access to site, builders taking a conservative approach during the early parts of that cycle and wider shutdown shortages in areas such as plumbing and other building product supplies – it’s not surprising (that the sector had a slowdown).”

Going forward, Reardon is optimistic about a rebound in activity particularly in the December quarter.

He says prospects vary across individual markets.

In detached housing, HIA was previously expecting record lows prior to the announcement of HomeBuilder but now expects activity over the next year to bottom out at levels similar to those which were seen after the GFC.

The multi sector faces difficult circumstances and an improvement in activity is unlikely until there is greater clarity about the return of overseas migration.

Office building was suffering from restriction and uncertainty about operation of office space as well as difficulties in the broader economy.

A recovery in this sector is not likely until there is greater certainty about broader economic reopening.

Civil construction will be boosted as projects announced in recent budgets such as the 2018 budget move through to construction – albeit with any new cycle of major project announcements being unlikely in the near term.

On the broader economy, Reardon expects a rebound in the September quarter due to the impact of JobKeeper but cautions that coming years may see some quarters of contraction interspersed with otherwise robust levels of growth as federal stimulus is wound back.

A return to pre-COVID levels of wealth, he said, will not occur for at least two or three years.

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