ABS Gross Domestic Product (GDP) results for Australia for the December 2018 quarter shows the economy grew by 0.2 per cent during the quarter – short of the expected 0.4 per cent.
By and large, the shortfall in quarterly GDP growth is attributed to the decline in construction activity, seen in the fall in new home building activity, renovations, non-residential construction, and exports. As such, the resulting weak quarterly GDP growth may provide the impetus for the RBA to cut interest rates.
In contrast, Victoria performed well. State final demand for Victoria for the December 2018 quarter grew by 0.6 per cent and this follows the 0.6 per cent increase in the September 2018 quarter. Despite the declines in the construction of residential dwellings, strong growth in demand for non-residential construction was one of the main drivers for Victoria’s growth in state final demand for the last quarter.
While the Victorian economy is doing well relative to the national aggregate, the recent decline in demand for new-home building is a cautionary sign to the Victorian State Government that building and construction must be at the forefront of its economic policies. Indeed, building and construction represents a significant portion of the Victorian economy, with the industry being the largest full-time employer and the second-largest in terms of total goods and services delivered in the state.