Australia has been getting plenty of big news regarding the enormous increase in housing prices, with Sydney’s median hitting an astonishing AUD$1.15 million in April after a 13.1% increase in the last 12 months. Due to this increase, residential construction workers have had a field day, with supply and demand going through the roof and a booming economy supporting mass scale residential construction.
However, for the first time in 18 months, housing in Melbourne and Sydney slipped 1.1% in May, and forecasts have warned of a possible housing market crash dependant on various factors including household debt, living costs, housing prices and interest rates. This slip has heavily impacted the construction industry with the Australian Bureau of Statistics reporting a plunge of 5.6% in residential building approvals between April and May, after forecasting only a 1.3% slip due to the fall in the market. Approvals have had a trending decrease since mid-2016, indicating the Australian construction cycle has peaked and will now continue on a downhill trajectory after previous remarkable GDP growth.
At the beginning of 2017, Australian unemployment was at 5.9%. In June, after the economy added 14,000 jobs, the rate decreased to 5.6%.
Nonetheless, the decline in construction, approvals and housing costs has unusually had no impact on the job market, with ANZ Bank Group recording a lift in job advertisements in June. The 2.7% rise to 175,091 ads in June, in comparison to a minimal 0.4% increase in May, marks a 4.95% increase in 2017 thus far, contrasting the decrease in construction activity.
At the beginning of 2017, Australian unemployment was at 5.9%. In June, after the economy added 14,000 jobs, the rate decreased to 5.6%. Overall employment rose to 12,166,900, with full-time employment increasing by 62,000 and part-time decreasing by 48,000. The true trend level for the Australian economy is suggested to be sitting around an increase of 15,000 to 20,000 jobs per month.
A recent study by SEEK, based on the average salary of the jobs advertised on its platform, offered insight into the highest and the lowest paying jobs in Australia. Although mining maintains the highest average salary at AUD$115,005, construction employees slide in at third place with an average salary of AUD$108,471, and consultation and strategy comes in at second.
The average Australian salary remains at a low $81,235, indicating a further struggle with general household debt and living costs in comparison to the rising cost of living. However, based on the higher average salary of construction workers, it’s suggested that construction industry employment will remain steady, in regards to both wages and employee intake.
This employment stability in the construction industry is equalising the impact of the decrease in construction and reducing any negative impact on the Australian economy, possibly even lifting consumer sentiment. The strong market also suggests the Reserve Bank will disregard the lack of GDP growth throughout the last year, thanks to a continuing and further forecasted decrease in Australian unemployment.
It’s difficult to confirm conclusively what will happen to the market in the coming months but the RBA is more and more concerned about destabilising the economy with an interest rate increase. In the end of the first quarter of 2017, Australia’s household debt reached 190.4% of annual disposable incomes, one of the highest in the developed world. This indicates that if the interest rate is to be higher, it will be done gradually over a period of years, dependent on international markets.
Construction has floated the Australian economy since the end of mining boom but it’s suggested that residential construction and labour costs are predicted to decrease with housing prices. Australian unemployment is projected to remain at a low and commercial building on a steady increase, as the Australian economy steadies itself after what has been a progressively volatile housing market.