Australian Building Industry Slump Accelerates on Unit Projects

By Jacob Greber

Oct. 7 (Bloomberg) -- Australia's construction industry contracted at a record pace in September as work was cut on commercial and apartment buildings.

An index measuring construction fell 11.3 points to 31.8 from August, according to a report by the Australian Industry Group and Housing Industry Association released in Sydney today. That was the lowest level since the index was started in September 2005. A reading below 50 shows construction contracted.

The seventh month of shrinking building work increases central bank Governor Glenn Stevens' scope to cut borrowing costs by at least a quarter-point later today. Construction has fallen as banks hoard cash amid the global credit squeeze and consumers cancel plans to buy or renovate homes.


``The ongoing credit squeeze and deteriorating economic sentiment contributed to a marked fall in demand for building projects,'' said Tony Pensabene, an associate director of economics at the Australian Industry Group.

``New orders for the industry as a whole are now at their lowest level in three years, signaling that the current weakness in activity is likely to continue.''

Today's report reinforces the need for the Reserve Bank to reduce the overnight cash rate today, Pensabene added.

Stevens and his board will cut the benchmark rate by a half-point, the biggest reduction in more than seven years, to 6.5 percent, according to 16 of 21 economists surveyed by Bloomberg News. Five forecast a quarter-point reduction.

The decision will be announced at 2:30 p.m. in Sydney.

A gauge of commercial building tumbled to 35.1 points in September from 57.1 in August, today's report showed. Home construction fell to 27.9 points from 34.5 points and apartments slumped to 24.9 points from 43.3.

Today's survey is based on responses from about 120 construction companies on sales, new orders, deliveries, employment and input costs.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net