The Australian economy managed to beat market expectations in the last quarter of 2019 despite the continued softening of the residential building segment, according to the Australian Bureau of Statistics (ABS).
Australian GDP growth reached 0.5% in the last quarter of 2019, exceeding market expectations by 0.3% to 0.4%. The 2.2% annual gain also beat market forecasts by 2%.
"The economy continued to grow and recovered throughout the year. However, the growth rate remains below the long-term average, "said ABS chief economist Bruce Hockman.
However, the residential construction segment continues to be a major drag. New construction activities decreased 4.1% in the quarter while renovations decreased 2.2%.
Investment in housing also decreased 3.4% in the quarter, registering a sixth consecutive decline.
The slowing residential sector hurt 0.2 percent of overall GDP growth, said Diwa Hopkins, senior economist at the Housing Industry Association (HIA).
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Hopkins said that the Reserve Bank of Australia's three rate cuts and the easing of credit rules have supported the national economy at large.
"The effect of these movements had not yet filtered through the residential construction sector, which represented a drag on the economy during the quarter of December 2019", a- she declared.
A recent analysis by Matthew Hassan, an economist at Westpac, said that growth in housing approvals does not seem to react as strongly as expected to rate cuts.
Shane Garrett, chief economist at Master Builders Australia, said that the residential construction segment is among the main sections of the economy that Australia needs to watch out for. Garrett said recent events, such as the bushfires and the COVID-19 epidemic, could potentially have an impact not only on the residential segment, but on the economy as a whole.
"Faced with these challenges, it is imperative that everything is done to stimulate demand and confidence throughout our economy, including support for construction and construction companies affected by the disruption of supply chains building products and the wider economic impact of the coronavirus, "he said.
Hopkins shared the same sentiments, adding that the December 2019 economic growth figures predated the start of trade and travel restrictions due to the coronavirus epidemic.
"The restrictions pose a risk to the level of housing construction – through their effects on supply chains and also the demand for new housing," said Hopkins.
An earlier HIA projection indicated a slight resumption of construction this year.
"Despite this huge contraction, we believe that the cycle had pretty much run its course and that the overall housing market had reached a turning point at the end of 2019, supported by interest rate cuts and growth in house prices, "said Tim Reardon. , chief economist at HIA.
However, it is unlikely that the next recovery in house building activity will reach the heights recorded during the boom years from 2014 to 2018.
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