Australian building construction prices are likely to have a lower than expected impact on the cost of living index figures due to be released tomorrow (Wednesday).

Building construction prices rose by 0.4 per cent in the June quarter compared to a 0.7 per cent rise in the previous quarter according to the Australian Bureau of Statistics Producer Price Indices released on Monday.

Davis Langdon’s senior economist and national research and development manager, Dr Andrew Wilson, said that as a consequence, the price of building would make a smaller contribution to the Consumer Price Index.

“The Producer Price Index measures changes in the selling prices received by producers and gives an early indication of inflationary pressures consumers will later face for finished goods.” said Dr Wilson.

House building prices made the biggest contribution to the building construction data with a rise of 0.7 per cent while non-residential construction prices in Australia rose by only 0.1 per cent over the quarter.

State data revealed mixed Producer Price Index results, with Victoria and South Australia showing notable construction price growth in all sectors while Queensland and Western Australia building prices continued to recede.

Dr Wilson said New South Wales recorded slight price growth over the period.

“New South Wales building construction prices rose by only 0.13 per cent in the June quarter compared to the previous quarter with a rise of 0.5 per cent in the price of housing construction being offset by a minimal rise of 0.07 per cent in non-residential construction prices,” he said.

“Other Residential Sector building prices continued steady growth with a 0.5 per cent rise in the quarter, the same increase recorded for the previous quarter.

“Building price increases reflect current market activity with the propping-up effect of the Building the Education Revolution waning and the competitiveness of tender markets increasing as a consequence.

“The New South Wales building industry awaits a sustained upturn in private non-residential construction activity to replenish its workbooks.

“However activity in the Other Residential Sector, particular apartment construction, is keeping the industry active, with strong prospects of continued growth in this market segment.

“The increase in house building prices was contributed to by a strong quarterly rise in the cost of house building materials in Sydney of 1.4 per cent, the largest increase since March 2009. This increase was largely due to a 13 per cent quarterly increase in the price of steel products.” 

For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au 

Click here to view other media releases.