Australia's construction investment still declining but at a more measured pace

Australia's engineering construction is expected to continue to decline, but the slump of 7.3% in Q1 is likely to have been exceptional, especially the 9.8% drop in private engineering. Still, given ongoing sharp reductions in mining construction spending, another decline is expected, likely in the order of 6%. 

"We see a risk that public engineering work, rather than expanding as in the previous two quarters, will post little change", says Societe Generale.

In contrast, building construction by the private sector is likely to have expanded further, at a similar pace as in the previous two quarters, given strong increases in building approvals throughout 2014 and in the first quarter of this year. Public sector building work, in contrast to the previous five quarters when it fell at a rapid clip, is expected to show little change from the Q1 level. As a result, the volume of building construction is expected to exceed that of total engineering work for the first time since Q4 10. Overall, this first partial reading for Q2 GDP is expected to indicate less drag from construction on GDP growth than in Q1.