Total construction work completed in Australia in the third quarter increased by 3.2% year-on-year and 1.6% from the second quarter, as reported by the Australian Bureau of Statistics (ABS) on Wednesday. The engineering construction category, which encompasses public works and infrastructure, was the most robust, rising by 6.5% year-on-year in the third quarter and 2.6% from the previous quarter, according to the ABS. Meanwhile, the residential construction sector saw a slight increase of 0.1% year-on-year in the third quarter and a more substantial rise of 1.8% from the second quarter. The non-residential building construction sector experienced a 1.7% increase year-on-year, although it experienced a decline of 1% from the previous quarter, added ABS. Australia's construction sector has been under the pressure of rising interest rates through 2024, as the Reserve Bank of Australia (RBA) has aimed to temper the nation's inflation rate, which has exceeded target levels. The RBA raised the key policy interest rate from a historic low of 0.10% in April 2022 to 4.35% in December 2023, where it has stabilized. While Australian officials reported a 2.1% headline inflation rate for October on Wednesday, the 'trimmed mean' core inflation rate, monitored closely by the RBA, stood at 3.5% year-on-year in October, remaining above the central bank's target band of 2% to 3%, noted ING Think. "The upshot of all of this is that there is simply no rush for the RBA to do anything with rates anytime soon.

Our 1Q25 rate cut (by the RBA) forecast remains an 'at the earliest' view," stated ING Think..