Australia and New Zealand market intelligence: clean energy and housing investment support activity
Our latest report finds that Australia and New Zealand’s construction markets are being supported by public sector investments, while private sector activity remains subdued.
A significant increase in private sector investment is needed if housing and clean energy targets are to be met. However, this is being held back by high construction costs and high interest rates.
Transport and energy sectors drive strong activity
Ongoing inflationary pressures are keeping interest rates elevated, suppressing demand across the Australian economy. Economic growth was flat in Q1, with output increasing by just 0.1 percent over the quarter.
Overall, the construction outlook in Australia remains mixed and largely unchanged from previous quarters. Capacity constraints have eased in some regions, while others remain tight. Queensland remains in the spotlight with a significant pipeline of healthcare projects and preparations for the Brisbane 2032 Olympic and Paralympic Games.
Public sector investment in the transport and energy sectors will continue to drive strong activity in the near term. State government spending in transportation, clean energy, social infrastructure and housing will also support activity over the medium-term.
Annual wage growth reached 4.1 percent in March, an increase of 0.8 percent from the previous quarter. The slow pace of loosening in the labour market continues to exert upward pressure on labour costs amid ongoing shortages.
Modest improvement exhibited by New Zealand’s economy
Despite performing better than expected this quarter, the New Zealand economy remains in challenging territory. Inflation expectations are stable, which has prompted an earlier-than-expected rate cut by the Reserve Bank of New Zealand. This marks the first round of easing monetary policy and we expect to see further rate cuts in the months ahead.
The New Zealand construction market remained relatively unchanged over the second quarter of 2024. Cooler market conditions, driven by restrictive policies and a sluggish economy, have dampened new investment in the sector.
The new government is committed to significantly increasing public housing supply, with a focus on regional areas. The drive towards renewable energy by 2030 and net-zero emissions by 2050 is expected to spur substantial investments in the energy sector. As the economy strengthens, private sector investment is expected to follow suit.
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