Economist optimistic despite dip in housing construction

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Despite the recent dip, housing construction figures are expected to jump in 2015 as mining investment continues to slow in Australia, a chief economist said.

CommSec chief economist Craig James believes the 2.2 % fall in Australian housing construction in the September quarter is temporary and should rise “solidly” next year, based on the strong run of building approvals over the past year.

Official figures show total housing constructions dipped at 5.1% over the year. The major drop came from engineering, including mines, roads and bridges at 3.2%.

"The decline in engineering is as we would expect with the tapering off of the investment phase of the mining boom. We will see this distinction over the next year or so, where engineering will pull back, replaced by particularly residential and to some extent commercial construction,” James said in an interview with AAP.

James also attributed the decline to the government’s belt-tightening procedures, “as state and territory governments try to get their budgets into line”.

For JP Morgan economist Tom Kennedy, the housing construction peak is over and is likely to stay flat or fall negative in the final quarter of 2014.

"We've seen the peak in this current phase, and that is evident by the building approvals data which have moved lower," Kennedy said. "We still think you're going to get that boost from residential construction to the economy, but it's probably not going to be of the same sort of magnitude that you saw in the first and second quarters."

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