The sold out 2018 HIA Construction Outlook Breakfast was held in Melbourne on Wednesday, with Victorian Treasurer Tim Pallas MP delivering the keynote address on the current Victorian economy. Bill Evans, MD and Global Head of Economics and Research, Westpac and Tim Reardon, Principal Economist, HIA also gave their view of the economic climate and its impact on the construction industry.
Following the event, William Buck Director Neil Brennan summarised 9 key takeaways:
- Spending on infrastructure is one of the key strategies for the upcoming election to maintain Victoria’s record economic growth
- The RBA is very concerned by household debt and hence interest rates won’t be dropping to correct any house price adjustment (unlike 2013) so prices likely to continue to come off
- The change to 457 visas presents a big economic challenge for Victoria as other countries like the US and Canada look to take a chunk some of Australia’s $25bn foreign education sector
- Residential investor construction is likely to continue to reduce as imposition of P&I lending policies come into full effect
- Growth in Land prices in Victoria are finely likely to cool as first home owner price demand flattens and/or moves to regional areas
- Margins for builders will continue to be squeezed as construction costs rise while interest rates remain unchanged and existing dwelling prices cool
- Wages growth likely to be very modest (across the board) to cover the current savings gap which will impact household spending
- 1 in 10 people in Victoria work in Construction – tightening off the industry could have a significant flow on effect to the overall Victorian economy unless its offset by continued infrastructure investment
- Those businesses with a national focus not growing their Victorian market are missing out on the country’s current growth area and need to readjust quickly.