Construction contracts for 21st straight month

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Construction contracts for 21st straight month

Australian construction activity has declined for the past 21 months, a report shows.

The Australian Industry Group-Housing Industry Association's performance of construction index (PCI) fell 4.2 points to 35.6 in February.

A reading below 50 indicates a contraction in activity.

The index has now shown a contraction for 21 consecutive months.

All four construction industry sub-sectors experienced falls in activity, with commercial and apartment building sectors posting the largest decline.

The new orders sub-index also declined 1.7 points to 34.2.

Australian Industry Group (Ai Group) director of public policy Dr Peter Burn said the February data showed the rate of decline increased after slowing in January.

"The tentative signs of recovery that had emerged in the closing months of 2011 as interest rates were lowered, appear to have dissipated since the start of this year," he said.

"With new orders also weak in February and with market interest rates now somewhat higher, the outlook for the next few months remains flat, particularly for commercial and residential construction."

Housing Industry Association (HIA) senior economist Andrew Harvey said the index showed the Reserve Bank of Australia's decision to cut the official interest rate by 25 basis points in November and again, by the same amount, in December had not been enough to halt the decline in the sector.

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He said the current cash rate of 4.25 per cent remained too high.

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"The ongoing policy gamble of an almost sole focus on the resources sector, combined with interest rate settings that remain too high, continues to hang like the sword of Damocles on not only the construction sector but the Australian economy in aggregate," Mr Harvey said.

AAP

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