Home building down 1.6pc, with worse to come

A smaller than expected decline in construction work over the first three months of the year will not be enough to keep economic growth from shrinking in the March quarter, economists said.

Total construction work slipped 1 per cent to $49.4 billion, slightly less than the 1.5 per cent expected by economists.

Residential construction dipped 1.6 per cent to $17.2 billion in seasonally adjusted terms, the slowest rate of decline since the March quarter last year. Residential construction is down 12.5 per cent in annual terms.

Westpac's Andrew Hanlan said the slightly better than expected figure would not change the view of the bank's economists that March GDP was turning negative.

"The first quarter outcome of -1 per cent leaves our view around March quarter GDP growth unchanged – currently forecasting a decline of 0.7 per cent," Mr Hanlan said.

The construction figures released by the Australian Bureau of Statistics showed a smaller sample of respondents for the survey due to COVID-19 complications.

The figures are expected to worsen in coming months.

The Reserve Bank expects dwelling investment to be down 17 per cent in the year to June and a further 13 per cent lower in the year to December.

The bank said the economic slowdown has had a large indirect effect on many employers in these industries.

"Recent survey measures of conditions in these industries have declined very sharply, and firms have reported large declines in demand."

Residential construction firms in the AIG Performance of Construction Index indicated that new business had declined sharply over recent months.

"While the existing pipeline of construction projects has supported construction employment to date, this pipeline is expected to decrease as some future projects are delayed."