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Construction levels hit record highs across Australia

28/11/2008

Investors should focus their attention on South Australia, Western Australia and Queensland following new data that shows construction levels reached record highs in the September quarter.

Building work to be done in SA is a staggering 43% higher than a year ago, according to Craig James, chief economist at CommSec. James said the amount of construction work undertaken had increased dramatically across most states, underpinned by strong activity in the engineering sector.

"Rumours of the death of the economy are highly exaggerated. Not only did construction work hit record highs in the latest quarter, but the amount of work still to be done is over 20% higher than a year ago," said James.

"The good news is that activity posted solid gains across all states, even in the beleaguered economy of New South Wales. Queensland is clearly the construction powerhouse, but SA has the strongest prospects for 2009."

The construction sector will continue to drive the economy over the coming year, which James said would "insulate Australia from the gloom offshore".

"There is a near record amount of residential and commercial building projects to be completed, and new approvals soared by an additional 10% in the past quarter alone," he said.

"While not all these approvals will go ahead, construction and engineering companies still remain flush with work for the majority of 2009."

However, James added that cost pressures remained the key issue for the construction industry.

"Construction costs rose by 7.5% over the year - the strongest growth in almost eight years," he noted.

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