The big news in May was the broadly anticipated 2024-25 Federal Budget. Handed down on 14 May, it’s fair to say the Budget didn’t contain any huge surprises. With a strong focus on cost-of-living issues and housing affordability, key outcomes included rental and energy bill assistance, Stage 3 tax cuts and additional funding injected into new housing and infrastructure. As part of the Homes for Australia Plan, the Government will contribute an additional $6.2 billion, in its efforts to build 1.2 million new homes over the next five years.
The injection of additional funds into Australian housing and infrastructure is somewhat of a double-edged sword for the construction industry. On the one hand, that funding could have a stimulatory impact on the industry. However, in order to achieve its goals, that money will essentially go into projects that will require labour to execute. Unless there is a clear plan to increase the number of skilled workers in construction and associated industries, these Government initiatives will ultimately compete with the private sector for scarce labour resources – and the impact of this could be stifling rather than stimulatory.
Also in May, the Reserve Bank of Australia met for their third monetary policy decision meeting of 2024, opting to maintain the cash rate target at 4.35 per cent. Despite a moderation in inflation, achieving the targeted 2-3% range continues to be a lengthier process than the Board once anticipated. The Board’s recent monetary policy decision has sparked a fresh wave of uncertainty, leading to conflicting interpretations among economists regarding future cash rate cuts. While many initially predicted October for the next cut, the tone set by the May policy decision, paired with recent ABS inflation data, has prompted some to speculate that easing might be delayed, with February 2025 emerging as a potential timeframe.
The forthcoming June meeting is expected to provide greater clarity on future policy directions.
View the key macro-economic indicators from May 2024:
- Official Cash Rate: 35%
- Monthly Consumer Price Index (CPI):
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- Annual inflation: 3.6% (12 months to April 2024); up from 3.5 per cent in March
- Housing: 4.9% (12 months to April 2024); down from 5.2% in March
- Rents: 7.5% increase for the year (to April 2024)
- Construction Work Done, Australia, Preliminary:
In seasonally adjusted terms in the:- Total construction work: 2.9% decrease to $64,032.5m
- Building work: 3.7% decrease to $33,315.1m
- Engineering work: 2.1% decrease to $30,717.4m
- Building Approvals:
The seasonally adjusted estimate:- Total dwellings approved fell 0.3%, to 13,078
- Private sector houses fell 1.6%, to 8,822, while private sector dwellings excluding houses fell 1.1%, to 3,981
- Residential Vacancy Rates: 1%; 33,177 (April 2024)
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