I wrote the other day about the challenges facing the American construction industry as it tries to recover from the economic woes inflicted by the coronavirus pandemic. Of course, the injuries to construction are a symptom of a systemic problem; industries throughout the economy have been ravaged by the deadly virus and the associated lockdowns.
In the US, the unemployment rate hovers around 7 percent. Last week 712,000 Americans filed for unemployment benefits, which causes a ripple effect of damage. Everyone is feeling the crunch—including, for example, companies that perform right to work checks. On the other hand, Jeff Bezos and his fellow 0.01 percenters are doing just fine, though they don’t really qualify as people anyway.
In Australia, the construction market hasn’t fared much better. But things are starting to look up. Reuters reports that, due to record low interest rates (the Reserve Bank of Australia slashed them to 0.1 percent last month), the Australian housing market is experiencing impressive growth at the moment. There is plenty of demand from people who have never owned homes before, and approvals for new homes are at a 20-year high.
Andy Kerr, National Australia Bank executive for home ownership, said November was a banner month.
“In November, demand for NAB home loans was stronger than we’ve seen for more than two years,” he stated. “Applications over the past six weeks are up more than 25% against the prior six weeks. We expect strong interest to continue given the likelihood of low rates for several years.”
This is fantastic news for the construction sector. Demand for new homes means demand for builders to construct those new homes, and that’s just what the doctor ordered for an industry that was ailing just six months ago. For an idea of just how good things are beginning to look, consider that, compared to a year ago, approvals for new detached houses have increased by 32 percent.
As Reuters reminds us, the prospects for housing looked incredibly dim in the spring, with some experts projecting a 10 percent drop-off in home prices by year’s end. Recall also that GDP dipped by a distressing 7 percent in the last quarter. GDP is now expected to increase by 2.5 percent in the third quarter—the biggest upward leap in 12 years.
Facilitating the rebound was a big government stimulus package that put money in people’s pockets and encouraged them to inject much-needed liquidity into the markets. Also, Australia has manged to all but eradicated Covid-19 from its shores, which doesn’t hurt. Washington might want to take notes.