Increase in dwelling investment driven by renovations: NAB

Increase in dwelling investment driven by renovations: NAB
Increase in dwelling investment driven by renovations: NAB

Dwelling investment increased 1.0% in the quarter, and has risen in each of the last four quarters, according to the Q3 Report released by NAB.

However this quarter, NAB found that the increase was entirely driven by alterations & additions (up 4.5% q/q), as investment in new dwellings fell 0.8% q/q.

Alongside the cooling in the housing market, NAB expect dwelling investment to decline over the next couple of years.

Alan Olster, NAB Group Chief Economist said that a pull-back in new building approvals is already evident, though the large pipeline of work yet to be done will provide some support, suggesting the real weakness will likely occur in 2020.

Increase in dwelling investment driven by renovations: NAB

The report also found that underlying business investment declined for the second consecutive quarter (-1.9% q/q).

Reflected largely by a fall in non-dwelling construction (-5.6% q/q) as both new building and new engineering construction declined.

Mr Olster noted, "the weakness in non-dwelling construction appears to be at least partly related to the mining sector as despite overall non-mining investment being up (1.0% q/q),  mining sector investment declined 7.5% q/q."

"There was a large fall in Northern Territory non-dwelling construction, he added"

As the tail-end of the construction phase of the LNG mega-projects wraps up, NAB expect mining investment to stabilise, with some potential upside given the improvement in business conditions in the sector.

Following the latest releases of growth, labour market and prices data, NAB have stated they are reassessing their view on monetary policy.

They currently have the next cash rate movement forecast as an increase in mid 2019, but are in the process of reviewing this statement.

Tags: 
Economy Nab

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