Building recovery to be short-lived

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BIS Shrapnel has forecast a moderate uptick in building activity, but has said the relief is to be short-lived.

The forecaster has predicted an 8% recovery of building commencements for 2011/12 following a 12% decline in 2010/11. Commercial and industrial building is likely to drive the upswing, the company said.

"The continuing recovery in commercial and industrial building – up 21% – will be a key driver of the improvement in building commencements in 2011/12, while increased construction in the health sector – up 73 per cent – will also play a part," BIS Shrapnel managing director Robert Mellor said.

Residential building is likely to lag behind in 2011/12 after being negative in 2010/11, the company said. However, Mellor commented that a rise in multi-unit residential starts will help to offset declines in house starts. Growth in residential construction is predicted to be strongest in New South Wales and Queensland.

In spite of the slight recovery, BIS Shrapnel has predicted gains will be stymied by high interest rates. The company has forecast aggressive moves by the RBA in response to inflation driven by the resources sector, and has predicted the standard variable rate to peak at 9.4% in the second half of 2013.

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