Australia and New Zealand combined will see 1.9% to 2.5% GDP growth in the 4th Q of 2022):
Skyrocketing inflation presents a huge challenge to the Austrian and New Zealand economies. Australia is forecast to see construction-related inflation in the 5.8% to 6.8% range for the 4th Q of 2022, and New Zealand is looking at 5.3% to 5.9% for the same period.
Australia and New Zealand were both experiencing a brief period of infrastructure, new housing, and commercial and industrial construction growth after the COVID 24-month period; this growth has started to slow down in the last two months as energy and oil-related costs started to impact construction materials and ocean freight/transportation costs.
Supply chain interruption issues look like they will get worse over the next couple of months as industrial production in China continues to face COVID lockdown issues. Contractors are experiencing material shortages, delivery times on construction materials have increased from a normal 2 to 4 weeks to 6 to 20 weeks to arrive at the site and even longer in some cases.
Construction is one of the top 5 industries in Australia and represents approximately 10% of the country’s annual GDP. The value of construction work each year is in the $350 to $400 million range, and the industry employs between 1 and 1.25 million individuals.
Australia’s economic relationship with China has seriously cooled down in the last 18 months, this issue is related to China’s South China Sea territorial claims that Australia is criticizing. This dispute will impact Australian mineral exports and could impact future mining-related projects. The recently announced AUKUSA nuclear submarine deal has upset China. While it’s early days for the AUKUS program, the pact will bring several key technological benefits to Australia.
Overseas – ocean freight costs have increased by more than 40% in that 9 months, this, of course, will impact imported materials into both Australia and New Zealand.