Australia’s two speed economy sighted

Although building construction work in Australia is flat, engineering construction is booming.

And this development, already evident in figures produced by the Austrlian Statistician, might well be the first glimpse of the two speed economy that is thought to lie just over Australia’s economic horizon.

The bureau reported that Australian companies spent more than $13.5 billion on engineering work, on seasonally adjusted figures, in the March quarter of this year.

That was 5.2 per cent up on the December quarter figure.

Although the bureau did not provide a break-up, it’s a safe bet that much of this work was done, directly or indirectly, for the mining industry.

High interest rates, though, have dampened demand for other kinds of construction work.

The value of residential work, for example, rose by a bare 0.3 per cent, in the March quarter, to just $9.7 billion.

And the value of non-residential building fell by 0.5 per cent in the quarter to just $6.7 billion.

The Federal Treasury is worried about the secondary effects of the mining boom.

It has warned that money flowing into Australia, under new, higher priced contracts, could have a serious inflationary effect on Australia.

But Westpac data, released yeterday, shows that other sectors of the Australian economy are likely to slow down abruptly in the months ahead.

And another bank, the ANZ, is already predicting that Austraiia’s inflation will hit 4.9 per cent, later this year.

It is warning, too, that further interest rate rises will be needed, if that happens.