Public demand contributed 0.7 percentage points to growth.
As COVID-19 case numbers rose, healthcare spending increased with a focus on testing (including the shift from PCR to RAT), personal protective equipment and vaccines for children.
While the JobSaver program ceased in the December quarter, Disaster Recovery Payments were provided to individuals and businesses affected by the floods this quarter.
National defence spending saw a strong increase as more than 7,000 personnel from the Defence force were deployed to assist flood affected communities. Further, military and humanitarian assistance was provided to Ukraine.
Public investment rose 1.7 per cent over the quarter, with the largest increase in national defence investment.
Dwelling investment contracts and rising rates likely to see demand ease
Dwelling investment fell by 1 per cent, once again detracting from growth in the quarter. The contraction was driven by new dwelling investment, which fell 2.2 per cent overall, largely the result of significant labour shortages, input price pressures and supply chain constraints.
The largest fall in new dwelling investment was observed in Queensland, with the floods a key driver of a 9.7 per cent contraction.
Growth in alterations and additions, which remain close to record highs, partially offset the fall in new dwelling investment, with homeowners continuing to boost their property value with renovations. This was particularly the case in Australia’s most expensive property markets - NSW and Victoria - where alterations and additions increased by 6.6 and 5.7 per cent respectively.
Ownership transfer costs – largely a reflection of stamp duty – remain elevated, but in price adjusted terms are starting to fall as transaction volumes decline.
The latest house price data from CoreLogic shows that property prices have probably peaked, with further contractions likely as interest rates continue to rise. The largest market corrections are expected in NSW and Victoria where affordability constraints are biting the hardest.
Historically, falling property prices tends to mean a reduction in construction and building activity, however recent disruption, compounded by strong demand, has seen the time taken to build a new dwelling increase from 8 to 12 months according to the Housing Industry Association. This in turn means there is a significant amount of residential building in the pipeline, yet to be delivered.