Another strong month of house building activity underpinned the slower rate of contraction during December, with residential builders continuing to report an improvement in customer enquiries and buying levels.

Reduced demand for apartment building and a further decline in engineering construction constrained growth in December. While new orders were down for the month, employment expanded in December and supplier deliveries rose on the back of improved conditions in earlier months.

Australian Industry Group Director Public Policy, Dr Peter Burn, said that the survey results clearly show that construction industry conditions remain tough overall with many businesses facing on-going difficulties in securing new project work.

"While the stronger growth in house building is encouraging and provides critical support to overall levels of activity, the impact of higher interest rates and the removal of the first home buyers grant boost will test the durability of the housing recovery over the coming months", he suggested.