Q2 Australian construction work done surged on Wednesday by a record. While lumpy work at an LNG project drove this increase, the data also showed strong growth in public infrastructure spending. The capital expenditure survey increased for the year ahead by the biggest margin since the mining boom; this time led by the service sector. The CEO of a major building materials company predicted that Australia’s infrastructure boom (now underway) would last up to 10 years and deliver bigger profit momentum than the housing boom. New Zealand house price inflation fell to a five-year low. Australian yields, particularly at the long end of the curve, have risen significantly relative to US yields. The rise in relative yields and commodity prices fully explains the recent resurgence in the AUD/NZD. However, it is still low relative to its long run average. Current economic trends and external balances suggest it can continue to rise.
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