New home building data disappointing

There are disappointing signs that the much-anticipated home building boom might have peaked before it really got going.

It could mean economic growth will be even softer than already predicted.

That is not the result Treasurer Joe Hockey will have been hoping for as he puts together his mid-year budget review.

There were widespread hopes housing construction would be one key element to fill the vacuum left by the end of the mining investment boom.

Instead, new figures show that residential building work completed in the September quarter actually fell 1.6 per cent compared to the previous three months.

Housing Industry Association senior economist Shane Garrett estimates Australia needs to build about 180,000 homes per year, a threshold that had only recently briefly reached.

"The fact that we are moving below it again bodes poorly for the country's housing prospects," Mr Garrett warned in a statement.

Along with a further 2.2 per cent drop in engineering work during the quarter, TD Securities strategist Prashant Newnaha said it points to a soft economic growth outcome when the national accounts are released next Wednesday.

Mr Hockey has been holding back his budget review, awaiting this report to get the most up to date growth reading he can.

He faces a daunting task with billions of dollars worth of budget measures stuck in the Senate, while revenues are down as the iron ore price continues to slide - falling a further 1.2 per cent to below $US70 ($A75.74), the lowest level since June 2009.

The deputy head of the Bureau of Resources and Energy Economics Wayne Calder said declining commodity prices also continue to weigh on investment decisions.

Many developers are revisiting project feasibility studies, he said.

While Prime Minister Tony Abbott thinks the government can get back on track by removing a few policy "barnacles", Mr Bowen argues it needs to go back to the drawing board and start the budget again.

"The barnacles aren't the problem, the budget is the problem," he told ABC radio.

Mr Abbott hit back during parliamentary question time, saying Labor had handed the government a fiscal deterioration unprecedented in Australia's history.

"Having created the problem they are now trying to sabotage the solution," Mr Abbott said.