Activity in the Australian construction sector has fallen for the third quarter in succession, as the residential and commercial building sectors struggle to pick up the slack from work winding up on big resources projects.

The overall value of construction fell 2.6 per cent in the March quarter to be 6.7 per cent lower over the year.

The deceleration was far sharper than the consensus market view of a 1.5 per cent fall and follows a 3.6 per cent slump in the December quarter.

It also represents the ninth fall in building activity in the past 10 quarters.

Residential construction was the only area exhibiting growth, up 1.5 per cent over the quarter and 5.7 per cent for the year, although this was weaker than the 2.5 per cent growth in December quarter.

Overall building construction was down 1 per cent in the quarter, dragged down by a particularly disappointing 5.5 per cent slump in non-residential construction.

This is significant slowing in building activity following on from 2.7 per cent growth in the previous quarter, where non-residential building (such as office blocks, shopping centres, factories and warehouses) was up a solid 2.5 per cent.

On annualised basis, construction - excluding big engineering projects - grew at 1 per cent compared to 8 per cent growth three months earlier.

Engineering construction – which takes in the big resources projects – continued its rapid slowdown, as expected, falling 4.2 per cent for the quarter to be almost 13.7 per cent lower compared to the same time last year.

However, the fall was not as dramatic as the previous quarter and goes some way to support the Reserve Bank's view that the slowdown in mining construction may have bottomed out in the first half of the year.

Housing construction near zenith, mining decline peaking now

On the housing side, it appears that the strong momentum of the previous two quarters has eased somewhat and conditions may have softened following a drop in housing approvals earlier this year.

ANZ economist Daniel Gradwell said, while housing construction continues to expand, it is nearing a broad peak.

"A record volume of work in the pipeline continues to underpin work done despite a general cooling in the housing market in recent months," Mr Gradwell said.

"While this backlog of work may support further growth in activity, we think housing construction is unlikely to be as significant a contributor to GDP in 2016 as it was in 2015."

NAB's Tapas Strickland noted the volatile nature of the unwind in mining investment will likely continue to weigh on figures over the next year, with the peak decline in mining investment expected to be occurring now.

"Consistent with this mining unwind, construction work done fell most sharply in Western Australia (down 9.3 per cent over the quarter) and the Northern Territory (down 10.2 per cent) and further weakness [is] expected," Mr Strickland said.

"While non-residential building work done fell 5.5 per cent, the details reveal that all is not woe with favourable trend increases now occurring in the non-mining states of New South Wales."

The quarterly construction data is the first key partial figure that goes into the calculation of next week's release of the first quarter GDP number.

"Today's undershoot was not sufficient to alter the outlook for GDP next week, which should be similar to that recorded in second half of 2015, with household consumption and net trade delivering most of the growth, while business investment and non-residential construction remain the notable drags," JP Morgan's Tom Kennedy said.

Quarterly business investment – or capex - figures will be released tomorrow.