The slowdown in Australia's construction industries has intensified, with a far sharper than expected contraction over the second quarter.

Key points: Construction work has fallen 11pc over the past twelve months and, in terms of value, it has retreated to levels reported at the start of 2017

Construction work has fallen 11pc over the past twelve months and, in terms of value, it has retreated to levels reported at the start of 2017 Home building has fallen for four consecutive quarters to be down 10pc over the year

Home building has fallen for four consecutive quarters to be down 10pc over the year The "ugly" result is expected to have a material impact on second quarter GDP, slicing around 0.4ppt off growth

In seasonally adjusted terms, overall construction work fell by 3.8 per cent over the three months, well short of the more optimistic, but still weak, market forecast of a 1 per cent decline.

Over the year, construction work has fallen by more than 11 per cent, with the total level of work done down to a level last seen more than two years ago.

As expected, residential construction was the biggest drag, down 5.1 per cent for the quarter and almost 10 per cent for the year.

It is the fourth consecutive quarter housing construction has fallen.

Engineering construction, which takes in big infrastructure projects, failed to offset the housing slowdown and fell 1 per cent for the quarter to be down 16 per cent over the year.

Construction in New South Wales, Victoria and the ACT fell for the third consecutive quarter, but thing were worse elsewhere.

South Australia has been going backwards for four quarters. It is five quarters in Queensland, six in Western Australia and seven in the Northern Territory.

Tasmania is relatively healthy, having reported just two successive quarters of falling activity.

GDP to take a hit

Westpac's Andrew Hanlan said construction's peak in the middle of last year is now well behind it.

He noted there were a number of factors at play:

The turning down of the home building cycle;

The turning down of the home building cycle; A pull-back in public works;

A pull-back in public works; A further winding down of private infrastructure activity led by the mining sector (although this dynamic has largely run its course).

"With the construction sector representing around 13 per cent of the economy this result will dent second quarter GDP, potentially in the order of 0.4 percentage points," Mr Hanlan said.

"The housing downturn still has further to go and will weigh on conditions throughout 2019 and into 2020."

The Housing Industry Association (HIA) is hopeful the steep decline in residential construction is nearing an end, bottoming out at about 180,000 new homes per year.

But HIA chief economist Tim Reardon does not expect the sector to bounce back to anywhere near the record level of 230,000 new homes per year, seen at the peak of the recent boom, for a very long time.

"It could be at least a decade, perhaps more, before we get back above 200,000 homes per year," he told RN Breakfast earlier this week.

"It took 20 years of mismanagement by state governments to build up the pent-up demand for new homes, in particular Sydney and Melbourne, that created that situation where we were building more than 200,000 homes per year.

"If the population continues to grow at 1.6 per cent, economic growth remains solid, wage growth remains around about where it is at the moment, then that 180,000 is around about our new market equilibrium."

About the only positive in the data was a pick-up in public-funded infrastructure and some new work in the mining sector in response to higher recent prices.

Suppliers hit

The impact of the downturn showed up starkly in the half-year results of Australia's largest cement producer Adelaide Brighton.

The company swung to an $18 million loss, largely due to impairment and restructuring costs.

Underlying pre-tax profit fell more than 30 per cent on a 6 per cent decline in sales.

"Demand for construction materials slowed further during the period," Adelaide Brighton chief executive Nick Miller said.

"Residential construction approvals fell 25 per cent in the six months to June and residential construction is is forecast to decline into 2021."

Mr Miller said the company would need cut costs in light of the prevailing market conditions.

"While we expect demand conditions to remain soft in the near the term, the company is well placed to weather the cycle and maintain and grow our strong market position," he added.