The Australian Industry Group-Housing Industry Association Performance of Construction Index increased by 6.85 points to 55.2 last month, the strongest rate of growth since June last year.
HIA chief economist Harley Dale says the higher levels of activity reflect an increase in work on both new and existing projects.
"It shows that we're seeing continued solid growth for the non-residential building sector, which is something that's been apparent for quite some time now," he said.
"But we did also see a little bit of a pick-up in the demand for new houses, so a little bit of a better result for the residential side of the building market."
But the HIA also says another interest rate rise before the end of the year could reverse the steady gains in the sector over the last month.
Mr Dale says residential construction is yet to make a significant recovery and higher interest rates will further slow that process.
"There is some growing talk around again about an increased risk of another interest rate rise over the next three to six months," he said.
"Should we get another interest rate rise, that would of course have a dampening effect on the chances of the residential sector recovering into early 2008."Source: ABC
