The downward spiral in the building sector may be reversing, with an increase reported in residential and commercial projects last month.

The Australian Industry Group-Housing Industry Association Performance of Construction Index increased by 4.2 points in June to a reading of 39.5, the slowest pace of decline in four months. The industry is not crashing, but the index remains well below the 50-point level that indicates growth in the sector.

According to Housing Industry Association chief economist Harley Dale, the building sector has not expanded for more than three years. He says while improvement is welcome, the recovery is "fragile".

There’s been some speculation that an election this year is causing businesses to hold off on launching major projects. Mr Dale says residential construction in particular strengthened last month, "It's pleasing to see three of the four elements of construction - the fourth being engineering, which was weaker this month - have actually moved in the right direction,” he said, “the sooner we can know of an election date the better... the sooner we get some more certainty back out there, the sooner we've got the prospect of some further recovery coming through in areas like residential construction."