Australia's construction industry contracted in December 2015, a weak end to the year despite a growth in apartment and house building.

The Australian Industry Group's Performance of Construction Index shows engineering and commercial construction dropped 3.9 points to 46.8 points.

On that scale, a level below 50 points indicates contraction, and comes after four consecutive months of expansion.

“Commercial construction has failed to register any meaningful growth,” said Ai Group's chief economist Julie Toth.

“Looking ahead, the downturn in new orders across all four construction sub-sectors in December is a concern for 2016,” Ms Toth said.

Engineering construction has been contracting for 18 months straight, showing the effects of a declining mining sector and related activity, as well as a decline in government projects as well.

The picture becomes even darker when combined with data from the Australian Bureau of Statistics, which shows little action in the pipeline as building approvals slump by 12.7 per cent in November.

“Despite continued low interest rates, there now seems little doubt that building approvals have passed their peak, which should soon flow through into weaker dwelling investment,” economist David Bassanese said.

“In turn, that poses major challenges to our already weakly growing economy.”

Bassanese says even if new dwelling constructions reach a solid level, they will still not lead to economic growth.

He says a downturn in housing construction would see a “sizeable swing in its direct contribution to annual economic growth of around 0.6 percentage points from the September quarter 2015 to the December quarter 2016”.