A pessimistic building outlook is likely to translate into significant job losses in 2009 and 2010, despite recent government fiscal stimulus and aggressive interest rate cuts, according to Master Builders Australia’s National Survey of Building and Construction.
Master Builders Australia Chief Economist, Peter Jones, said: “The pessimistic outlook is compounded by a project finance ‘drought’, with one third of respondents to the March quarter survey saying a lack of finance was a major constraint on their business.”
The March quarter survey followed Reserve Bank moves to cut official interest rates by another one percentage point in February and the government’s announcement of a AUD42bn (USD30bn) economic stimulus package.
Mr Jones said, “The survey adds more weight to calls for the Reserve Bank to cut interest rates further.”
“Despite positives from the government’s AUD42bn economic stimulus package, builders have become gloomier about the impact of the global financial crisis on their business activity and employment levels than they were three months ago,” he added.
The survey reveals builders expect activity to fall by more than 20% and staffing/sub-contract numbers to fall by more than 10% as a result of the global financial crisis. Well over half of respondents believe the AUD42bn fiscal initiative will have a positive impact, albeit only a slight or moderate one, whilst 35% predict it will have no impact on their business.
Jones continued:
“The survey revealed expectations for builders’ own business activity, profits, investment and employment remained deeply entrenched in negative territory during the March quarter.”
“The glimmer of hope was some early signs of improvement in the residential sector, with Master Builders survey results confirmed by latest ABS lending and approvals data.”
The March quarter survey has major implications for the May Budget which needs to go beyond fiscal stimulus already in place, including the bringing forward of public building projects.
Master Builders believes there is a need to extend the eligibility period for recently introduced temporary incentive schemes, specifically; the 30% small business and general investment allowance, and the AUD21,000 (USD15,000) first home owners grant ‘boost’ scheme for new houses.
Master Builders has also recommended a reduction in the company tax rate, the bringing forward of tax cuts, and the introduction of a reducing rate of capital gains tax.
“Effective and timely measures such as these can help provide critical stimulus needed to insulate the economy from the worst effects of the global financial crisis, particularly unemployment,” Mr Jones remarked, further stating:
“It is the private sector that in the end will drive the Australian economy out of recession.”
Further to this, Master Builders has strongly rejected recent calls for the removal of negative gearing and capital gains tax concessions. They believe that putting higher tax hurdles on investors providing affordable housing would only exacerbate a worsening undersupply of dwellings evidenced by low vacancy rates and rising rents.
The significant deterioration in the construction outlook points to an urgent need for further assistance to help the building industry cope with fall out from the global financial crisis and a looming downturn.
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