Builder Confidence Buoyed by Government Stimulus

A rebound in builder sentiment is now evident as the Government’s fiscal stimulus starts to kick in, according to Master Builders Australia’s National Survey of Building and Construction.
Master Builders Australia Chief Economist, Peter Jones, said: “The Government’s policy strategy to leverage the building and construction industry as part of its efforts to cushion the economy from the global recession is bearing fruit.”
“The more optimistic outlook by builders in the June quarter comes as government economic stimulus measures such as the schools program and social housing initiatives begin to kick in.”
Mr Jones said, “Builders also believe the recent Federal Budget will be positive for their business and are less fearful of the negative impact from the global financial crisis.”
The quarterly survey reveals expectations for building industry activity recovered somewhat in the June quarter after the massive fall in sentiment experienced over the past 6 to 12 months.
“Despite the more optimistic outlook by builders, the June quarter survey points to a volatile period ahead.”
The index, at 43.6, remains below the neutral 50 mark, indicating that builders still expect industry activity to deteriorate over the next six months.
A similar pattern emerged in relation to survey results for own business conditions, profits, investment and number of full-time employees.
The proportion of builders expecting a reduction in business activity as a result of the global financial crisis fell from 80 per cent to 60 per cent in the June quarter.
Nonetheless, of those expecting an impact, more than half expect their own business activity to fall by more than 20 per cent over the next 12 months.
Similarly, in the face of the looming downturn, 60 per cent expect staffing/sub-contract numbers to fall by up to 5 per cent, with 40 per cent anticipating employment numbers to fall by more than 5 per cent.
He said, “Despite the ‘less negative’ result for the June quarter, builders still intend to cut back employee and subcontractor numbers in the period ahead, a major cause for concern.
“Key forward indicators in the residential sector are providing some encouragement, although it will take time for activity to turn around, particularly as the extended first home owner boost is set to halve from end September before ceasing at the end of the year.”
In the June quarter, there were indications that the pace of decline in display centre traffic/enquiries might be abating, with nearly a third of respondents reporting higher levels of traffic compared to the previous quarter, up sharply on levels reported over the past 12 months.