National survey reinforces future rate cut call

A survey carried out by the Master Builders Association has led to calls for further rate cut consideration



A national survey of more than 500 builders and contractors has revealed key indicators are starting to improve, but are failing to result in increased activity.

The March quarter 2013 Master Builders National Survey of Building and Construction shows builders expect the industry to improve in the medium term, but are still struggling in the short term.

The information follows Thursday’s ABS report on building approval figures, which the MBA says reflects the fragile nature of the upturn in residential building, as well as showing a further deterioration in non-residential building.

Peter Jones, chief economist at MBA, says that while signs of a recovery may be beginning to emerge for the industry, the upswing is coming from a very low base and questions remain about its strength.

"The turnaround in the survey sentiment suggests previous interest rate cuts may be beginning to take hold, but builders are yet to see any benefit from the rate reductions. Builders reported less work on the books than in the previous quarter, sales contracts remained essentially unchanged and profits remain weak.”

However, Jones says expectations for industry activity and own-business activity rose to levels above the survey's neutral reading, which suggests there could be improvement for the industry in the short to medium term.

"As a major driver of economic growth and employment, a strong recovery in the building and construction sector is vital for Australia's economy. The industry has been earmarked by Treasurer Wayne Swan and the Reserve Bank to play a major role lifting the non-mining sectors as the economy loses the mining investment boom as a driver, however, the industry is a long way from filling that gap.”

Although the RBA has done most of the heavy lifting when it comes to stimulating the non-mining sectors, he says it shouldn’t rule out further interest rate cuts.

“The Government must also play their part by creating a more business-friendly environment. It is important State and Territory governments also address supply side constraints and bottlenecks.”

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