06/04/2009 - 10:50

Builders' pessimism grows in March qtr

06/04/2009 - 10:50

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Around 35 per cent of respondents to a national survey of building and construction companies believe the federal government's $42 billion stimulus package will have no impact on business.

Builders' pessimism grows in March qtr

Around 35 per cent of respondents to a national survey of building and construction companies believe the federal government's $42 billion stimulus package will have no impact on business.

The March quarter survey, undertaken by Masters Builders Association (MBA), also found the continued pessimistic building outlook is likely to translate into significant job losses over the next two years, despite moves by the government and the central bank.

Another survey, commissioned by the Construction Forecasting Council has tipped more than 75,000 jobs in the industry will be lost due to a sharp fall in building activity.

"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," MBA chief economist Peter Jones said today.

"The survey adds more weight to calls for the Reserve Bank to cut interest rates further.

"Despite positives from the Government's $42B 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."

The survey reveals builders expect activity to fall by more than 20 per cent and staffing/sub-contract numbers to fall by more than 10 per cent as a result of the global financial crisis.

Well over half of respondents believe the $42B fiscal initiative will have a positive impact, albeit only a slight or moderate one, whilst 35 per cent predict it will have no impact on their business.

"The survey revealed expectations for builders' own business activity, profits, investment and employment remained deeply entrenched in negative territory during the March quarter," Mr Jones said.

"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.

MBA believes there is a need to extend the eligibility period for recently introduced temporary incentive schemes, specifically; the 30 per cent small business and general investment allowance, and the $21,000 first home owners grant 'boost' scheme for new houses.

MBA also recommends 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."

"It is the private sector that in the end will drive the Australian economy out of recession."

Master Builders strongly rejects recent calls for the removal of negative gearing and capital gains tax concessions.

To put 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.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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