Australian Construction Industry Sentiment Declines

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Thursday, July 4th, 2013
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Despite signs of an improving market in home building, levels of confidence within the construction sector in Australia have dropped back amid declining expectations for activity and employment and a shrinking backlog of work on the books.

In the latest National Survey of Building and Construction, which covers more than 450 builders across the residential, commercial and civil sectors published by Master Builders Australia, a slight majority of builders indicated a deterioration in current business conditions and indicated their expectations about the near-term future remained slightly negative.

Worse, as the percentage of firms with greater than six months work on their books – a number that has fallen in five of the past seven quarters – drops back to around 35 per cent, the sub-index for employment intentions fell to levels not seen since the post-GFC slowdown while readings for sales contracts and profitability remain near 10-year lows.

In the only substantial positive, the index for display continues to trend upward despite having moderated in the past quarter.

Business Confidence Chart

Survey of Confidence among builders in Australia is declining

Master Builders Australia chief economist Peter Jones says the latest survey shows there has been no tangible recovery in conditions despite the low interest rate environment and some signs of improvement in Australian Bureau of Statistics Indicators such as housing finance and building approvals. He noted, however, that the generally positive signs regarding display centre traffic may at least signal that the worst of the industry’s downturn has passed.

“The survey reveals an industry bouncing around the bottom and at best indicates that business conditions may have troughed,” Jones says.

“The big question for builders is the timing of a substantive upturn. Promised improvement down the track does not help pay the bills in the here and now and is putting many businesses at risk.”

Jones called on policy makers to continue their accommodative stance regarding interest rates and adopt policies which help restore business and investor confidence in the economy.

The latest survey comes amid expectations of a modest recovery in building activity but a drop off in civil construction as resource projects dry up.

In its latest forecasts, Master Builders says it expects a significant recovery in residential construction over the next three years along with a more muted recovery in non-residential building.

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