Concern is growing among Australian builders on whether private sector demand will pick up in time to compensate for reduced public demand as government stimulus programs come to an end.

The latest result from Master Builders Australia’s national survey reveals a worrying decline in builder sentiment.

Master Builders Australia Chief Economist, Peter Jones, said: “Builders’ expectations regarding their own business activity and profitability noticeably weakened in the March quarter with indicators tracking these measures remaining well below the peak achieved before the global financial crisis-induced downturn.”

“Builders’ backlog of work fell away quite sharply in the March quarter, almost certainly a result of a tailing back of government stimulus work.”

The amount of work on the books recovered in 2009 from the global financial crisis-induced downturn and held up in 2010 as projects for the BER schools program and social housing initiative came through into order books.

Mr Jones said, “Despite reports of improved conditions elsewhere, financial constraints still bedevil the building and construction industry, with very little evidence of any easing in the latest figures.”

In the March quarter, nearly 30 per cent of respondents were concerned that availability of finance was having a major or large constraining effect on their businesses. Builders still expect interest rates to rise over the next 12 months with the impact on forward orders at an elevated level.

He said, “Softer business conditions have led to an easing of skills shortages, notwithstanding that further out the situation will likely reverse as recovery builds momentum.”

For almost all categories surveyed, the degree of difficulty in finding employees/sub-contractors fell back quite markedly in the March quarter, including categories such as project managers, site managers and foremen/supervisors.

Prior to this, builders had begun to again experience some difficulty finding subcontractors/employees after the global financial crisis and economic downturn resulted in a significant relaxation of pressures.

Mr Jones said, “With the impact of higher interest rates still hanging over the industry, the risk of heavy-handed interest rate policy is a real threat to all sectors of building and construction.”

“The Reserve Bank should consider keeping interest rates on hold for an extended period until a private sector recovery in the building industry can regain momentum.”

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