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    Budget 2014: building industry embraces new gain, braces for pain

    David Wheeldon

    The 2014 Federal Budget was announced last night, and building and construction groups are welcoming investment earmarked for infrastructure while expressing concerns around initiatives to support the residential and commercial building sectors.

    Overall, Master Builders Australia expects the budget to have a positive impact on the building and construction industry.

    Wilhelm Harnisch, CEO of Master Builders Australia, said the Government’s roadmap to structural budget repair and a return to surplus should be a positive for business, home-buyer and investor confidence.

    “The building and construction industry particularly welcomes the Government’s $50 billion infrastructure package, which will support $125 billion in construction work,” he said.

    “But roads are not everything and the Government will need to focus on broadening infrastructure investment to include urban investment in the post-Budget period.

    “Master Builders welcomes the cut in company tax while recognising that many small building firms are not incorporated."

    However Master Builders are also deeply concerned about the negative impact of several initiatives on the building and construction industry.

    “The cessation of funding for the National Rental Affordability Scheme (NRAS) makes it doubly important for the Government to find more effective methods of tackling the lack of housing supply and providing more affordable social housing,” said Harnisch.

    “The cessation of funding for the Tools For Your Trade program is disappointing but is offset by the Trade Support Loans for apprentices.

    “The phasing out of skills programs such as the Apprenticeship Mentoring Program and the National Workforce Development Fund is another disappointment which will place pressure on the Government to implement a viable apprenticeship reform program to guarantee a skilled workforce for the future.

    “The imposition of the fuel levy will hit tradies particularly hard because of the amount of travel they undertake. Their increased transport costs will be passed on to the consumer,” Harnisch added.

    “As the Treasurer has acknowledged, this Budget is “just the start” and Master Builders is looking to the Government for more detail of its National Economic Strategy in coming weeks."

     

    Spending cuts will impact residential building industry

    The Housing Industry Association (HIA) response was that spending cuts announced across the board, addressing the budget deficit, will come at the expense of a number of worthwhile programs.

    “The residential building sector has only just begun to play a pivotal role in driving the economy as the nation transitions away from mining led growth. The recovery in new home building has been highly dependent on demand generated from the household sector. Maintaining and improving consumer sentiment remains a priority,” said HIA Chief Executive, Industry Policy, Graham Wolfe. 

    “The abolition of the National Workforce Development fund, among other training programs, is unfortunate. While the programs are a legacy of the former government, the objectives are not inconsistent with this government’s objective of creating a productive workforce. The funds have been reallocated through the establishment of the Industry Skills Fund, although the fund has a much narrower focus on a few select industries.

    “The establishment of the Trade Support Loan scheme represents a significant development. The scheme enables apprentices to borrow up to $20,000 throughout the duration of their apprenticeship, on loan terms comparable with those available to university students under the Higher Education Loan Programme. However, the decision to restrict access to only those undertaking apprenticeships in trades on the National Skills Needs list should be revisited,” Wolfe said.

    “The abandonment the final round of the National Rental Affordability Scheme is disappointing. The scheme has resulted in thousands of affordable homes for low and moderate income households, increased Australia’s housing stock and generated countless jobs the process.

    “The commitment to infrastructure investment and delivery in the budget is to be commended. However, the extension of that investment to support the delivery of new housing is missing from the budget.”

    The development sector is also poised to take a hit to affordable housing with the 2014 Budget announcement that the Government will not proceed with the final round of the National Rental Affordability Scheme (NRAS) and scrap the First Home Saver Accounts Scheme.

    “This budget has done little to assist with addressing the affordability issues being experienced by those trying to enter the housing market,” said Sian Sinclair, Head of Real Estate and Construction at Grant Thornton Australia.

    Sinclair said the limited take up of the First Home Saver Scheme since its introduction in 2008 made it an easy one for the Government to drop.

    “Of more concern is the fallout on consumer confidence when taxpayers realise the impact of the personal tax changes on the family income and concessions, which could see the recent spending in residential housing sector reigned in, just as it was getting started,” she added.

     

    ACT region the biggest loser

    As previously forecasted by the Australian Construction Industry Forum (ACIF), the economic outlook for the Australian Capital Territory (ACT) will be significantly impacted by job cuts in the Australian public service.

    With 16,500 public service job losses, the budget forecasts the ACT to be hit hardest, forecasting a lower population in 2015 and again in 2016.

    Lower employment, consumption levels and housing demand is expected to adversely impact construction spending, particularly in residential. A proposed new convention centre for Canberra has been left out of the budget, and the most positive news from the budget was $26.8 million towards a new Department of Social Services building in Tuggeranong.

    Speaking to Architecture & Design prior to the budget release, director of Canberra-based DNA Architects, Glen Dowse, confirmed there was a lot of uncertainty among those in the region’s architecture and building industry.

    Of major concern were the cuts to public sector jobs and government investment in building projects.

    “If the public sector feels under threat, confidence collapses and all areas of the economy suffer, including spending on retail, on homes and all across the commercial sector," said Dowse.

    “The building industry is pretty fragile at the moment. A lot of the architects relying on institutional work are really suffering.

    “We are under control, mainly because we have a good base of clients and wide range of work."

    Dowse also observed that domestic work had been recovering in Canberra after a prolonged slow down, albeit still “really lagging behind the rest of Australia”. However, this could now be at risk, unless the government takes appropriate steps to simulate the industry in the ACT, particularly around opportunities like addressing an undersupply of retirement properties.

     

    Infrastructure

    Consult Australia Chief Executive Megan Motto said the 2014-15 Budget rightly identifies infrastructure investment as a critical economic lever to build productivity, jobs and growth for years to come.

    “There will be a lot of debate about who wins a larger slice of this budget pie, but the key outcome of this budget will be to increase the size of the pie," she said.

    “In a tough market where many firms are struggling with the gap left following the investment boom in the resources sector, the additional $11.6 billion announced through the Government’s Infrastructure Growth Package is urgently needed across the states and territories.

    “But this is not about the Government just doling out the cash for infrastructure projects. We are seeing the delivery of more far-sighted policy frameworks.

    “The Government is putting the foundations in place to support a more sustainable funding base for a long-term infrastructure pipeline."

    Motto said the real test is going to be linking the funding promises made in this budget with improvements in planning, procurement and delivery.

    Also applauding the announced infrastructure investment, developer group the Urban Taskforce’s CEO Chris Johnson added:

    “With Australia’s population increasing at around 400,000 people a year the Federal Government will need to allocate funds to States and Councils who support growth particularly with appropriate urban density. While the Federal Government is moving out of housing production policies so that States take the lead role, it is important that pro-growth States and Councils are the recipients of funding grants.

    “Western Sydney has done well in this budget with the Western Sydney Infrastructure Plan and the recent announcement of the new airport at Badgerys Creek. The NSW Government needs to now get its Metropolitan Strategy for Sydney finalised and resolve the structure of councils across Metropolitan Sydney to build on the Federal Government commitments.”

     

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