The Master Builders’ survey index ‘level of employees and subcontractors’ has now fallen well below the neutral 50 mark. This indicates that builders intend to reduce workforce levels in the coming six months.
This evidence is in line with recently published ABS employment data for the February quarter showing a decline in construction employment in annual percentage change (trend) terms.
Separate sector-specific construction industry figures are unavailable, but it would appear that strong employment gains in the (less labour intensive) engineering construction sector are being outweighed by significant job losses in the stagnant residential and declining non-residential building sectors.
Master Builders Australia chief economist Peter Jones said: “Business conditions are deteriorating, profitability is under pressure and the pipeline of building work is evaporating.”
“A broad-based private sector recovery has failed to gain momentum. Confidence is lacking. There is now a strong case for the Reserve Bank to cut rates to underpin the slow lane of the economy.”
“Master Builders’ latest national survey for the March quarter reveals builder sentiment has turned even gloomier, with disappointing sales and weak display centre traffic and enquiries across residential and non-residential building.”
“Three years on from the global financial crisis the building industry has lost the cushioning effect of government economic stimulus programs whilst the credit squeeze and other regulatory constraints continue to affect business operating conditions.”
“The March quarter survey reveals significant excess capacity and a rapidly softening labour market and it is little surprise that builders are indicating that they may reduce levels of employees and subcontractors in the period ahead.”
Master Builders say the survey results appear to lead ABS employment data
By state, only New South Wales and the Northern Territory recorded positive jobs growth in the year to February with big falls in Victoria, South Australia and the Australian Capital Territory.
Jones said: “The latest readings do not auger well for building and construction activity and the industry is in for a worrying period ahead.”
“A limited number of large projects may prevent total collapse, but this is of limited benefit for small businesses doing it tough in the building and construction industry.”
Building and construction small businesses make up over 95 per cent of all businesses in the industry and close to one quarter of all small businesses in Australian industry.