By Tina Perinotto
3 May 2011 – The Reserve Bank of Australia’s decision to leave interest rates on hold and resist inflationary pressures and a tightening labour market will improve building industry confidence, at a time when workload expectations in property had “dipped into the negative”, according to international property and construction consultants Davis Langdon.
Key factors in economic outlook have been the Queensland floods and cyclone Yasi and the uncertainty following the end of the Federal Government’s stimulus spending.
Commentators have told The Fifth Estate that private sector spending to plug holes left by the end of the public stimulus program has not been smooth and that reaction to the spate of Australian and global disasters has been generally skittish, whether companies have been directly affected or not.
Michael Skelton, Australia and New Zealand research manager for Davis Langdon, which is part of the AECOM group, said negative expectations in the construction sector were the first since the downturn of mid-2009.
“Davis Langdon’s Sentiment Monitor shows that this has been fuelled by a lack of work following the end of stimulus spending projects and exacerbated by the floods and cyclones,” Mr Skelton said.
“These events, combined with broader softening conditions, have left the industry uncertain about future projects.”
Mr Skelton said there was a stark divide between parts of the industry starting to benefit from more resources-related projects proceeding and those struggling to get projects off the ground. An interest rate hike would have further hampered a recovery in confidence,” he said.
The Australian Financial Review said the Reserve Bank of Australia resisted a response to the sharp rise in inflation and seemed “content to monitor the economy’s halting progress” so far this year.
“The impact of the high dollar has been compounded by the wind down in government stimulus spending and the enormous disruption to production caused by January’s floods and cyclone Yasi,” the newspaper said.
“In this environment the Reserve Bank has been content to keep interest rates steady, assured by evidence that consumers remain cautious about their borrowing and spending. Growth in credit card balances is weak, personal borrowing is low and housing lending is growing at its slowest pace since records began in 1976.”