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Interest rate cuts fail to revive struggling building sector
09/07/2012 - Australia's construction sector contracted for the 25th straight month in June, showing recent interest rate cuts have failed to revive the struggling sector's fortunes.
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The Australian Industry Group (AiG) Performance of Construction Index (PCI), released on Friday, remained flat at 34.8 in June.
A reading below 50 indicates a contraction and the distance from that key level indicates the strength of the decrease.
The weak result comes despite the Reserve Bank of Australia cutting the cash rate 1.25 percentage points to 3.50 per cent since November last year.
Construction activity fell to its lowest level since 2009, the AiG said, with apartment building the weakest sub-sector (with an index reading of 21.8), followed by commercial construction (26.6) and house building.
"The residential and commercial construction sub-sectors continue to be a drag on overall business activity with lack of demand and access to finance both holding these important sub-sectors back", AiG director of public housing Peter Burn said.
Housing Industry Association chief economist Harley Dale called on governments to do more to support the sector.
"Residential construction activity looks set to trough at GFC-equivalent levels and yet were not in the midst of the GFC," he said.
"That is a concerning update on Australia's economic prospects and policy makers should heed this clear signal for policy action."
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John Adrian | 9/07/2012 11:59 1
Maybe the headline could also read " interest rate cut fails to revived clinically dead manufacturing sector" as well.
Pat | 9/07/2012 13:43 2
Interest rates have failed to revive the construction industry because the "cost" of construction is toooo high. The construction industry at all levels, government services, land developers, builders and suppliers. Have grown fat on the incentives provided by governments to 1st home buyers. And they wont/cant reduce their margins and costs accordingly, to encourage/stimulate the demand that's in the market, because no sane person wants a $350-$450,000 dollar mortgage when our real wages haven't gone up for years. The real estate market is GROSSLY over valued and needs to be allowed to go through its normal cyclical adjustments downwards, before joe blow average can afford to buy a home again. But there is too much pressure from the Australian banking industry for the government to allow that to happen, because if values go down, their investment is at risk if the mortgage holder has to sell for a loss. SO Australian public, SUCK IT UP and wait, we're being held ransom to the banks again.
Lou Furbadamo | 11/07/2012 10:08 3
Another example of just how out of touch the government and the RBA are with reality. They must erroneously think that because things are booming in their own captive, cushy bureaucratic sectors with massive pay hikes and perks. That the rest of the sickly, over taxed, overburdened private sector economy is doing the same, after having to endure, support and pay for their obscenely snorting excesses, inefficiencies and wasteful mistakes! Clearly the above report and a mountain of other evidence suggests not and that much of the economy is in deep recession. An embarrassing contradiction to the Dream Time glowing picture painted by our illustrious and internationally cocky PM and her “How I lov Ya! How I lov Ya! treasure(r) Swannee”! Personally, “I’d walk a thousand miles, to avoid one of your smiles, My dear old Swannee”! You can tell I’m easily impressioned by their Versatile Impresario Spin Doctor CraighyE, cause believe it or not, his singing and lairising is much better than our government governance! Accordingly, The good doctor also has a sure cure elixir, if you’re a long suffering terminal case in Manufacturing or Retail etc. What!, with the prohibitively escalating cost of grants to life support failing industry and employment. He miraculously suggests, somehow packing you off overseas to cheaper Asian dives, so you can’t be embarrassingly seen or register a black mark on their cynically doctored score sheets. Especially when they’re incredulously, vainly gloating about our exemplary economic “absurd con” performance overseas. Of course, work place versatility is supposedly, merely another example of their necessary modern trend to “Global flexible Supply Chain” work practices? Cause they can’t fix their causal problems here! I’ve actually got one of these new globally segmented, universal pull chains on my vintage toilet cistern! But it kinks up, unhinges and falls apart often at the business end. The old fashioned twisted rope pull downs were cheaper & better! Some, haven’t taken note of the Trade Minister’s aforementioned fascinatingly treacherous, Bull-Edict, that “Australian companies should relocate manufacturing and production overseas where costs are cheaper.” Therefore, John’s conclusion of “clinical dead manufacturing” may be premature if you haven’t looked nor checked for mobile overseas pulse, as our Dr. “Singing pie in the Skyhooks” suggests? But “Nil Desperandum”, cause when we find them, even in dire, stuffed and near bankrupt condition. If we get our mitts on exiled Labor mate, Craighy Thomo’s clinton like, “I never had paid sex relation with that prostitute”, Good times, plastic Union credit card”. Well! We’ll be able to pay for all sorts of fancy, scattily clad, masseurs to slap and tickle revive and lively “Up Spout” productivity again, right here in Oz. Without unpatriotic disruption and heartache of packing and moving to suggested foreign overseas! The major failing not often mentioned nor factored, is that much of the RBA rate cuts haven’t been passed on by friendly gouging banks. Who opportunistically miserly squirrel that extra half nut or crumb every time there’s a change or chance. In addition credit criteria are much tighter and stringent than previously. So given overall looming negativity, rather than the up beat song and dance Swannee peddled prospects for our economy. Impact of the recent interest cuts has clearly been too diluted to have been of significant benefit nor confidence boost. It’s about time the RBA woke up and positively reacted to these basic facts, to help rather than punish us. Cause my Mother could do a better job of managing rates and the country for that matter!
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