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  • 02 Sep 2015

Employment and Interest Rate Boost Business Confidence

Business confidence in the Queensland economy, and the building and construction industry, is on the upswing, according to Master Builders’ latest Survey of Industry Conditions.

This follows a fall in the previous quarter.

Master Builders’ Deputy Executive Director Paul Bidwell said the survey was one of the best ways to gauge specific industry expectations and business performance in all regions across Queensland.

“These results reflect a period of stability in Queensland, following the state election and the scaling back of mining investment,” Mr Bidwell said.

“Optimism has been boosted by an improved unemployment rate and continued low interest rates.

“The good news for the construction sector is that relative to the wider economy, it is expected to perform strongly. And within the industry there are a significant number (37%) that expect the industry to improve further.”

The report also found:

As the nation continues to debate tax reform and economic stimulus, 84% respondents said there would be a significant or moderate impact of scrapping negative gearing and capital gains tax concessions on the demand for new construction.

The level of business activity strengthened with more than a third of respondents reporting stronger levels of work in progress.

Turnover and profitability rebounded, recovering much of the previous quarter losses. Turnover has returned to positive territory and profitability is just slightly below.

Employment levels have remained at the same level for the past 12 months, with an expected improvement in the coming September quarter. The story is similar for apprentices, with demand flat over the past 12 months.

For the first time in the history of the survey (five years), labour costs are regarded as the number-one constraint by the industry.

The lacklustre level of demand also rated as a critical constraint on business growth. The fact it continues to rate as a concern in the face of state-wide improvement is a reflection of the patchy nature of the current growth which has failed to reach many regions and sectors of the industry.

And while interest rates remain low and building costs are competitive, the ability to invest in new construction has declined due to stagnating wages and a tightening of finance terms by banks, especially for investors.

For the most part the South East Queensland corner continues to drive growth, with the Gold and Sunshine coasts being the standout performers across the state.