And why wouldn’t they? The RBA/Treasury plan to fill declining mining growth with more houses is not going well. New home sales have tanked since rate cuts started:
The AFR lines up quotes from building materials executives today:
The building industry is cutting costs and shedding jobs amid predictions that construction in Australia faces permanent structural change caused by the strong local dollar and a greater number of apartment developments.
From Boral:
…“The reality is Boral cannot continue to sustain the overhead structure that has built up over time and has burdened the group, and become increasingly evident at the bottom of the cycle,” said Boral chief executive Mike Kane.
From Hills Holdings:
“Anyone who thinks building approvals will get an uptick and that it will all be the same as it was seven years ago, I don’t subscribe to that view,” Mr Pretty said. “The market and its structure have changed. It is more competitive, therefore business models have to change.”
From Brickworks:
“I don’t think we’re going to see any 180,000 to 190,000 housing starts anytime soon. My general feeling is the entire industry is scaling down to around 160,000 [housing] starts at a peak,” he said. “Our shareholders want returns and we’ve got to make money on the right level of capacity to meet the market demand That’s what’s caused all this incredible restructuring over the past 18 months across the industry.”
From Master Builders:
“We need a restoration in confidence. We need short-term stimulus measures, not only to stop the red ink in the building industry,” he said, “but to take out insurance for the general economy to sow seeds for revival in non-mining sectors as we lose mining’s contribution.”
From Mirvac:
“While conditions remain challenging across the country, there are clear signs of an improvement, particularly towards medium-density accommodation. We expect residential markets with exposure to metropolitan outer-growth corridors to be more challenged,” he said.
Correct.
Replacing mining growth with more houses is a forlorn hope. First home buyers do not want to live in McMansions on postage stamp sized blocks on the urban fringe that are priced well above market value. I mean, sheesh, they’re not idiots.
The solutions being offered by policy-makers?
The Opposition has none:
“Labor’s deliberate policies of more red tape, higher taxes and increased business burdens have slugged manufacturing businesses like Boral, making it more difficult for them to remain competitive,” she said.
The Government wants to make it worse. Having failed to address the macroeconomic problems associated with the mining boom,it is fiddling with microeconomic planning (from The Oz):
RESOURCE and infrastructure giants will be told to spend more heavily with local manufacturing companies in a Gillard government plan due within weeks to aid struggling industries amid fears of a wave of further job layoffs.
Big investors will have to prove they support Australian manufacturers in a new directive from Canberra that adds to existing rules aimed at increasing demand for local steel, building products and other materials.
I can’t support this on the principle alone that it’s a backdoor mining tax that reeks of direct government mis-intervention in good business practices. Let alone practical issues such as how is it going to be policed? It will be either a bureaucratic nightmare or a failure. I might add that mining investment is about to begin falling. The super-cycle is winding down. We need to replace that falling growth with something new.
This is all supporting the unsupportable. Stick to the macro. Doyen economists have suggested Tobin taxes and printing AUD. Address the dollar.
