The headline rise in construction work done understates the increasingly dire condition of the commercial building sector, Master Builders Australia.

Master Builders Australia’s chief economist Peter Jones said: “Yet another decline in building work done provides a backdrop to recent collapses of long term construction companies that will only have negative consequences for the supply chain and the wider economy.”

“The commercial building industry is caught on the wrong side of the two speed economy and the aftermath of the global financial crisis.”

“The industry is concerned that future prospects remain poor, with few projects in the pipeline. This does not augur well for employment going forward.

The ABS figures released this week showed residential construction also falling in the March 2012 quarter.

HIA senior economist, Andrew Harvey, said: "The total value of residential building work done fell by 2.0 per cent in the March quarter with new dwellings down by 1.4 per cent and renovations down by a sizeable 5.3 per cent.”

"The result is a concern as it suggests not only that dwelling investment will again detract from GDP growth in the March 2012 quarter, but also that the renovations side of the residential building industry is now also facing headwinds," noted Harvey.

In annual terms, major renovations (alterations and additions) activity is down by 5.1 per cent over the year, while new housing is down by 8.8 per cent.

"Renovations have been the positive news story for the residential building industry with the value of total work holding up relatively well, but there are now mounting signs that this side of the industry is slowing."

"Today's data is just another piece of evidence that current policy settings need to be amended. The official GDP growth forecasts remain too optimistic, interest rates need to be cut again next week and governments need to quickly support the domestic non-resources industry, including residential building and manufacturing so that the nation is well-placed to grow in the longer-term," added Harvey.?

Jones from Master Builders added: “It is imperative that the Government and the Reserve Bank set the policy levers to arrest the severe decline and to help rebuild confidence in such a crucial sector of the economy.

He said, “The Government and the Reserve Bank cannot simply rely on the mining sector to underpin economic activity and jobs.”

New home sales show improvement

Meanwhile, new home sales mounted a partial recovery in April following a very weak end to the first quarter of 2012’, according to the HIA - JELD-WEN New Home Sales.

HIA Chief Economist, Dr Harley Dale said an April lift in new home sales of both detached houses and multi-units was an imperative result.

"Even with this latest improvement, the aggregate volume of both new home sales and local government building approvals imply that in the absence of a rapid and sustained recovery, national new home building is heading to a recessionary level in 2012," said Harley Dale.

"That's an unfortunate fact which everybody needs to face and which requires further interest rate cuts and immediate government action," Harley Dale said.

"We keep hearing that Australia is one of the world's strongest economies in aggregate. That's a redundant concept if people on the ground aren't feeling and experiencing that, and they haven't been for quite some time."

"Further interest rate cuts are required and the Reserve Bank should just get on with the job on June 5th," said Harley Dale. "However, rate cuts are not a panacea and the key to a housing recovery lies with governments at all levels. Job losses are mounting and governments need to collectively act to revitalise new home building through reducing the sector's excessive tax burden and through an immediate injection of investment and funding."

The HIA - JELD-WEN New Home Sales report, based on a survey of Australia's 100 largest builders, showed a rise of 6.9 per cent in total seasonally adjusted new home sales in April 2012. Detached house sales rose by 6.4 per cent while multi-unit sales were up by 10.3 per cent.

In April 2012 the number of seasonally adjusted new detached house sales increased by 17.2 per cent in Victoria ahead of the removal of the First Home Bonus. Detached house sales also increased in Western Australia (by 9.8 per cent) and New South Wales (by 1.8 per cent). Detached house sales fell by 5.9 per cent in South Australia and by 5.5 per cent in Queensland.?