New construction work plummeted in the March 2009 quarter, signalling substantial fallout from the global financial crisis, a leading building association has said.

New Australian Bureau of Statistics (ABS) figures show work on new residential dwellings fell by 6.3 per cent to an annualised worth of $33.3 billion in the March quarter. Work on detached houses also dropped 8 per cent to $22.8 billion.

Master Builders Australia CEO, Peter Jones, said the figures are an indication of tough times ahead for the building and construction industry.

“Commercial builders are being choked by tough lending criteria imposed by financial institutions and funding issues, and softening market conditions will leave a significant hole in activity,” he said.

However, despite the gloomy outlook, Jones expects the residential building sector will recover later in the year as lower interest rates and government initiatives drive an upturn in the market.

“Confidence is missing a link,” he said. “Once the economic situation has stabilised, a housing upswing will gather momentum.”

The Housing Industry Association (HIA) claims the ABS figures reinforce the urgency of rolling out the federal government’s plan for 20,000 public and community housing dwellings. 

HIA Chief Economist, Dr Harley Dale said the initiative creates a “strong prospect” to reverse the situation later in the year.

“This is important for employment in construction and in related manufacturing and service sectors,” he said.

Teamed with the First Home Owner Boost and record—low mortgage rates, experts say a stream of government initiatives will help turn around the decline in new home building activity.

“A massive pipeline of work that is yet to be done should cushion the fall and offset weakness in building and engineering activity,” Jones said.