NO. 18— DECEMBER 2006 Newsletter At the Annual General Meeting held on 26 October 2006, the following Councillors were re-elected to the Board: Danny Gattone Swadlings Timber & (President) Hardware Peter Hutchison MiTek Australia (Vice President) Simon Olding Simon B Olding P/L (Vice President) Glenn Barkman Koala Timber Products Robert Frost Tasman KB Ron Gattone Crescent Timber & Hardware Ian Halliday Harper Timber John Harrison Harrison’s Timber & Hardware Norm Harrison Australian Timber Industries Nils Koren Gunnersen Michael Swan Swan Le Messurier Germano Tomassetti ITI (NSW) Limited John Walker Belmont Timber New Appointment to the Board: Brian Ziebell The Laminex Group TABMA welcomes Brian Ziebell as a new board member. TABMA would also like to thank those board members who continue to show support for our organisation by again standing for election. Without their support our Association would not be where it is today. TABMA BOARD 2007 CHIEF EXECUTIVE OFFICER’ S REPORT The past year has been a particularly tough year for both members and your association. The major downturn in the industry is being felt by everyone with a number of members closing their doors. The industry is also still going through a period of rationalisation with several smaller traditional operations merging or simply getting out of the industry. This is continuing to restrict growth in membership numbers. Our vision “ To be the Peak Association of the Timber and Building Materials Industry on a National Level. To continue to represent and assist members and industry participants in the improvement of their businesses” is now coming to fruition with the establishment of TABMA (Aust) Ltd. Much of the board’s time has been focused on commercial activities including the purchase of a property, establishment of a Pine handling facility at Port Kembla and the formation of a National association. The purchase of commercial premises at Pyrmont was a sound strategic decision and will help secure TABMA’s long term future both through rental income and the development potential of the site. I would like to acknowledge the continued support of suppliers to our industry including the timber wholesale sector especially their sponsorship of TABMA’s activities including our premiere event, The TABMA Annual Awards. Also, I acknowledge the support and contribution of the TABMA board during a year where several important commercial decisions were made. The TABMA board represents a good cross representation of our industry including merchants, fabricators and suppliers.
Transcript
NO. 18— DECEMBER 2006
Newsletter
At the Annual General Meeting held on 26 October 2006, the following Councillors were re-elected to the Board:
Danny Gattone Swadlings Timber & (President) Hardware
Peter Hutchison MiTek Australia (Vice President) Simon Olding Simon B Olding P/L (Vice President) Glenn Barkman Koala Timber Products
Robert Frost Tasman KB
Ron Gattone Crescent Timber & Hardware
Ian Halliday Harper Timber
John Harrison Harrison’s Timber & Hardware
Norm Harrison Australian Timber Industries
Nils Koren Gunnersen
Michael Swan Swan Le Messurier
Germano Tomassetti ITI (NSW) Limited
John Walker Belmont Timber
New Appointment to the Board:
Brian Ziebell The Laminex Group
TABMA welcomes Brian Ziebell as a new board member.
TABMA would also like to thank those board members who continue to show support for our organisation by again standing for election. Without their support our Association would not be where it is today.
TABMA BOARD 2007
CHIEF EXECUTIVE OFFICER’S REPORT
The past year has been a particularly tough year for both members and your association. The major downturn in the industry is being felt by everyone with a number of members closing their doors. The industry is also still going t h r o u g h a p e r i o d o f rationalisation with several smaller traditional operations merging or simply getting out of the industry. This is continuing to restrict growth in membership numbers. Our vision “To be the Peak Association of the Timber and Building Materials Industry on a National Level. To continue to represent and assist members and industry participants in the improvement of their businesses” is now coming to fruition with the establishment of TABMA (Aust) Ltd. Much of the board’s time has been focused on commercial activities including the purchase of a property, establishment of a Pine handling facility at Port Kembla and the formation of a National association. The purchase of commercial premises at Pyrmont was a sound strategic decision and will help secure TABMA’s long term future both through rental income and the development potential of the site. I would like to acknowledge the continued support of suppliers to our industry including the timber wholesale sector especially their sponsorship of TABMA’s activities including our premiere event, The TABMA Annual Awards. Also, I acknowledge the support and contribution of the TABMA board during a year where several important commercial decisions were made. The TABMA board represents a good cross representation of our industry including merchants, fabricators and suppliers.
g Most Improved Establishment Swan Le Messurier g Exceptional Customer Service GBS Mitre 10 g Trainee of the Year Nathan Lee GOLD AWARDS were presented to: g Best Building Materials Centre - State New Line Building Supplies g Best Frame & Truss Operation - State Oxley Timber Company - Goulburn g Supplier of the Year ITI NSW Pty Limited g Wholesaler of the Year Hyne Timber - Cameron Park g Member of the Year Swadling’s Timber & Hardware - Rosebery g Sales Representative of the Year Wayne Prosser - Tasman KB g Apprentice of the Year Anthony Shakar
Finally I would like to thank members for support of the association in particular the use of our commercial activities including group training, recruitment and BTC.
What a fantastic night! The 2006 Annual Awards Presentation & Dinner was held in the Grand Ballroom, Hilton Sydney on Saturday 18 November. The event was attended by over 400 industry representatives from all sectors of the industry. The evening recognised and paid tribute to those in our industry who have excelled in their chosen field. After a sumptuous three course meal guests were entertained by David Campbell and the lively band The Anthill Mobb, who managed to keep the groovers dancing away until midnight.
And the winners are…. g Best Building Materials Centre - City New Line Building Supplies g Best Building Materials Centre - Country GBS Mitre 10 g Best Frame & Truss Operation - City Austek Frames & Trusses g Best Frame & Truss Operation - Country Oxley Timber Company - Goulburn g Best Traditional Timber Yard Peninsula Timbers g Best Specialist Timber Merchant Fedwood Pty Ltd g Host Trainer of the Year Austimber Supplies Pty Ltd g Best Timber Manufacturing Operation Annandale Timber & Mouldings g Best Building Supplies Warehouse over 6,000 sq m Magnet Mart—Albion Park Rail
ANNUAL AWARDS PRESENTATION AND
DINNER
Kevin Collison (CEO TABMA), Deanna Kearns (Executive Officer TABMA Qld), David Campbell,
Ros Scarcella and Mary-Ann Duggan from TABMA
TABMA thanks the following companies for their valued support of our Awards Night.
Without them our event would not be possible.
gold sponsors
Side loadersSide loaders
silver sponsors
TABMA thanks the following companies for their valued support of our Awards Night.
Without them our event would not be possible.
bronze sponsors
The European House Borer (EHB) was detected in the Perth suburb of Parkerville in 2004. At the time of detection Department of Agriculture entomologist Peter Davis said this was the first time this serious timber pest had been found in the state. The borer has now been detected at 102 sites in the Perth metropolitan area, mainly in the Perth Hills and Gnangara/Ellenbrook areas. "It is a destructive pest of untreated seasoned softwood timbers commonly used for structural purposes in Australia. Furniture made from pine and other softwoods is also susceptible to attack,” said Mr Davis. Recently Western Australian EHB Response teams have driven every road below the 26th parallel, from Geraldton to Esperance for the third time in the search for the EHB. EHB Response Director Lisa Christy said the most recent survey has found no indication that EHB has moved outside the Perth metropolitan area. “While EHB has never been found outside of Perth, the EHB Response undertakes the delimiting task annually to confirm the pest remains contained to the metropolitan area.” “This year, we have still not found any evidence that EHB has moved into rural areas and new regulations limiting the movement of untreated pine should help to keep it that way.” Regulations introduced in Western Australia February of this year prohibit the movement of untreated pine out of affected areas without undergoing treatments and receiving approval from EHB Response staff.
Graham Whyte, new Executive Officer for TABMA WA currently represents our industry on
the Industry Consultative Committee—European House Borer.
The new structural pine standards – and the intended introduction to the market of significant volumes of SP graded product – have been shelved for the time being. As sections of the timber and housing industry started to come to grips with a new set of grades, other sectors, particularly truss and frame fabricators, designers and specifiers, were uneasy about the timing of the introduction. Announcing the deferment “until market conditions are more acceptable”, the Australian Plantation Products and Paper Industry Council (A3P) is resolute that the new SP grading system will be introduced – but it has given no time frame for such an outcome. “We believe the new SP graded product will benchmark the latest Australian and international structural timber production technology and associated new generation quality assurance principles,” said A3P chief executive Neil Fisher. “A3P will use this opportunity to spend additional time formulating a more effective
RESPONDING TO THE EUROPEAN HOUSE BORER
THREAT IN WESTERN
SP TIMBER GRADES BACK ON THE
DRAWING BOARD
process for the introduction of SP grades and finalising the two industry standards providing the documentation framework for SP grades. Work will continue on the inclusion of SP grades information in relevant codes and standards.” Mr Fisher said the breathing space would help ensure a smooth transition of the program in the future. A3P was the driving force behind the new standards and the Timber Development Association (NSW) took on management of the project developing the information resource for the industry. SP grades comprise four grades allowing lower grade to take the places of F4 and F5 material, often graded lower than MGP10 grade. The production of SP grades requires a new control on the stiffness property “E” for SP1, SP2 and SP3. This means users can expect less differential deflection between elements such as trusses in roof structure, particularly with SP3 grade as SP1 and SP2 are naturally less variable within the grades. SP4 does not have this control and it is not recommended for truss chords and other deflection-critical applications. Hundreds of thousands of dollars have been invested in the initial roll out of SP information – both in Australia and New Zealand – as new span tables, standards and codes were prepared for engineers, surveyors designers, TAFE teachers and presented at conferences and meetings. But introduction of structural pine grading appears inevitable at some future point and when this does happen, and standardisation and quality issues are resolved, the investment of time and money in the program will be largely redeemed.
A delegation of 18 members from the Chinese building industry visited TABMA on Friday 1 December. Kevin Collison welcomed the delegation and gave a brief overview of the structure and function of the Australian timber industry. Mr Stephen Mitchell from Timber Development Association briefly explained: • The Australian Standard for residential and
multistory constructions • Energy efficient requirements of Australian
housing standards • building recycling and waste management
systems in Australia. Mr Sun Xiangyuan, Vice President China Building Materials Industry Association (CBMIA) explained the CBMIA structure: • 15,000 members • 1000 employees, 14 departments, 9 divisions • currently contracted to regulate and enforce
part of China’s building standard • current contracted to import and regulate
treated timber products from United States. Following a gift giving ceremony at TABMA, the group participated in a tour of Swadling’s Timber & Hardware at Bankstown and Hyne Timber at Prestons. Mr Sun said he was very keen to establish a relationship with TABMA to build the channel between Australia and China for member’s benefits.
CHINESE DELEGATION VISIT
The international trade in illegally logged timber is a major problem for a number of countries in the developing world. The practice causes environmental damage, costs governments billions of dollars in lost revenue, undermines the rule of law, funds armed conflict and lowers the price of timber in importing countries. Consumer countries contribute to these problems by importing timber and timber products without ensuring that they are legally sourced. It is estimated that illegal or suspected illegally sourced timber and timber products account for about ten percent of Australia’s timber imports, or around $400 million in value each year. TABMA’s chief executive, Kevin Collison recently returned from a conference in Port Moresby, Papua New Guinea (PNG) hosted by the PNG National Forest Authority and the International Tropical Timber Organisation to outline the steps the Australian Timber Importers Federation (ATIF) is taking to guard against the importation of illegally sourced timber from its overseas suppliers.
ATIF working to develop credible timber verification processes.
At the conference Mr Collison explained that ATIF had a commissioned report setting out actions proposed by members and other timber importers in response to the Federal Government’s 2004 election pledge to work co-operatively with the timber industry to inhibit the import of timber that could not be verified as having been sourced from legal forest operations. ATIF has been working closely with the Federal Government on this issue.
Mr Collison also outlined the use of the Australian Customs Services databases to track the origins of timber products and the collaborative relationship the Australian Department of Foreign Affairs and Trade that facilitated cross checking with customs databases. Also speaking at the conference PNG Forest Industries Association executive officer Bob Tate said the PNG forest industry would have difficulty expanding unless the Government improved its current policy framework. "The capacity of the government to manage sustainable forestry needs to be expanded. Systems that give business partners confidence that the industry is complying with national laws and regulations are a priority." Summarising the Australian position Mr Collison said ATIF members were endeavouring to source timber and timber products from lawful, well managed forests and plantations. “ATIF members recognise that the independent qualification of forests and the process chain is the most useful tool in providing assurances that the timber they deal in comes from lawful and well managed forests.” “The ATIF will be placing energy into the adoption of processes that can verify legality through dealings with suppliers,” said Mr Collison. He added that importers and the Australian Government were working to develop self regulatory mechanisms and that the ATIF would be working with key countries and the Federal Government to develop recognisable and credible verification processes.
PNG venue for International Tropical Timber Organisation Conference on illegal logging
PUTTING THE CASE FOR LEGALLY VERIFIABLE
TIMBER IMPORTS
Conservation Eric Abetz, said the document set out practical measures to assist South East Asian and Pacific countries combat illegal logging, “Australia’s domestic forest industry, are key planks of the Howard Government’s draft illegal logging policy. This blueprint builds on the Government’s 2004 election commitment to protect another 180,000 hectares of rainforest in Tasmania,” he said. “The Government’s commitment to this protection doesn’t mean it will countenance the importation of more illegal timber products from places, such as South East Asia and the Pacific.” “This plan provides practical and workable measures to help protect the world’s forests and ensure they are harvested in a legal and sustainable way,” said Minister Abetz. Key elements outlined in the discussion paper include:
• Working with other countries to combat illegal logging.
• Grow, diversify and value add the domestic industry to reduce the need to harvest tropical rainforests.
• Pursue illegal logging at bilateral and multilateral forums.
• Raise market and consumer awareness. • A code of conduct for importers. • Examine government procurement
guidelines in relation to the sourcing of timber products.
Minister Abetz indicated that the paper does not impose a blanket ban on illegal timber products, which would be not only impractical due to chain of custody issues, but also result would also prevent legal timber coming into Australia. Responding to the release of a discussion paper Chairman of the Australian Timber Importers Federation (ATIF) Barry Warren, confirmed that international trade in illegally logged timber was a major problem for a number of countries in the developing world. Mr Warren advised that the ATIF was taking significant steps to guard against the future importation of illegally sourced timber. “A report that we commissioned sets out actions proposed by members and other timber importers in response to the Federal Government’s commitment to control the import of illegally sourced timber.”
Port Macquarie will be the location of what is being called Australia’s first fully sustainable village. White roads, water troughs and solar powered homes will be part of futuristic Magpie Village concept where construction is due to commence in January 2007. The 65 lot village will be built on an old dairy farm near Port Macquarie. A spokesperson for the project said homes would generally not have air conditioning and would not be connected to mains water or sewerage systems. The village would be about five degrees cooler than neighbouring suburbs due to its white roads, which will be lined with a canopy of trees. "Black wide roads without tree shading and dark roofs are known to increase temperatures significantly." Knee-high water collection troughs along each street will channel water into a dam. Edible vegetation will be grown on top of the troughs to "allow people to walk along and eat grapes off a vine". Solar cells will generate enough power to run all modern appliances and have enough left over to sell to electricity companies. Homes would be connected to the main electricity grid for emergency purposes. Residents would be allowed to use their own cars, but there would be a number of community hybrid fuel cars available for use. The 65 lots measuring 700 square metres each and costing $200,000 were released for sale recently. It is estimated that homes complying with sustainable guidelines will cost between $150,000 and $400,000 each to build.
In releasing a discussion paper: Bringing down the axe on illegal logging – a practical approach, Federal Minister for Fisheries, Forestry and
ILLEGAL LOGGING DISCUSSION PAPER
RELEASED
FIRST SUSTAINABLE VILLAGE ON DRAWING
BOARD
Eric Abetz, Federal Minister for Fisheries, Forestry and Conservation – paper sets out practical, workable measures to help protect forests and ensure they are harvested in a legal
and sustainable way.
The Australian Government has approved the formation of a new company to promote the timber industry. Forest and Wood Products Australia (FWPA) will provide generic marketing and promotion of the environmental credentials of timber, as well as providing research and development services to the industry which are currently undertaken by the Forest and Wood Products Research and Development Corporation (FWPRDC). Chief executive of the National Association of Forest Industries (NAFI) Catherine Murphy, said the announcement is great news for the forest industry. “FWPA will enhance opportunities for the forest industry through access to new markets domestically and internationally, as well as promoting the green credentials of timber.” “NAFI is also pleased to note that the Australian Government has agreed to match the current levies paid by timber importers. This will result in an additional $700,000 being available specifically for research and development,” said Ms Murphy. “Support of the formation of the new body was demonstrated by an industry ballot held earlier this year. With funds from a new growers’ levy and an increase to the current hardwood sawlog levy, FWPA will take a significant role in maximising the research, marketing and promotional opportunities for the forest industry,” she concluded.
“We will most certainly be working co-operatively with the Minister and the industry to inhibit the import of timber that cannot be verified as having come from legal forest operations,” he said. The release of a discussion paper was also welcomed by the TABMA. National President Danny Gattone said that the practice of illegal logging exploited foreign resources and exposed the Australian timber industry to the unsavory practice of bypassing timber obtained from legal sources. “We believe it is important for Australia to act decisively on the issue of illegal timber trafficking to both help protect the integrity of our own leading-edge, sustainable timber industry and to strengthen our credentials as responsible stewards of the world’s forests.” “The Australian public has a right to expect vigilance on this issue. The Government and Senator Abetz are to be congratulated on the release of the discussion paper,” Mr Gattone said. “The Minster can be assured that TABMA is totally supportive of his efforts to bring this environmentally and socially damaging practice to a close.” Mr Gattone confirmed that voluntary compliance procedures to address the issue of timber import verification struck the right balance and would receive industry backing. “A blanket ban would merely serve to damage legal timber operations and positive moves to implement sustainable forest management practices by some of Australia’s northern neighbours.” “We really want to be able to continue to support efforts to improve sustainable timber production activity that is legally based and independently certified,” said Mr Gattone. TABMA Chief Executive Officer and ATIF Executive Officer Kevin Collison said ATIF members recognise that independent third party forest management and process chain certification is the most useful tool in providing assurances that the timber they deal with comes from lawful and well managed forest operations.” Mr Collison applauded the decision of the Federal Government to work to develop self regulatory mechanisms and reinforced the intention of the ATIF to work with the Government and key supply countries to develop credible timber import verification processes.
TIMBER PROMOTION COMPANY TO BE FORMED
“The initial results of the timber framing construction trialing are promising,” says Mr O’Neil. ”If home owners and builders continue to use and to expand timber framed construction it will bring considerable benefits to the pine timber frame and truss industry – plus contribute to the continuing growth of the economy in the West.” Confirming Mr O’Neil’s views on the shortage of trades in the building industry, West Australia’s Housing Industry Association Executive Director John Dastlik, said that while the skills issue is a national industry wide problem, the current shortage of new housing in the resource rich regions of Western Australia and regional Queensland is likely to hurt job prospects and economic growth in the years ahead. A shortage of brickies and availability of pine framing has seen
timber framed, brick veneer construction being trialed in Western Australia.
The NSW parliament has made a number of further significant changes to NSW industrial relations laws in response to the Work Choices amendments to the Workplace Relations Act. The Industrial Relations Further Amendment Act 2006 amends the Industrial Relations Act 1996 (NSW) (IR Act), the Occupational Health and Safety Act 2000 (NSW) (OHS Act) and the Workers Compensation Act 1987 (NSW) (WC Act). Most relevantly, the Act: • provides a state avenue for an employee to
seek relief following their dismissal, based upon a breach of the NSW OHS Act;
• ensures employees on workers
Catherine Murphy , chief executive, NAFI: Formation of timber promotion company great news for industry.
Double brick has been the traditional home construction method in Western Australia for decades. However, as the rest of Australia knows things are on the move in the West. The growth of the state’s economy is outstripping that of China, unemployment is at rock bottom and innovation is the catch cry. According to the chairman of TABMA Western Australia, John O’Neil, in the middle of all this economic activity is a housing boom that the eastern states can only dream about. But he adds that in the midst of this economic expansion, like some eastern states, Western Australia is experiences an acute skills shortage. Nowhere more so says Mr O’Neil than in the housing industry. One of the major constraints has been that traditional double brick construction needs plenty of brickies - and they are thin on-the-ground. “So builders have been trialing brick veneer construction with timber framing and trusses.” Although well established in eastern states, this building construction method has, until relatively recently, been unfamiliar over large areas of Western Australia. However, Mr O’Neil says a combination of a major shortage of brickies and the availability of good quality pine framing, both treated and untreated, has seen timber framed becoming more common. “It provides a much quicker method of construction with some related cost savings and can be supported by modern, effective whole-of-house termite protection systems.”
TIMBER FRAMING MOVEMENT IN THE
WEST
NEWS UPDATE INDUSTRIAL RELATIONS FURTHER AMENDMENT
NSW WC Act and expanded to cover all "workers" as defined in the WC Act. These ‘injured employee’ provisions prohibit terminating an employee, who is not fit for employment because of a compensable injury, within six months of the worker first becoming unfit (or within the period of accident pay specified in the relevant award, agreement or NAPSA if that period is longer). The provisions also provide that an employee who is lawfully terminated because of his or her injury has a right to return to work within two years of the termination, if fit to resume work. The period of 2 years may be extended by the NSW Industrial Relations Commission in special circumstances. Replacement employees must be informed of the injured worker’s right to return to work. Failure to inform a replacement employee of the injured worker’s right to return to work is an offence. These injured worker provisions apply whether or not the employer is covered by Work Choices. NSW IRC as Free Lance Dispute Resolver 3. The amending Act also facilitates the NSW Industrial Relations Commission providing dispute resolution services to parties covered by Work Choices and to hold joint sittings with other state tribunals in matters with implications beyond NSW. Under the model dispute procedure introduced by the Work Choices amendments to the Workplace Relations Act, the Australian Industrial Relations Commission is required to resolve disputes between parties where they cannot agree on who should p rov ide d ispu te resolution services. All of the changes discussed above commenced on 1 December 2006.
(Australian Business Lawyers—Phone: 9458 7005)
compensation who are dismissed because of their injury or illness are still protected by NSW laws; and
• facilitates the NSW IRC acting as an alternate dispute resolution provider.
OH&S Termination 1. The NSW OHS Act has been amended to provide for reinstatement by the Industrial Court where an employee is terminated in breach of the OHS Act (for example, for making an OHS complaint, being an OHS representative or exercising some other function under the OHS Act). Where reinstatement is impracticable, the Court can order compensation of up to 6 months remuneration. If the employee establishes that one of these matters occurred or existed it is presumed that the employee was dismissed for that reason. To rebut the presumption an employer must show that the matter was not a substantial and operative cause of the dismissal. These provisions apply whether or not the employer is covered by Work Choices. Corporate employers should expect that dismissed employees will seek to rely on these provisions as an alternative to an unfair dismissal claim. This is particularly likely to be the case where the employee is excluded from the federal unfair dismissal scheme - for example, because the employee has less than 6 months service or where the employer employs 100 employees or less. Whilst, a similar claim may be brought federally as an unlawful termination claim, employees and their representatives may consider the NSW process as a simpler one and choose it. Terminating or victimising an employee for these reasons is also: (a) an offence under the OHS Act. A first offence by a corporation carries a maximum penalty of $27,500 (individual - $16,500); and (b) prohibited conduct under the federal Workplace Relations Act, exposing a corporate employer to a pecuniary penalty of up to $33,000. Workers Compensation Related Terminations 2. The "injured employee" provisions currently in the NSW IR Act have been moved to the
Overview
Having declined in the previous three quarters, work done on all new housing increased by 3 per cent in the June quarter of 2006. But activity was still 6 per cent lower than a year earlier. Work done on new houses rose by 3 per cent but was nearly 4 per cent less than a year ago. Work on multi-units increased by 5 per cent and was 11 per cent lower than a year earlier. New housing activity fell by 5 per cent in the ACT but was higher in every state and in the NT. Activity edged up by less than 1 per cent in NSW and SA, but rose by 7 per cent in Victoria and Tasmania, by 5 per cent in WA and by 4 per cent in Queensland. Work on national housing renovations rose by 3 per cent but was 4 per cent lower than a year ago. Over the year to June, activity fell in NSW (-5%), Victoria (-11%), SA (-10%), the NT (-7%) and the ACT (-8%) but increased in Queensland, WA and Tasmania. The trend in dwelling approvals reached a trough of 147,000 a year last March: well below the underlying requirement for about 156,000 new homes in 2006/07. The trend rate has since been rising and reached 153,000 in the June quarter and 159,000 in the September quarter. Approvals were then trending downward in Queensland, SA, WA and the NT. Elsewhere, however, the trend was upward. Housing loans to both owner-occupiers and investors eased in August but, at $16 billion for the month, remained high. Loans approved in August were 4 per cent higher than in October 2003, when total lending was at its previous peak. Recent rates of household borrowing for housing suggest a sustained interest in the housing market, despite relatively high house prices and increased interest rates. Housing starts fell by 4 per cent in 2005/06, to 150,800. They are forecast to rise by 2 per cent to 154,000 in 2006/07.
Outlook for Housing Geoffrey Bills December quarter 2006
Welcome to Outlook for Housing: a quarterly publication that aims to keep clients up-to-date with the latest housing market trends.
Work Done on Housing, Australia
5
10
15
20
25
30
35
Sep '03
Dec Mar '04
Jun Sep Dec Mar '05
Jun Sep Dec Mar '06
Jun
$ billion Chain volume measures, base 2004/05 at seasonally-adjusted annual rates
New multi-units
New houses
All new housing
Housing renovations
Dwellings Approved, Australia
0
20
40
60
80
100
120
140
160
180
200
Dec '03
Mar '04
Jun Sep Dec Mar '05
Jun Sep Dec Mar '06
Jun Sep
Trend values, at annual rate'000
Total
Houses
Multi-units
Housing Loan Approvals, Australia
0
2
4
6
8
10
12
14
16
18
Owner-occupier Investor Total
$ billion
2000
Monthly, seasonally adjusted
2001 2002 2003
+4%
35%35% 42% 45% 43%
Investors % total:
2004
August 2006from 2003 peak:
+21%
-16%
2005
39%
2006
38%
Consumer Confidence Near Normal
85
90
95
100
105
110
115
120
125
Oct '03 Oct '04 Oct '05 Oct '06
Index
10-year average
Source: Westpac-Melbourne Institute
Recent Trends In the year to March 2006 Australia’s population increased by 263,200, 11 per cent more than the increase in the previous year to March and the biggest increase since 1989. Natural increase added 128,700 people and net immigration 134,500. The biggest increase was in Queensland, where population grew by 80,200, compared with growth of 65,700 in Victoria, 56,900 in NSW, 38,600 in WA and 11,900 in SA. Compared with the previous year, population growth increased in all states and territories except Queensland. The underlying requirement for new housing in Australia is forecast to rise from 154,000 last year to 156,000 in 2006/07. Requirements in NSW are forecast to increase to 40,000. In Victoria they are expected to stay at 40,000 but in Queensland to ease to 37,000. In the September quarter of 2006, the trend level of dwelling approvals increased to an annual rate of 159,000: slightly above national requirements of 156,000. The trend in approvals was below 2006/07 requirements only in NSW, Tasmania and the NT. Approvals were trending downward in SA, steady in WA and rising in all other states and territories. Although stronger population growth creates a need for new housing, relatively weak consumer confidence and poor affordability will dampen effective demand. Consumer confidence collapsed in August, following the rise in interest rates and soaring petrol prices. It has since recovered to near its long-term average. The November rise in interest rates, which took the cash rate to 6.25 per cent, should continue to dampen confidence. But it is likely to be the last increase in this cycle. We see interest rates coming down in the second half of 2007. With unemployment low and incomes rising strongly as a result of the boom in commodity prices, consumers are nevertheless likely to remain reasonably confident.
The Outlook In its latest forecasts (September 2006) the International Monetary Fund estimates that the world economy grew by 4.9 per cent in 2005. It forecasts continued strong growth of 5.1 per cent in 2006 and 4.9 per cent in 2007. We expect growth in the Australian economy to increase from 2.7 per cent in 2005/06 to 3.6 per cent in 2006/07 and to 4 per cent in 2007/08. Work on new housing, which fell by 5 per cent in 2005/06, is forecast to increase by 1 per cent this financial year and by 5 per cent in 2007/08. The burden of household debt is at record-high levels. In the March quarter of 2006, interest paid was 10.9 per cent of after-tax income: higher than in 1989, when interest rates were around 17 per cent. Households are very vulnerable to any increase in interest rates. In the September quarter of 2006, the affordability of housing to first-home buyers in Australian capital cities fell by 4 per cent. The August increase of 0.25 per cent in interest rates, combined with a rise of 3.3 per cent in house prices, outweighed a slight rise in household incomes to push affordability lower. Housing became less affordable in all capitals except Sydney, where house prices continued to fall. New ABS indexes of established house prices show that in the June quarter of 2006, capital city house prices were 6.4 per cent higher than a year earlier. The contrast between capitals remained stark. In Sydney, prices had fallen by 0.5 per cent, but in all other capitals they had increased: by 5 per cent in Brisbane, 6 per cent in Melbourne, 7 per cent in Adelaide and Hobart, 19 per cent in Darwin and by 35 per cent in Perth. Starts of new dwellings fell by 4 per cent to 150,800 in 2005/06: houses by 1 per cent to 103,500, multi-units by 10 per cent to 47,300. In 2006/07, starts of both houses and multi-units are forecast to increase by 2 per cent, taking total dwelling starts to 154,000. Higher interest rates and poor affordability are expected to keep the coming recovery modest. A further rise of 4 per cent to 160,000 is expected in 2007/08.
