Australia's construction giants face a challenging 2009 despite falling interest rates, government infrastructure spending and a boost to home buyer grants.
Most builders and materials manufacturers have scaled back their profit forecasts for this financial year because of the economic downturn and sluggish housing market.
An easing in monetary policy has provided some hope for a housing turnaround after the Reserve Bank of Australia (RBA) undertook aggressive interest cuts each month since September.
The RBA has made home ownership more affordable with its four consecutive rate cuts, bringing the official cash rate down by three basis points to 4.25 per cent.
Further cuts are tipped for the new year, with some economists forecasting the cash rate to reach 3.50 per cent by the end of June.
The federal government also stepped in with a raft of measures to boost the economy.
It has doubled the first home owners grant to $14,000 and raised it to $21,000 for those buying or building a newly constructed home.
But it will take time for these measures to translate to a boost in housing activity, experts say.
And they also say nothing will save builders and suppliers for a dismal 2009.
"This financial year is a write-off for the construction industry," one analyst told AAP.
"The focus is now on the second half of calendar 2009."
Australia's peak housing body, the Housing Industry Association (HIA), predicts housing starts in 2008/09 to fall by seven per cent compared with the previous year.
The HIA also says consumers are likely to remain cautious, given the economic downturn.
"We will be into 2009, possibly some months through, before these lower interest rates translate into a significant stimulus to housing sector expenditure," HIA chief economist Harley Dale said.
Major building products companies have factored the lag into their results, with Boral Ltd and CSR Ltd both cutting back earnings forecasts on first quarter results.
Each company expects similar or slightly weaker annual results compared with the previous year.
CSR, which supplies building products to the local market, has already cut about 400 jobs at its building products division, and management continues to review the structure of the company.
Managing director Jerry Maycock has hinted a restructure could be on the cards, although the economic conditions will play a significant role in the timing.
While Australia's housing market is in a downturn, other construction companies, particularly James Hardie Industries NV, have a bigger headache to deal with.
The US housing market is in the doldrums, with starts tumbling by 18.9 per cent in November from a month earlier to a fresh record low.
US housing starts are down 47 per cent on the previous year and the data suggests the bottom has not yet been reached.
"The US market faces a longer-term issue of oversupply, and their economy is going backwards at a rate of knots, so the situation there is much worse than the domestic market," an analyst, who declined to be named, said.
James Hardie, which derives about 80 per cent of its earnings from the US, has so far shut down two of its production plants there.
Chief executive Louis Gries told the market in November the company was bracing for further lean times in the US.
"It's going to be a very quiet (northern hemisphere) winter in our view," he said.
James Hardie's ongoing legal stoushes are also taking their toll, with legal fees soaring since the Australian Investments and Securities Commission (ASIC) began civil action against former executives and directors of the company in the NSW Supreme Court.
The ASIC action began in September and is likely to run well into 2009.
Also feeling the pinch in the US is Boral, which has mothballed several of its US brickworks and cut its American workforce by 40 per cent throughout 2008.
However, chief executive Rod Pearse remains optimistic, telling AAP in November the US market usually bounced back from downturns.
"It may go lower, but it normally would bounce back pretty quickly," Mr Pearse said at the time.
One builder apparently doing better than most is Leighton Holdings Ltd, the country's largest developer and contractor.
Chief executive Wal King has been talking up the company's ability to ride out the economic storm due to its diversity and record level of work on its $36.1 billion order book.
A major contributor for Leighton is the construction boom, which got a further kick along with the Rudd government's proposed national infrastructure work.
Prime Minister Kevin Rudd has pledged $4.7 billion for work on railways, roads and education infrastructure, $2.5 billion of which is new spending.
The investment is touted as the latest bid by the government to jump-start the economy and prevent rising unemployment.
And more spending has been flagged for 2009.
Such moves provide a glimmer of light for the nation's builders, ensuring the record level of infrastructure building continues well into the future.
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