Building slump hits forestry

By PAULA OLIVER

A post-GST slump in Australian home building is starting to affect local timber exporters, and analysts say it could be several months before the industry picks up.

There was a boom earlier this year when Australians rushed to complete homes before the new tax pushed construction prices up.

But prices have now increased as much as 9 per cent, and building approvals have dropped a quarter since January. Up to 100 building workers have already been laid off.

Research company BIS Shrapnel has predicted that the slump will continue for two years, also affecting office, hotel and retail building.

Carter Holt Harvey and Fletcher Forests confirmed yesterday that they had begun to feel the effects of the slump, but both New Zealand forestry companies said they had been expecting it and had made preparations.

"The short answer is yes, we have been impacted by changes in demand in Australia," Fletcher Forests spokeswoman Ginny Radford said.

"But it's not earth-shattering, because we are pursing a number of strategies to minimise the downturn."

Carter Holt Harvey, announcing an impressive first-quarter result last week, said that activity in the Australian construction market was lower than before the introduction of GST.

"We're still looking at the detail of the numbers, but there is certainly a correction occurring after the high-level activity pre-GST," said the marketing general manager for wood products, Scott Fuller.

"Whilst the June results are quite a way down, before GST they were at their highest ever, so the real impact is yet to come."

Mr Fuller said Carter Holt had spent the past three months preparing for the downturn and was being careful not to build up stocks in areas where they were not needed.

Appliance company Fisher & Paykel, which has a factory in Australia and accounts for about 30 per cent of the washing machine and fridge market, said it had not yet felt any impact from the downturn.

Corporate affairs manager Richard Blundell said sales before the introduction of GST had been huge, but July had stayed strong as well.

"Many think the driving force for our products is new-home startups, but we believe that's more true of dishwashers and cookers," he said.

"Fridges and washing machines, which are a much bigger part of our business, are more confidence-related purchases, and there hasn't been a drop in confidence yet."

Mr Blundell said the Olympics could carry through a strong feel-good factor, similar to that surrounding the America's Cup, and that could keep business confidence high.

Auckland Specialist Timbers owner Chris Wiffen said his company, which exports gum and radiata pine to Australia for flooring, joinery and furniture, was still feeling the effects of a boom.

"We're still very busy, and earlier it was so busy we couldn't get enough timber over there to keep up," he said.

"Our people over there are not laying anybody off."

It had been hoped that a $7000 grant from the Australian Government for first-home buyers after the introduction of GST would cushion the impact.

But Australian building industry representatives say the grant applies to purchases of existing homes as well, giving no incentive for people to build.