Construction industry woes

The construction industry downturn continues, after Sydney-based building group St Hilliers Construction announced on May 16 it had been placed in voluntary administration because its funding had run out.
The construction industry has suffered some of the highest insolvency rates when compared to other sectors, with the continued downturn in home building adding to the turmoil.
The collapse also comes as building experts say it will take a few months for interest rate cuts to flow through to SMEs.
St Hilliers Construction, which is the construction arm of the St Hilliers Group, announced it had appointed Trent Hancock and Michael Hird of Moore Stephens as voluntary administrators. Both were contacted this morning, but a reply was not available prior to publication.
The company employs about 350 people.
The business said in a statement this morning that an appointment wouldn't affect the St Hilliers Property group, which is responsible for funds management and property development.
However, it did say that an associated company, St Hilliers Ararat, is part of a consortium contracted to help build the $350 million expansion of Ararat Prison.
St Hilliers Ararat has now been placed in liquidation, and St Hilliers Construction is in voluntary administration due to its exposure under guarantees for St Hilliers Ararat's debt.
"Negotiations over several months between the Ararat Prison equity investors and its bankers in conjunction with the State of Victoria have failed to reach a definitive agreement for additional funding of approximately $150 million," it said.
The company said it could not allow debts to be incurred without sufficient funding and, as a result, it needs to stop work on the Ararat project and place the company into voluntary administration.
Executive chairman Tim Casey said in a statement the action was "very regrettable".
"We have over a number of months explored and exhausted all possible avenues to recapitalise the construction business and find a solution to the significant cost and time overruns on the Ararat Project. Unfortunately a solution was not possible under the current regime."
"We will now work actively and constructively with the administrator and all stakeholders to continue all viable projects and to find a way to restructure the construction business going forward. For the rest of the St Hilliers Group it remains business as usual."

10 whacky projects that survived Swan’s big axe.

Treasurer Wayne Swan’s Budget might have grabbed the headlines for more than $32 billion worth of cuts and savings, but there was still plenty of money for programs and initiatives that are a little unusual.
SmartCompany has scoured the budget papers to find 10 whacky projects that survived Swan’s big axe. While we know these projects are very important for the people involved, and many are quite worth, they still raise a few eyebrows:

1. Slim Dusty statue

The Government will put $30,000 towards the erection of a statue of Slim Dusty and Joy McKean in the country music capital of Australia, Tamworth.

2. Parliament House Walk

There’s $100,000 to conduct a feasibility study into the establishment of a Parliament House Walk from Canberra’s iconic building to its Civic Centre.

3. Cricket under lights in Canberra

Australia’s federal pollies clearly want to get down on a few day/night cricket games in the nation’s capital – the Government will spend $2.5 million as a contribution towards putting up lights at Manuka Oval.

4. Filming The Wolverine

This was one announced before the budget, but it bears repeating. The Government will stump up $12.8 million to attract production of the film The Wolverine to Australia. Hopefully the Prime Minister gets front row seats at the premiere for that sort of dosh.

5. Hosting the G20 meeting

You know those G20 meetings that are good for photo opportunities and not much else? Well, Australia will host one in 2014 and we’ll spend a staggering $326.9 million over the next four years to do so.

6. A right royal scholarship

The 60^th anniversary of the accession of Queen Elizabeth II will be marked with the spending of $400,000 over four year to establish a special scholarship for female leaders. Very worthy, but I’m sure a bunch of flowers for Her Majesty would have been much cheaper.

7. Weather ads

The Bureau of Meteorology will score $300,000 to conduct a trial of running advertising on its website. Apparently the ads won’t pay for themselves then!

8. Microbreweries money

The Government will spend $10 million over the next four years to extend a special excise refund scheme for Australia’s microbrewers. We’ll drink to that!

9. The climate change sell job

Buried in the spending initiatives in the Families, Housing, Community Services and Indigenous Affairs portfolio is a $36.1 million for an information campaign around the household assistance that will be provided under the carbon tax plan. Get ready for an impressive sell job.

10. The tradie ambassadors

The Government will spend $200,000 to establish an Apprentice Ambassadors program that will involve the support of “a number of high-profiled Australians” to promote the idea of doing an apprenticeship. Nice idea, but does it really need that much money?

Australia a glimpse of its economic future By Terry Ryder

I have a conviction, one that is confirmed everywhere I go, that Australians do not comprehend the enormity of what’s coming to our economy.

We’re on the threshold of the greatest period of prosperity in our history and there will be mega repercussions for real estate.
Few people get it. One reason is the numbers are so big as to be meaningless. What does $500 billion (the value of upcoming projects) really mean?
Another reason is the paucity of political leadership. The Federal Government is not selling the message and the Federal Opposition is talking down the nation daily.
A third reason is the negativity of media.

So we have a boom nation with a recession mentality. It’s quite bizarre.
I visited Gladstone recently to speak at a business conference. If anyone wants to study the implications of the resources revolution, Gladstone is a good place to start.
There are seven very large projects under construction in Gladstone. The total investment is about $55 billion and they are creating at least 17,000 construction jobs.
There are a further nine projects regarded as committed to start in coming years. These total about $25 billion in investment and a further 11,000 construction jobs.
The total impact is $80 billion in investment and 28,000 construction positions.
To put that into perspective, let me tell you about Gladstone of the recent past. In the years leading up to the 2008 event known as the GFC, Gladstone had around $20 billion worth of projects on its books.
That generated a tremendous upsurge in real estate demand. There was double-digit price growth in four consecutive years from 2004 to 2008, including more than 30 per cent growth in 2007.
Gladstone’s median house price rose from $230,000 in 2005 to almost $400,000 in 2010, despite a relatively minor decline in 2009 after the impacts if the GFC were felt.
Now ask yourself this question: if $20 billion in investment inspired that kind of real estate growth, what will $80 billion do?
Gladstone today is so alive with activity it’s positively electric. Just try getting a hotel room or a hire car there without booking weeks in advance.
Three of the four massive LNG processing facilities are now under construction, side by side on Curtis Island just offshore. One corporation, the global resources entity Bechtel (amazingly, a private family company), is responsible for building all three.
Dick McIlhattan, manager of Bechtel’s LNG projects in Australia (they’re also doing the $29 billion Wheatstone project in WA), gives further perspective to the gargantuan nature of these enterprises when he says: “The total world production at the moment is 200 to 220 million tonnes per annum. Our four Australian LNG jobs, including the three currently under construction on Curtis Island, will produce 40 to 45 million tonnes per annum.”
McIlhattan calls the three simultaneous Gladstone jobs “unprecedented work”. He says: “I have never seen anything like that in my 40 years in the company. This is something pretty unique.
“All three facilities have capacity to build additional trains. If the world market holds together, there will be a lot of work for a lot of years here in Gladstone.”
The three projects are now progressing from earthworks to the concrete-pouring stage. The labour force is building and eventually 6,000 workers will be accommodated in workers’camps on Curtis Island.
Meanwhile the Gladstone property market cannot satisfy the demand for accommodation. Around the city, which is forecast to double in population in the next 20 years, there are multiple major sites on which developers are rushing to build new housing.
Developers like Devine are planning new master-planned communities and the State Government’s Urban Land Development Authority is trying to fast-track multiple developments to provide “affordable” housing.
How affordable they can be remains to be seen when land values have risen by up to 35 per cent in the past 12 months, according to Queensland’s Valuer-General.
Developments of this nature take time and in the meantime dwelling prices and rents are rising fast.
In the past year suburbs and towns in the Gladstone area experienced double-digit increases in median prices (at a time when all our capital cities declined), with the highest being a rise of 21 per cent in 12 months.
Residential rental vacancies are almost non-existent and rents are rising by at least $100 per week at a time. There are lots of unhappy tenants in Gladstone, especially those not earning the big money on the resources project.

Gladstone’s experience is not unique – there are similar scenarios around Australia, including at Port Hedland and Karratha in Western Australia, the Bowen Basin and Surat Basin areas of Queensland, and the Hunter region of New South Wales.

Chronology of interest rate moves since 1990

The following is a chronology of the Reserve Bank of Australia's interest rate moves since 1990.
Each move is measured in basis points (bp), which are one-hundredths of a percentage point.

May 1 2012 cut to to 3.75 per cent by 50 bp
April 2012 4.25 per cent no change
March 6, 2012, no change 4.25 per cent
February 7,2012 4.25 no change
December 6 2011 Cut to 4.25 per cent
Novemer 1 2011 Cut to 4.5 per cent
October 4 2000 No change
September 6 2011 No change
August 2 2011 No change
July 5 2011 No change
June 7 2011 No change
May 3 2011 No change
April 5 2011 No change
March 1 2011 No change
Feb 1 2011 No change
Dec 7 2010 No change
Nov 2 2010 Up 25 bp to 4.75
Oct 5 2010 No change
Sep 7 2010 No change
Aug 3 2010 No change
Jul 6 2010 No change
Jun 1 2010 No change
May 4 2010 Up 25 bp to 4.5
Apr  6  2010  Up 25 bp to 4.25
Mar  2 2010     Up   25 bp    to   4.00
Dec  1 2009     Up   25 bp    to   3.75
Nov  3 2009     Up   25 bp    to   3.50
Oct  6 2009     Up   25 bp    to   3.25
Apr  7 2009    Down  25 bp    to   3.00
Feb  3 2009    Down 100 bp    to   3.25
Dec  2 2008    Down 100 bp    to   4.25
Nov  4 2008    Down  75 bp    to   5.25
Oct  7 2008    Down 100 bp    to   6.00
Sep  2 2008    Down  25 bp    to   7.00
Mar  4 2008     Up   25 bp    to   7.25
Feb  5 2008     Up   25 bp    to   7.00
Nov  7 2007     Up   25 bp    to   6.75
Aug  8 2007     Up   25 bp    to   6.50
Nov  8 2006     Up   25 bp    to   6.25
Aug  2 2006     Up   25 bp    to   6.00
May  3 2006     Up   25 bp    to   5.75
Mar  2 2005     Up   25 bp    to   5.50
Dec  3 2003     Up   25 bp    to   5.25
Nov  5 2003     Up   25 bp    to   5.00
June 5 2002     Up   25 bp    to   4.75
May  8 2002     Up   25 bp    to   4.50
Dec  5 2001    Down  25 bp    to   4.25
Oct  3 2001    Down  25 bp    to   4.50
Sept 5 2001    Down  25 bp    to   4.75
Apr  4 2001    Down  50 bp    to   5.0
Mch  7 2001    Down  25 bp    to   5.5
Feb  7 2001    Down  50 bp    to   5.75
Aug  2 2000     Up   25 bp    to   6.25
May  3 2000     Up   25 bp    to   6.0
Apr  5 2000     Up   25 bp    to   5.75
Feb  2 2000     Up   50 bp    to   5.5
Nov  3 1999     Up   25 bp    to   5.0
Dec  2 1998    Down  25 bp    to   4.75
Jul 30 1997    Down  50 bp    to   5.0
May 23 1997    Down  50 bp    to   5.5
Dec 11 1996    Down  50 bp    to   6.0
Nov  6 1996    Down  50 bp    to   6.5
Jul 31 1996    Down  50 bp    to   7.0
Dec 14 1994     Up  100 bp    to   7.5
Oct 24 1994     Up  100 bp    to   6.5
Aug 17 1994     Up   75 bp    to   5.5
Jul 30 1993    Down  50 bp    to   4.75
Mar 23 1993    Down  50 bp    to   5.25
Jul  8 1992    Down  75 bp    to   5.75
May  6 1992    Down 100 bp    to   6.5
Jan  8 1992    Down 100 bp    to   7.5
Nov  6 1991    Down 100 bp    to   8.5
Sep  3 1991    Down 100 bp    to   9.5
May 16 1991    Down 100 bp    to  10.5
Apr  4 1991    Down  50 bp    to  11.5
Dec 18 1990    Down 100 bp    to  12.0
Oct 15 1990    Down 100 bp    to  13.0
Aug  2 1990    Down 100 bp    to  14.0
Apr  4 1990    Down 100-150bp to  15.0 to 15.5
Feb 15 1990    Down  50 bp    to  16.5 to 17.0
Jan 23 1990    Down  50-100bp to  17.0 to 17.5

Reuters, BusinssDay