A leading architect has called for a rethink in Australian interest rate policy following signs of what he says will be a significant contraction in activity for the architectural industry in Australia.
Peddle Thorp design director Peter Brook says that a collapse in professional indemnity premiums paid by professional architects to purchase insurance to cover any legal claims which are made against them signifies the likelihood of a significant downturn in activity and a possible recession in the broader Australian economy.
According to a report on Architecture & Design, Brooke says that Peddle Thorpe has received information from some insurance brokers about premiums being reduced by as much as 50 to 60 percent. Given that these premiums reflect the prospective turnover of the industry in the year ahead, he says, these numbers point to a worrying short term outlook for the architectural profession and subsequently, for building and construction and the wider economy.
“The evidence is anecdotal at this stage, but it reflects what people across the industry are saying” Brooke says.
“The architecture profession is heading for a massive slowdown. The warning is written in deep, dark, red ink.
“The building industry is about to freeze up”.
Brooke says architectural indemnity premiums are a leading indicator for the broader economy, and that under normal circumstances, a 10 percent fall in premiums would signify an oncoming recession in the broader economy whilst a 30 percent cut would signify a big recession.
Cuts of the magnitude the numbers suggest, he says, represent something which is ‘nothing short of catastrophic’.
Brooke, who describes as ‘beyond belief’ the Reserve Bank of Australia’s (RBA) refusal to loosen monetary policy at its last meeting, has called for an overhaul in the way the interest rates are calculated by the bank.
“They appear to be looking at the wrong indicators and they must start paying attention to architecture as a lead indicator for the Australian economy” Brooke says.
Others in the industry appear to support Brooke’s claims, with one talking about a ‘drought of work’ in New South Wales and another saying that the industry has been in a ‘recession of sorts’ since as far back as 2008.
By Ahn Jae Wook