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CANBERRA, Jan 21 AAP

January 21 2013, 1:59PM

A new survey has dashed hopes that the building industry will fill the vacuum in the economy left by the the mining sector coming off the boil.

Master Builders Australia's national survey of building and construction released on Monday shows industry conditions deteriorated in the December quarter 2012, despite the run of interest rate cuts over the past year.

Master Builders Australia's chief economist Peter Jones said the survey of more than 400 builders and contractors suggests 2013 was unlikely to be the year the industry lifted from its current downturn.

"Interest rate cuts over the past year appear to have failed to boost the confidence of new home buyers," Mr Jones said.

He said the survey supported calls for short term stimulus measures in conjunction with further interest rate cuts to help boost the industry.

"The Reserve Bank has pointed to the building industry to help boost the non-mining sectors of the economy, but this does not look likely unless macroeconomic policy becomes more accommodating," Mr Jones said.

The survey's index measuring builders' current level of activity fell again in the December quarter, from 47.4 to 45.2, remaining below the neutral 50 mark that indicates satisfactory levels.

The index is now below levels recorded during the 2008-2009 global financial crisis after a declining trend over the past two years.

Builders also reported a decrease in sales and profitability, and they expect to reduce their workforce in the period ahead.

The availability of credit has become a significant issue for builders looking to invest in new building projects, with 40 per cent of respondents saying this was having a major effect on their business.

Mr Jones said the federal government can no longer leave all the heavy lifting to the central bank.

"A short-term increase in the first-home owner's grant for new houses and bringing forward of civil works, combined with rate cuts, will go a long way towards restoring confidence," he said.

By Colin Brinsden, AAP Economics Correspondent