A Master Builders National Survey of more than 500 builders and contractors revealed key indicators are starting to improve but are failing to result in increased activity.

The March quarter 2013 survey showed that builders expect the industry to improve in the medium term, but are still struggling in the short term.

Recent Australian Bureau of Statistics building approvals figures reflected the fragile nature of the upturn in residential building as well as showing a further deterioration in non-residential building.

Peter Jones, Chief Economist of Master Builders Australia said while signs of a recovery may be beginning to emerge for the industry, the upswing is coming from a very low base and questions remain about its strength.

"The turnaround in the survey sentiment suggests previous interest rate cuts may be beginning to take hold, but builders are yet to see any benefit from the rate reductions,” he said.

"Builders reported less work on the books than in the previous quarter, sales contracts remained essentially unchanged and profits remain weak.”

Mr Jones said that good news for builders came in some of the industry's forward indicators, with display centre traffic and commercial enquiries increasing significantly in the quarter, making them higher than the average reading recorded over the past nine years.

"Expectations for industry activity and own business activity also rose to levels above the survey's neutral reading, which suggests there could be improvement for the industry in the short to medium term,” he continued.

"As a major driver of economic growth and employment, a strong recovery in the building and construction sector is vital for Australia's economy. The industry has been earmarked by Treasurer Wayne Swan and the Reserve Bank to play a major role lifting the non-mining sectors as the economy loses the mining investment boom as a driver, however, the industry is a long way from filling that gap.”

"Although the Reserve Bank has done most of the heavy lifting in trying to stimulate non-mining sectors, it must not rule out further interest rate cuts. The Government must also play their part by creating a more business friendly environment.

"It is important State and Territory governments also address supply side constraints and bottlenecks," Mr Jones concluded.