Builders are becoming more optimistic as the government's fiscal stimulus starts to kick in, according to Master Builders Australia's National Survey of Building and Construction.

"The government's policy strategy to leverage the building and construction industry as part of its efforts to cushion the economy from the global recession is bearing fruit. The more optimistic outlook by builders in the June quarter comes as government economic stimulus measures such as the schools program and social housing initiatives begin to kick in," said Peter Jones, Master Builders Australia chief economist.

The quarterly survey revealed that expectations for activity within the building industry recovered somewhat in the June quarter, after a massive fall in sentiment over the past six to 12 months.

Despite the fact that the proportion of builders expecting a reduction in business activity fell from 80 to 60 per cent, the index stands at 43.6, below the neutral 50 mark, indicating that builders still expect industry activity to deteriorate over the next six months.

Of those expecting an impact, more than half expect their own business activity to fall by more than 20 per cent over the next 12 months. 60 per cent expect staffing/sub-contract numbers to fall by up to 5 per cent, with 40 per cent anticipating employment numbers to fall by more than 5 per cent.

"Key forward indicators in the residential sector are providing some encouragement, although it will take time for activity to turn around, particularly as the extended first home owner boost is set to halve from the end of September before ceasing at the end of the year," said Jones.