The construction sector took another hit in the first three months of 2013, even with interest rates close to record lows.

The amount of construction work done fell two per cent in the March quarter, figures released by the Australian Bureau of Statistics (ABS) said on Wednesday.

Compared to the same period last year, total construction done was up just 0.2 per cent.

That’s despite interest rates being close to record lows, a factor which should be encouraging people to take out loans to build houses and businesses to build properties.

The Reserve Bank of Australia cut its cash rate 1.25 percentage points in 2012, partly to help stimulate underperforming sectors of the economy.

It cut by another quarter of a percentage point in May, bringing it to a record low of 2.75 per cent.

“The figures suggest that the construction sector is pretty week, in spite of the interest rate cuts,” JP Morgan economist Tom Kennedy said.

Mr Kennedy said the weak figures did not necessarily mean more rate cuts were on the horizon.

“I don’t think this data would be enough to get them over the line but it does add to their easing bias,” he said.

The ABS figures showed a slide in both building and engineering work during the quarter, with a drop in public sector the major drag on growth.

Public sector construction work was down 4.8 per cent during the quarter.

Master Builders Australia chief executive Wilhelm Harnisch said the sector was suffering from the caution and uncertainty in the economy as well as government policies.

“Regrettably, uncertainty and caution is widespread throughout the industry and the broader economy,” he said.

“The Reserve Bank continues to do the heavy lifting trying to stimulate confidence in the economy.

“Government policies must also be in place to complement interest rate cuts, otherwise the size and strength of the industry’s recovery is at risk.”

Economists said the weakness in the construction sector would have wider implications for the economy, with many revising down their expectations for gross domestic product growth in the quarter.

“There’s no building going on and the sector is a big multiplier for growth,” Commsec economist Savanth Sebastian said.

There was at least some positive news for the construction sector, with figures released by the Housing Industry Association (HIA) showing a rise in the number of new homes sold in April.

The HIA figures showed that just over 6,000 new homes were sold in April, an improvement of 3.9 per cent from the previous month.