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With Australia recently emerging from the Covid crisis and frequent lockdowns all around the country, how has that left the current state of the construction industry in Australia? Has there been a recent downturn, has it plateaued or has the construction industry seen an increase in activity and the potential for a building boom on the horizon? Let’s discover more about the state of the construction industry and how it’s likely to fare in the near future.

The Impact of Covid-19 On Australian Construction

The State Of The Construction Industry In Australia

Although the years 2020 and 2021 did see a downturn in Australian construction projects overall, the industry was not hit as hard as some others as it was deemed to be an essential service. Australian, state and territory governments also implemented programs to bolster the construction industry during the peak of Covid times, such as the HomeBuilder program as well as supporting apprenticeships and traineeships.

That being said, the industry did see a massive drop in employment numbers during the peak of the crisis but are predicted to jump to record levels by 2025.

Labour Shortages, Material Costs and Interest Rate Rises

In some parts of the country, there are genuine fears that the construction industry will be stifled by current labour shortages. Combine that with an increase in the cost of building materials and possible regular interest rates rises from the Reserve Bank and the near future for the building trade could be placed under immense pressure.

Small domestic builders who committed to contracts a few years ago are most at risk, due to interest rate rises, labour shortages and the rising cost of building materials. Smaller builders have smaller financial backing and less backup resources than the larger building corporations. While many of the country’s major builders look set to survive the current construction climate, the same cannot be guaranteed for smaller, independent operators.

One reason for the labour and talent shortage is due to the importation of overseas talent onto Australia shores through targeted immigration programs. Naturally, during the pandemic and with the borders closed, new offshore talent was no longer arriving. However, with the borders now open again and an emphasis being placed on traineeships and apprenticeships, the talent shortage should gradually decline in the coming years.

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Higher Building Costs Will Be a Permanent Thing

Higher building costs are set to be a permanent fixture in Australia’s construction industry. Recent price hikes for the cost of building materials and hiring labour are not going to abate. Instead, prices are set to continue to rise, forcing up the price of homes and other construction projects and possibly even pricing many people out of the property market altogether.

The first half of 2022 saw construction industry prices reach an inflation rate of almost 10%, with a further increase of around 6% expected for the second half of the year.

Is There Some Good News for the Construction Industry?

The near future for Australia’s building industry could hinge, at least in part, on the newly elected Labour government and whether it makes good on its election promises; many of which promise new infrastructure that will certainly give the construction industry a boost overall.

For example, the proposed “Powering Australia Plan” will see the rewiring of the country’s power supply in a bid to improve the nation’s position in the battle against climate change. Another proposal is a series of high-speed rail links between Sydney and Newcastle and from Sydney to Brisbane.

Further to Labour’s election promises is a scheme to help homebuyers get into the market. The “Help To Buy” scheme. Labour will fund more the 30,000 new social and affordable housing projects over the next five years. The Help To Buy initiative will be available to 10,000 eligible Aussies each year, who will receive up to 40% of the purchase price of a brand new home or 30% of the purchase price of an existing home. This will provide a massive boost for homebuyers in a market that is seeing prices soaring higher and higher. The downside to this scheme is that it’s only open to a select few Australians each year.

Things could have been far worse during the height of the pandemic. Although the construction industry did experience a downturn, being labelled an essential service saw building projects continue to push through tough times, leaving the industry in a far better position coming out of the pandemic than is the case with the construction industry in some other countries.

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The Outlook for Australia’s Construction Industry Over the Next 5 Years

Industry experts are of the opinion that the construction industry in Australia will continue to improve over the next 5 years, although it’s predicted to be a gradual process. However, due to the withdrawal of the HomeBuilder stimulus package, housing construction will likely be somewhat stifled, which could bring down the industry average overall during the next 5 years. Heavy and civil engineering construction is forecast to be trending upwards, which will give the building industry a much needed boost.

As was alluded to earlier in the article, although employment figures in construction dropped during the pandemic, those figures are set to continually rise until they reach record levels during the coming half decade.

While experts are reluctant to claim a building boom is on the horizon, the industry is set to improve.

The Conclusion

While Australia’s construction industry is currently clouded in some doubt, the future looks positive for the industry overall, especially during the next five years. An influx of overseas talent will boost the talent pool and see major construction projects that are in the planning stages come to fruition. Housing construction is experiencing a lull but other forms of construction will likely be forging ahead.

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