Builders call for $13bn construction boost

By Gerv Tacadena | 28 May 2020

Master Builders Australia urged the government to implement a $13.2bn building and construction stimulus to kickstart a recovery in the industry and the economy.

According to the EY modelling commissioned by Master Builders, a $13.2bn boost could potentially translate to roughly $30.9bn in new economic activity and create 105,000 new jobs across sectors.

The package will also commence $17.6bn worth of construction activity, including new dwelling starts, renovations, and commercial construction.

Denita Wawn, CEO of Master Builders, said the industry needs stimulus from the government, not just subsidies. There is also a need to establish a special task force to fast-track activity in the construction sector, Wawn said.

"Building and construction is shaping up to be one of the industries worst-hit in the long term by the COVID-19 economic crisis. We know from previous downturns that it takes four times longer for our industry to recover than the rest of the economy," she said.

The proposed stimulus package includes three crucial parts: $5.2bn would be set aside for a new home-building grant, $4bn for resilience renovation program, and another $4bn for commercial programs.

The new-home building grant would provide $40,000 funding for the purchase of a newly-constructed home. This grant is expected to inject $17bn worth of additional economic activity. Aside from adding 14,000 new homes in the market, the grant would also create 58,311 jobs across the economy, replenishing the 77,580 jobs lost since the onset of COVID-19 restrictions.

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The package is also pegged to include a resilience renovation program, which would provide funding for renovation projects aimed at improving the resiliency and accessibility of homes. Master Builders expect this program to contribute $7bn in economic activity and create over 24,000 jobs.

The last part of the package is focused on commercial programs including funding for cladding or asbestos rectification; a 10% drop in developer charges; and a 5% increase in government spending in health, defence, and education.

"For stimulus to occur building activity needs to commence. Builders and tradies cannot sustain their businesses and jobs on promises,” Wawn said. “We have seen that governments can fast-track construction activity in response to natural disasters, and COVID-19 is shaping up as an economic disaster.”

The latest figures from the Australian Bureau of Statistics show that the construction work done across the country went down during the first quarter of the year. It is important to note that these figures only cover a short period of time when COVID-19 restrictions were put in place.

Residential building construction was the main drag, declining by 1.6% on a seasonally-adjusted basis. Nicholas Fearnley, senior economist at BIS Oxford Economics, said the majority of the decline reflects the downturn in dwelling approvals seen through 2018 to 2019.

"The lag between the shift in sentiment caused by the pandemic, and its impact on the outlook for migration in particular, to dwelling approvals and work done will be at least six months. Consequently, we expect residential building activity to continue trending down well into 2021," he said.

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