Inflationary pressures and supply chain bottlenecks has led to calls from the Australian Institute of Architects to the Federal Government for immediate action with the local supply chain.
Unprecedented price rises impacting the nation’s building and construction sectors have reached breaking point, says the Institute.
Its National President Shannon Battisson in a media announcement said the building and construction sector was facing ongoing supply chain strain leading to escalating materials prices and shortages.
She said “a major ripple effect” was on the horizon which could lead to the “collapses of construction businesses through to the broader economy.” Ms Battisson also said risks were swirling around housing supply and affordability.
“Australia has experienced the largest ever increase in input prices for house construction since the ABS started collecting data collection in 1996,” she said.
“Nationally this was 17.3% for the 12 months to June 30 and in Melbourne it reached 20%, according to ABS data.”
“We also know that there is a significant shortage of construction trades. Labour costs have also increased due to governments’ stimulus measures, the rebuilding of communities in NSW and Qld affected by the floods, on top of the accumulation of outstanding work in Victoria from last July’s storms, repeating flood events in Sydney and bushfires over the past two to three years.”
Australia is “exposed” – Industry Group
The Australian Industry Group (Ai Group) Director of Research and Economics Dr Jeffrey Wilson told the 2022 PIR (Policy-Influence-Reform) Conference Australia the country is also at risk more broadly.
“The whole world has suffered these during COVID of course,” he said. But Australia is especially exposed. We are an island, so more subject to logistics interruptions than almost all other counties. And we are a highly specialised economy, so more broadly reliant on imports.”
Jeffrey said supply chain disruptions ranks alongside labour as a major constraint on general business activity.
“Across the economy, 41% of businesses are currently affected – they either cannot get the goods they need at all, or those goods are prohibitively priced. For retail and manufacturing, two-thirds are materially affected,” he said.
Jeffrey said supply chain problems continue to grow and according to Ai Group’s PMI input prices indicator – the best national proxy measure for supply chain stress – currently sits at an all time high of 89.
“For context, 50 for this indicator means neutral, and it has never exceeded the low-70s over the three decades Ai Group has produced it. Unprecedented indeed,” he said.
The Australian Institute of Architects has written to Treasurer Jim Chalmers and the Minister for Finance Katy Gallagher calling for the October 2022 Budget to establish a national supply chain strategy. The Institute wants the strategy to make Australia’s building and supply chain less vulnerable to pandemics, disasters or overseas conflicts.
They want it to apply to building and construction materials, components and fittings.
“Both sides of politics recognise how important construction is to our Australian economy and for jobs,” Ms Battisson said.
“Not surprisingly this is where a lot of stimulus funding was targetted in 2020 as the pandemic took hold. That immediate crisis has passed, and we now look to the government to use all of its levers to de-risk collapse and create a supply chain strategy that gives the Australian construction sector much greater resilience both now and into the future.”
Ms Battisson is concerned for construction companies and independent builders.
“The Institute is very concerned about the labour issue. We are confident that the construction sector, unions and government can collaborate to create short- and longer-term strategies to address skills shortages,” she said.
