Construction dampened by supply chain and labour shortage concerns

Recent data from the Australian Bureau of Statistics (ABS) reveals that Victoria has seen a further decline in the value of construction work carried out last year as the state continues to recover from the effects of the COVID-19 pandemic.

Master Builders Victoria (MBV) analysis of the ABS data shows that the value of Victorian construction work done has seen a decline of $1.8bn (3.14 per cent) compared to the same time last year.

Master Builders Victoria (MBV) CEO Rebecca Casson said the 12-month rolling total value of construction work grew steadily from 2014 to 2018 but has seen some fluctuations throughout COVID-19.

“Since May 2020, Victoria has seen a small but steady decline in the value of construction work done,” she said.

“The building and construction industry has largely been able to continue working throughout the COVID-19 pandemic apart from the enforced two-week shutdown; however, the industry has still been impacted by, and feeling the effects of COVID-19 lockdowns, including ongoing isolation requirements.”

The limitations within fixed-price contracts have meant that many builders are now operating with next to no profit margins as the price of labour and supply shortages has increased throughout the pandemic.

This has led to a profitless boom for many Victorian builders, with one regional Victorian builder reporting that he made the same profit last year as in 2020 despite taking on 50 per cent more work.

Ms Casson said that although new residential building approvals have returned to pre-pandemic levels, the industry’s ability to fulfil this demand is now challenging.

“This data demonstrates that supply chain disruptions and labour shortages are disrupting the building and construction industry’s ability to keep up with the pipeline of work ahead.”

Across Australia’s capital cities, price increases for material rose a further average of 3.8 per cent in the final three months of 2021, according to ABS Producer Price Indexes.

From 2020 to 2021, Melbourne experienced an overall price increase of 13.5 per cent across building materials, including cement and ceramic products, electrical items, floor and wall coverings, metal and steel, and plumbing products.

Building and construction play a vital part in supporting the economy, with every $1 million invested in residential building work creating $3 million worth of economic activity across the economy.

Ms Casson said supply and skills shortages must be addressed for the building and construction industry to continue supporting the Victorian economy and consumers to be able to afford housing.