Building material prices stabilise as Altus Group warns CFMEU demise could send costs soaring

Those calling for the CFMEU to be wound up have been told to be careful what they wished for, with one expert saying it could create a power vacuum and drive construction costs up further.

Construction workers at a CMFEU protest in Brisbane. Picture: Steve Pohlner

The demise of the embattled Construction, Forestry and Maritime Employees Union on building sites could create a power vacuum and lead to higher construction costs just as the industry is experiencing moderating building material prices.

Altus Group, which provides asset and fund intelligence for the construction real estate industry, warned that if the construction division of the militant union was shut down, construction prices could go up further as other trade unions attempted to fill the void and vied for membership, with pay rises likely to be part of their pitches.

Altus Group Asia Pacific development advisory head Niall McSweeney told The Australian that unions played an important role in the construction industry, and those who were calling for an end to the CFMEU could later come to regret that stance.

“Be careful what you wish for; there’s a good chance that it won’t turn out what people think, but the bad behaviour needs to be reined in,” Mr McSweeney said.

“The danger is that if it gets out of control and (the CFMEU) disappears overnight, that will create a power vacuum. The danger is that there would be several people who will try to step in and fill that void, which will lead to unions competing for members by saying ‘join me as I’ll get you twice the rate of increase that you used to get’.

Mr McSweeney said that those unions would have to be militant to achieve their promises, and it could lead to a lot of stoppages and industrial action like that of the late 1980s and early 1990s, when competition for members caused plenty of disruption.

The CFMEU’s construction wing was placed into administration in late August, removing 270 union officers from their mostly volunteer positions and a further 11 from their paid jobs, as a government-appointed administrator looks to clean up the controversial union amid claims it engaged in bullying, corruption, and criminal infiltration.

Sacked CFMEU leaders have since launched a campaign for the “absolute destruction” of the Labor Party, threatening to disrupt the waterfront and mount a High Court challenge as they try to reverse the administration.

It comes as analysis by Altus shows that material prices remain stable in Australia, although copper had risen in response to demand from energy transition and data centre projects.

Steel prices dropped to their lowest level since 2016 due to low demand, notably from China.

Altus said that while conditions had improved in the past 12 months, the construction industry was grappling with a complex cost environment.

Mr McSweeney said any benefit of easing material costs had been offset by labour costs, noting that there was a disparity between Enterprise Bargaining Agreement and non-EBA contractors.

Niall McSweeney from the Altus Group.

“It is not just about the rates people are being paid on particular jobs, but it has to be tied to productivity,” he said.

“We need to get higher productivity in regard to what we’re doing to sort of stabilise costs overall.”

Altus said that Brisbane was forecast to have the highest construction cost inflation for the third consecutive year with a rate of 7.5 per cent after 9.25 per cent in 2023, while Melbourne was expected to have the slowest inflation rate of 4.75 per cent. Sydney and Perth were at 5.5 per cent in 2024. Construction inflation was expected to slow into 2025 and 2026.

Higher costs had resulted in building approvals declining to their lowest level in nearly 12 years, continuing a downward trend, with just 13,237 approvals recorded over the quarter.

To meet the national goal of 1.2 million new houses by the decade’s end, Mr McSweeney said more state and federal government intervention would be needed to incentivise capital city housing development in the months ahead.