Building sector wages to rise: Ai Group and HIA report

Construction workers are looking at the highest rate of wage growth in 12 years as employers struggle to hire skilled staff amid a building boom.

Construction workers’ pay is set to climb in coming months. Picture: NCA NewsWire/Sarah Matray

Construction workers’ wages are poised to accelerate over coming months as employers struggle to hire skilled staff while activity in the building sector bounces back from Covid-19 restrictions.

The October survey of conditions in the building sector by Ai Group and the Housing Industry Association revealed construction activity had lifted strongly from the Covid lockdowns in August, even after a slight moderation in the latest month.

The survey showed that “builders reported an increase in new inquiries and improved confidence among customers responding to eased restrictions”.

However the report also said the “availability of skilled labour continued to be a challenge for construction businesses”.

“Some builders are investing in equipment and machinery because capacity pressures are limiting their ability to expand,” it said.

The survey’s index of average wages in the sector has pushed above 75 points for the first time in the history of the series, going back to 2009, with results above 50 signalling employers are lifting their average wages.

The average rise in enterprise bargaining wages is running at just shy of 4 per cent, around the average of recent years, according to the Australian Bureau of Statistics.

But the latest survey results suggested pay rises in the sector could move well above the peaks of 6 per cent annual growth recorded in 2016 and 2018.

Demand for labour looks set to remain firm into 2022, with ABS building approvals data on Wednesday showing a fall, but with a substantial pipeline of residential construction work.

The Morrison government’s $2.5bn HomeBuilder program – which has received 120,000 applications for the grant of up to $25,000 to build or substantially renovate a new home – helped spark a mini-boom for the construction industry, with the number of house building approvals peaking at a record 15,464 in April.

Since the scheme closed to applications on April 14, the number of detached home approvals has dropped by a third to 10,168 in the latest figures, according to the Australian Bureau of Statistics.

Despite the rapid recent declines, house approvals remained 17 per cent higher than in February 2020, just before the pandemic.

Including the volatile apartment segment – which lifted by 18 per cent to 7686 in September – the total number of dwelling approvals fell by 4 per cent in September to 18,090, but were still up 13 per cent on a year earlier, the ABS figures showed.

With recipients of the HomeBuilder grant able to start work 18 months after approval, only $600m in the budgeted $2.5bn has been paid through the scheme as at June 30, according to budget figures.