Coronavirus: 42,000 builders tipped to lose jobs

Construction of houses and apartments will not return to peak pre-pandemic levels until the middle of the decade, new analysis shows.

The construction industry is expected to contract by 3.2 per cent this financial year, from $232bn in 2019-20 to $225bn, largely because of COVID-19. Picture: Supplied

Construction of houses and apartments will not return to peak pre-pandemic levels until the middle of the decade, new analysis shows, with an estimated 42,000 jobs to be lost this year across the industry, mostly in Victoria, NSW and Queensland.

The first Australian construction market report to be published in a year shows con­struction work will decrease by 3.2 per cent this financial year, from $232bn in 2019-20 to $225bn, as the COVID-19 pandemic causes many builders to hold or defer new projects.

The Australian Construction Industry Forum report expects residential building to reach the bottom of the current downturn by June next year and experience a “fairly mild” medium-term rebound.

Residential construction projects, which were worth $26.7bn in the last year, will not approach 2018-19 levels of more than 200,000 dwellings built annually until 2025-26.

“It is ‘stop’ and ‘go’ with more ‘stop’ for the building and construction industry this fiscal year,” said the chairman of ACIF’s construction forecasting council, Bob Richardson.

“Cash is king in a time of uncertainty and many planned building projects are on hold or deferred indefinitely. We haven’t seen much growth in new major projects to make up for the work being finished now. The pipeline of new projects in some sectors is drying up.

“On balance, the contractions outweigh the areas of growth.”

Spending on infrastructure construction is expected to be $66bn this financial year, increasing to $71bn in 2022-23.

ACIF expects there will be 18,000 construction job losses in Victoria and 9000 job losses in NSW this financial year compared to 2019-20. In Queensland, there will be 7000 fewer construction jobs in 2020-21.

“Melbourne has been the engine room of economic growth powered in large part by growth in construction jobs. Sydney also lifted its performance recently,” FTI Consulting and ACIF’s chief forecaster, Kerry Barwise, said.

“The downturn in apartment building and COVID-19 brought all of this to a halt. (The federal government’s program) HomeBuilder and near zero interest rates will help turn this around, but it will take time.”

Sectors heavily hit by the pandemic are expected to see the most significant falls in construction work, with completed work in accommodation forecast to decrease 34 per cent this financial year, compared to 23 per cent in entertainment and recreation and 17 per cent in retail and wholesale trade.

While non-residential building, including commercial builds and public sector builds in areas such as education and health, is not expected to recover until 2022-23 and beyond, infrastructure construction is forecast to surge due to large investments by the federal and state governments.

Spending on infrastructure construction is expected to be $66bn this financial year, increasing to $71bn in 2022-23.

ACIF said the industry was concerned about the transition away from JobKeeper, which is due to end in March, and the expected reduction in JobSeeker payments.

There was also “lingering uncertainty” around the ability of banks and other financial institutions to pass on the full effect of interest rate cuts.

Aggregate building and construction activity is expected to begin to rebound in 2021-22, increasing by 2.3 per cent to $230bn, driven by increases in residential and engineering projects.

Non-residential builds are not expected to start increasing until 2022-23.