Australian construction shrunk by about $13.9 billion in annual terms based on the loss of jobs since mid-March, according to analysis of payroll data tracking the COVID-19-hit economy.
While the weekly pace of decline in jobs is slowing, the 6.5 per cent drop in employee jobs between March 14 and May 2 equated to a 76,500-reduction in people who each accounted for $182,000-worth of work annually, consultancy RLB estimated.
But the construction industry’s great fear is that the job losses to date – largely due to completion of existing projects – accelerate as new ones fail to start and soak up surplus workers. New Zealand-based Fletcher Building gave a preview of what could come on Wednesday when the building products supplier said it would sack 1500 people, 500 of them in Australia, because of the sharp downturn in demand.
“We’re not even close to what I think is around the corner,” said Shane Wilkinson, the managing director of Pace Development Group. “The large job losses will be felt when projects can’t get commenced.”
Australian Bureau of Statistics figures based on Australian Taxation Office payroll data showed the biggest loss of jobs from mid-March – when Australia recorded its 100th case of COVID-19 – happened in NSW. The state suffered a 7.4 per cent decline in its workforce, equivalent to a 27,285 cut in the number of people working in the industry.
Victoria underwent a 7.3 per cent decline, equivalent to the loss of 22,488 workers. Queensland’s 5.1 per cent decline meant a loss of 12,589, SA’s 4.8 per cent fall equated to a loss of 3722. In WA, the 6 per cent loss of workforce meant 7373 fewer jobs, while Tasmania’s 5.8 per cent decline implied a 1120-person decline.
NT faced a 5.7 per cent decline, or 554 workers, while ACT’s 8 per cent fall equated to the loss of 1543 workers, the RLB calculations show.
The figures also show that construction suffered fewer job losses than the professions, which were down by a much-larger 11.1 per cent as of May 2.
Melbourne-based Pace, which focuses on residential and mixed-use developments, also runs a building business that turned over “a couple of hundred million” worth of work last year, expects a 40 per cent reduction in revenue this year.
The company has slowed the rollout of projects to preserve equity and keep activity ticking over.
It has split its four-tower 40,000-square-metre Pace of Blackburn project in Melbourne’s east in half and will by August start work on the 3000-square-metre retail component and 125 of the 200 planned apartments. The company is also considering “pivoting” to bid for state government-backed stimulus spending such as the $2.7 billion package announced this week.
“Launching a project right now off the plan is fraught with danger,” Mr Wilkinson said.
“You’re not going to find the buyers. People have other things on their mind.”
A raft of large projects is due to complete in Melbourne this year, such as Cbus Property’s 447 Collins Street “Pantscraper” tower and Mirvac’s Olderfleet redevelopment at 477 Collins Street. Last month the state government approved a further handful of large new projects, including Pace’s $300 million apartment project in Flemington, as it sought to ramp up the economy.
In NSW, large projects such as Winten’s 1 Denison Street office tower in North Sydney, the Brookfield-developed Wynyard Place and Crown Resorts’ $2 billion One Barangaroo tower are all due to complete this year.
But with others such as the Victoria Cross, Pitt Street and Martin Place metro rail above-station developments on the way – as well as likely state government-driven stimulus measures – construction job losses this year in NSW would likely be limited to a further 3 per cent, RLB director Matt Harris said. The consultancy expects further losses of 5 per cent in Victoria.
Many in the industry expect a slump, warning that extra public spending will not make up for the retreat of private funds.
“The huge reverses in private sector investment will outweigh the possible expansions in government-driven projects and the commercial building volumes are likely to be quite depressed over the three-year period between 2020/21 and 2022/23,” Master Builders Australia said last month when it scrapped the forecasts it had published just two months earlier in February.
In its updated forecasts, the MBA slashed the expected number of new home starts this financial year by 27 per cent to 116,000 from 159,000. It also cut nearly 16 per cent from the expected value of commercial construction this year from $45.8 billion to $38.6 billion and warned of weakness lasting several years.
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