Opinion: Cash incentives for tradies misses the bigger picture - by Jon Davies, CEO, Australian Constructors Association
In response to Western Australia's ongoing labour shortage in the housing sector, the government is apparently considering a $10,000 cash incentive to attract skilled tradespeople from other Australian states. On the surface, this idea sounds logical—a quick fix for a desperate need but scratch a little deeper and it's clear that this approach isn't sustainable. Instead, the real solution lies not in chasing workers from one state to another but in making structural changes to boost productivity across the construction industry.
WA's residential construction sector is indeed facing a tough time. Low unemployment and a fast-growing population have fuelled demand for housing, and the state is required to add around 26,000 homes each year to meet the goals of the National Housing Accord. Competing for skilled labour are major infrastructure projects and a booming mining sector, each essential to WA's economic prosperity. As these projects grow, so does the demand for skilled workers. Offering incentives to attract tradespeople may seem like a solution, but it does nothing to address the deeper, systemic issues causing these labour shortages like an ageing population and growing demands for infrastructure.
There is also a key misunderstanding that infrastructure projects somehow 'steal' resources from housing construction. The truth is, the materials, equipment and even types of labour often differ substantially between infrastructure and residential construction projects. Building roads, schools and public facilities requires heavy machinery, specialised engineering expertise, and specific types of materials that aren't directly transferrable to housing. The 'competition' for resources is overstated and overlooks the need for infrastructure to be developed in parallel with housing.
Even if the WA government did manage to entice workers with cash incentives, it would simply shift labour shortages from one state to another. Such incentives do not add any new skilled workers to the overall Australian economy. They merely add to already significant inflationary pressures within the industry that in turn contribute to the shortage of housing developed by the private sector as increasing construction costs make commercial housing projects financially unviable.
The real solution to labour shortages and the increasing demand for housing and infrastructure is improved industry productivity. For decades, the Australian construction sector has lagged behind other industries in productivity growth. The Australian Constructors Association's 2023 Nailing Construction Productivity report revealed that improving productivity could add $56 billion to the economy each year, that number has since increased to $62 billion. Imagine the impact if we could realise this opportunity instead of relying on quick fixes like migration incentives.
This isn't about doing more work with less workers—it's about leveraging better processes, technologies and training to maximise what we can accomplish with the workers we already have. Other industries have embraced technology and streamlined processes to get more from their workforce. It's time construction did the same. Modern Methods of Construction (MMC) and new construction technology offer practical pathways to improvement, but significant barriers stand in the way. From outdated procurement practices to rigid regulatory frameworks, these obstacles need to be removed to create a more efficient and competitive industry.
Procurement processes should focus on driving improved project outcomes rather than the lowest price at the tender box. There are increasing signs that recent improvements in this area are at risk as budgets are stretched and governments feel pressured to be seen to be acting tough and driving a hard bargain. History has shown that this approach merely increases the bill that is ultimately picked up by taxpayers and contributes to the poor industry culture that is putting workers off from joining the industry.
The Australian Constructors Association, in collaboration with both Commonwealth and state governments, is currently developing a national strategy to improve productivity in the transport infrastructure sector. This work is essential, but it's just the start and much more needs to be done. Treasurer Jim Chalmers' announcement yesterday of a $900 million fund for productivity initiatives is another encouraging step, but small geographically dispersed piecemeal initiatives will not achieve the step change in productivity improvement that we need.
The time for short term solutions, problem shifting and tinkering around the edges is over. We need to think big if we are to address industry's productivity problem and construct the housing and infrastructure that Australia needs, when it needs it and for a price it can afford.
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