27.03.2025 - Opinion piece by Jon Davies, CEO, Australian Constructors Association
Even before the starting gun has been fired on the race to the lodge, it is clear that, with an electorate struggling to make ends meet, both main political parties will seek to portray themselves as the party best able to reduce the cost of living. Recently announced initiatives like rebates on electricity bills and increased bulk billing of GP visits are obvious ways to do this but what about improving the productivity of the construction industry? While this is unlikely to appear in any election manifesto, it should be a focus of whoever is elected if they are serious about improving living standards.
Living standards depend on two key factors: wages and the cost of goods and services. Employers can only increase wages without raising prices if workers become more productive. In construction—one of Australia's largest industries—productivity has stagnated for decades. The construction industry is the nation's fourth largest employer, with 17% of all Australian businesses employing over 1.3 million people and generating almost 8% of GDP. But according to the Australian Bureau of Statistics, construction is now less productive than it was thirty years ago. Compared to other major industries, its productivity growth in that time lags by more than 30%. That lost efficiency costs the economy over $60 billion a year. Closing this productivity gap would wipe out current labour shortages impacting the building of new houses and substantially reduce the cost of the new office buildings, warehouses, transport and power infrastructure that all contribute to the cost of goods and services. It would also help the government to pay for the power rebates and increased bulk billing!
So, what role can the federal government play in making the industry more productive? Whilst, with a few exceptions, it doesn't directly procure construction services, it is uniquely placed to improve the efficiency of how this is done. The following are just a few suggestions.
The appointment of an administrator to manage the affairs of the industry's largest construction union should see an end to the coercive control of construction activities for personal rather than project gain. But to prevent history from repeating, any new government must prioritise long-term industrial relations stability based on achieving common interests. As an example, a modern version of the Hawke-Keating Prices and Incomes Accord – uniting government, industry and unions – could drive a shared commitment to improving productivity.
In terms of bringing people together, the Commonwealth could also work with the states to harmonise the recognition of construction skills and qualifications allowing the free movement of labour across country to areas of high demand.
As far as possible, designs for key pieces of infrastructure such as schools, hospitals, prisons and electricity pylons could be standardised across the country and investment in offsite manufacturing facilities underwritten through stable pipelines of work.
The construction industry could be incentivised and supported to use the vast amounts of data it produces to improve the accuracy of project budgets, reduce re-work and identify opportunities for improvement rather than just being used to substantiate claims for additional time and cost.
Procurement rules focused on achieving true value for the taxpayer rather than the illusory value of a cheap tender price would create a race to improve project outcomes rather than a race to the bottom to undercut each other and take on unpriceable risk.
These are just a few suggestions because the construction productivity tree is groaning with low hanging fruit. All that is missing is a committed farmer willing to start picking. That farmer has to be the federal government as history has shown that there are too many barriers and too few incentives for anyone else to be successful at scale.
There are encouraging signs of this starting to happen. The Department of Infrastructure is leading an initiative to develop a national construction strategy designed to improve productivity in the construction of transport infrastructure projects and the Department of Workplace Relations, through the National Construction Industry Forum, is developing a blueprint for a more sustainable and productive industry, but this is just a start and there is a risk that any new government might not continue this work.
Given the size of the prize, whoever forms government must make construction productivity a priority. Maybe it's a Department for Construction Efficiency or maybe it is just a coordinated, strategic focus across government. Without it, the cost of homes, infrastructure and essential services will continue to rise and Australians will keep paying the price through declining living standards.
About us:
The Australian Constructors Association is the only representative body for contractors delivering vertical and horizontal construction projects, as well as undertaking infrastructure asset management. Our members construct and service the majority of major infrastructure projects built in Australia every year. Our goal is to create a more sustainable construction industry.
