The ABS released their June 2019 “Construction Work Done, Australia, Preliminary” today. It paints a picture of slowing momentum once again. This will flow into a weaker GDP number ahead.
The trend estimate for total construction work done fell 2.7% in the June quarter 2019.
The seasonally adjusted estimate for total construction work done fell 3.8% to $48,778.0m in the June quarter.
The trend estimate for total building work done fell 2.2% in the June quarter 2019.
The trend estimate for non-residential building work done fell 0.8% and residential building work fell 3.0%.
The seasonally adjusted estimate of total building work done fell 5.7% to $28,506.2m in the June quarter.
The trend estimate for engineering work done fell 3.1% in the June quarter.
The seasonally adjusted estimate for engineering work done fell 1.1% to $20,271.8m in the June quarter.
The construction sector is in a downtrend, with activity having peaked in mid-2018. This reflects: (1) the turning down of the home building cycle; (2) a pull-back in public works; and (3) a further winding down of private infrastructure activity led by the mining sector (although this dynamic has largely run its course).
With the construction sector representing around 13% of the economy this result will dent Q2 GDP, potentially in the order of 0.4ppts – depending upon how these quarterly partials flow through to the national accounts estimates.
The housing downturn still has further to go and will weigh on conditions throughout 2019 and into 2020.
On public works, there is a sizeable work pipeline and governments are adding projects to the investment pipeline – suggesting that the segment will be more supportive of conditions over the forecast period. On private infrastructure, commencements have picked-up somewhat (eg some iron ore projects have proceeded in response to the recent elevated prices) and the work pipeline has increased – pointing to an emerging lift in activity during the year ahead.
“What we need to do is rebuild confidence in Australia’s building and construction sector,” said federal minister Karen Andrews after the July 2019 meeting of the Building Ministers’ Forum). Via The Conversation.
This has been a recurring theme since the federal, state and
territory ministers commissioned Peter Shergold and Bronwyn Weir in
mid-2017 to assess the effectiveness of building and construction
industry regulation across Australia. They presented their Building Confidence report to the ministers in February 2018.
In the 18 months since then, the combined might of nine governments
has made scant progress towards implementing the report’s 24 simple
recommendations. Confidence in building regulation and quality has
clearly continued to deteriorate among the public and construction
industry.
In last week’s Four Corners program, Cracking Up,
Weir was asked whether she would buy an apartment. She responded: “I
wouldn’t buy a newly built apartment, no […] I’d buy an older one.” She
went on to say:
We have hundreds of thousands of apartments that have been built
across the country over the last two, three decades. Probably the
prevalence of noncompliance has been particularly bad, I would say in
the last say 15 to 20 years […] And that means there’s a lot of existing
building stock that has defects in it […] There’ll be legacy issues for
some time and I suspect there’ll be legacy issues that we’re not even
fully aware of yet.
These comments may not have delighted those developers trying to sell
new apartments, or owners selling existing apartments, but they are
fair and correct. Confidence will not be restored until all the
governments act together to improve regulatory oversight and deal with
existing defective buildings.
Residents of the Lacrosse, Neo200, Opal and Mascot towers and other buildings with serious defects are already living with the impact of “legacy” problems. Over the weekend, another apartment building was evacuated
– this time in Mordialloc in southeast Melbourne. The building was
deemed unsafe because it was clad with combustible material and had
defects in its fire detection and warning system.
A costly but essential fix
Fixing such defects is a costly business. A Victorian Civil and Administrative Tribunal decision
established that replacing the combustible cladding on the Lacrosse
building in Melbourne would cost an average of A$36,000 per unit. At
Mascot Towers, consultant engineers estimated the cost of structural repairs at up to A$150,000 per unit on average.
According to UNSW and Deakin
research, between 70% and 97% of units in strata apartments have
significant defects. Let’s assume 85% have such defects and the average
cost of fixing these is only $25,000 per unit. That would mean total
repair costs for the 500,000 or so tall apartments (four-storey and
above) across Australia could exceed A$10 billion.
The Victorian government has taken the lead on combustible cladding, setting up and funding a A$600 million scheme
to replace it. It’s also replacing combustible cladding on low-rise
school buildings even though these may comply with the letter of the
National Construction Code.
No other state has yet followed this lead. This is concerning given the risk to life. No one viewing images of the Neo200 fire in the Melbourne CBD could doubt how dangerous combustible cladding can be.
The other states and territories should immediately copy the
Victorian scheme. While not perfect, and probably underfunded, it is a
positive step to improve public safety. The Andrews government should be
congratulated for doing something practical while its counterparts in
New South Wales and Queensland, which have many buildings with
combustible cladding, fiddle about.
All governments share responsibility
The federal government’s response has been inadequate. When asked
about contributing to the Victorian scheme, Karen Andrews said:
The Commonwealth is not an ATM for the states […] this problem is of
the states’ making and they need to step up and fix the problem and dig
into their own pockets.
This flies in the face of reality. All nine governments are responsible for building regulation and enforcement. All signed the intergovernmental agreement on building regulation.
The federal government, which chairs the Building Ministers’ Forum, leads building regulation in Australia. The Australian Building Codes Board, which produces the National Construction Code,
is effectively a federal government agency. The precursor to the
national code, the Building Code of Australia, was a federal initiative.
The crop of building defects we see today are a direct result of
negligent regulation by all nine governments over the past two decades.
Clearly, they all have a legal and moral duty to coordinate and
contribute to a program to manage the risks and economic damage this has
created.
The governments must stop playing a blame game. Effective programs
are urgently needed to fix defects, including combustible cladding,
incorrectly installed fire protection measures, structural
noncompliance, structural failure and leaks.
The Australian Building Codes Board, which is directly responsible
for the mess, should be reformed to ensure it becomes an effective
regulator. The National Construction Code should be changed to make consumer protection an objective in the delivery of housing for sale.
All parties involved will have to take some pain: regulators,
developers, builders, subcontractors, consultants, certifiers, insurers,
aluminium panel manufacturers, suppliers and owners. Only governments
can broker a solution as it will require legislation and an allocation
of responsibility for fault.
The alternative will probably be a huge number of individual legal cases and a rash of owner bankruptcies, which may well leave the guilty parties untouched.
Author: Geoff Hanmer, Adjunct Lecturer in Architecture, UNSW
The
construction union has slammed the Victorian Liberals plan to oppose the
introduction of a registration scheme for engineers as reckless and
irresponsible.
The Bill,
currently before the Victorian Parliament would for the first time introduce a
registration scheme for engineers in Victoria, ensuring only those properly
qualified and accredited could undertake work.
CFMEU Construction and General Division National Secretary Dave
Noonan said that the registration of engineers was an important first step in
tackling the national crisis in the building and construction industry.
“The
Liberals plans to oppose the registration of engineers in Victoria, a measure
that would begin to address the national crisis in construction, is reckless
and irresponsible.
“Just
last week, independent research revealed the cost of repairing defects in
residential apartments across Australia would cost a staggering $6.2 billion.
“Liberal
opposition could cost the State and consumers billions. They’ll fight for
deregulation at any cost.
“In
Mordialloc, Victoria residents have just been advised that their apartments are
no longer fit to occupy due to combustible cladding and significant fire
risk.
“We now
have legislation that begins to address the issues of shoddy workmanship and
defective construction work and the Victorian Liberals oppose it.
“Where is
their commitment to helping the thousands of families who cannot live in
apartments they’ve paid for, or face huge bills due to dodgy construction work
and design?
Mr Noonan
said that Victoria was in the extraordinary position of having no registration
scheme for engineers.
“In
Victoria, anyone can call themselves an engineer. Builders, electricians and
plumbers all need to be registered but the people who design the buildings they
construct do not.
“Construction
workers who drive cranes, erect steel and build scaffold are required to have
high risk licences to ensure site safety. Yet the Liberal Party doesn’t think
engineers, who are crucial to site safety should be registered and accountable?
They are again putting profits ahead of safety.
“The
failure to register engineers and the failure of government regulation in the
building and construction industry more generally goes a long way to explaining
why we now have a crisis that is bringing the sector to its knees.
“It’s
time for the Victorian Liberals to quit being part of the problem and start
being part of the solution. Support the registration of engineers in Victoria
now.”
Property insider Edwin Almeida and I discuss the recent ABC 4 Corners programme on high-rise construction issues, and consider the broader implications.
Australia’s apartment sector is reaping the costs of a “poorly oversighted industry with a lack of competence and, in some cases, a lack of integrity”, says the author of a landmark report into Australia’s building industry. From The New Daily And ABC.
Bronwyn Weir has told an ABC Four Corners special investigation
into the apartment construction industry that “commercial imperatives
have really overtaken public interest” and that the industry was in
crisis.
Ms Weir who, with former senior public servant Peter Shergold, co-wrote the landmark Building Confidence report, found widespread noncompliance and dysfunction in Australia’s apartment construction industry.
The
report has come into even sharper focus after some high-profile
high-rise failures in Sydney and Melbourne, and hundreds of buildings
discovered to have dangerous flammable cladding.
Ms Weir said given her knowledge of industry practice over recent years, she would never buy a newly built apartment.
“If
I was going to be investing in an apartment, I’d buy an older one. It’s
common sense, isn’t it? It’s just logical,” Ms Weir told Four Corners.
The ABC investigation comes only months after the evacuation of Sydney’s Opal and Mascot
towers due to faults, and on the same day as a report by the nation’s
leading construction union that found fixing the country’s residential
apartment block defects could exceed $6.2 billion.
The Shaky Foundations: the National Construction Crisis report,
commissioned by the Construction, Forestry, Maritime, Mining and Energy
Union (CFMMEU) with analysis done by Equity Economics, found the “costs
of failure are piling up” and that Australia’s building industry had
reached “crisis point”.
Another study of apartment building
defects by Deakin and Griffith universities found 97 per cent of
buildings examined in NSW had at least one defect in multiple areas,
while the figure in Victoria was 74 per cent, and in 71 per cent in
Queensland.
Together, the findings together with recent structural
failures and flammable cladding saga paint a picture of an industry in
crisis – a crisis that politicians seem unwilling – or unable – to
tackle.
One of the authors of that report, Nicole Johnston, told Four Corners that defects were “very common” nationwide.
“We have got a real problem here,” Dr Johnston said.
“It’s
systemic, and it’s infecting lots of buildings across the landscape in
all parts of the country. It’s very clear, it’s very prominent and we
have a serious problem here.”
Ms Weir told Four Corners
that noncompliance within the industry had become “particularly bad … in
the last 15 to 20 years”, which had left a huge legacy of sub-standard
buildings.
“It’s gotten worse over that period. And that means
there’s a lot of existing building stock that has defects in it,” Ms
Weir told reporters.
Ms Weir advised anyone thinking of investing in apartments should consider something built five or more years ago.
“You would like to think that if there are major issues with that building, they’ll have started to show,” Ms Weir said.
“So
I think if people are looking at investing, there are ways to do good
due diligence. Buying off the plan is a really tricky proposition at the
moment.”
“The
existing building stock is what it is. We have hundreds of thousands of
apartments that have been built across the country over the last two,
three decades,” she told the program.
“[The new reforms] won’t
improve existing building stock, unfortunately. So there’ll be legacy
issues for some time and I suspect there’ll be legacy issues that we’re
not even fully aware of yet.”
Deakin’s Dr Johnston told the program that previous calls for reform had gone largely unheeded.
“People have been jumping up and down about this for years and years and years,” Dr Johnston said.
“There’s
been lots of committees formed, there’s been lots of task forces,
there’s been lots of consideration around these, but really nothing has
happened.”
In 2017, NSW did try to propose a bill to police
dangerous or non-confirming building products, similar to laws in force
in Queensland.
Executive officer at the Building Products Industry
Council Rodger Hills said the draft bill was shown to industry leaders,
who felt it was even better than the Queensland equivalent.
But by the time the bill entered Parliament, it had been “absolutely gutted”.
“We counted up about 80 clauses that had been pulled out of the documentation,” he told the program.
Engineers
Australia chief executive Peter McIntyre said there was a “crisis of
confidence” in the industry that needed to be fixed urgently.
“There’s
concern among organisations like ours, Engineers Australia, so this is a
pivotal time to take action and fix it,” Mr McIntyre said.
New research commissioned by the construction union has revealed that Australia’s building and construction crisis will cost $6.2 billion in remediation and associated costs.
The
independent research, undertaken by Equity Economics and contained in the
report ‘Shaky
Foundations: The National Construction Crisis’ being
launched today, analysed the additional costs to owners of remediating water leaks, fire safety breaches, structural failure
and combustible cladding and associated costs, in apartment buildings
constructed within the last ten years.
The
research also found that over 3,400 apartment
buildings across Australia had defective, non-compliant combustible cladding
installed, and would require remediation work to make the buildings safe.
CFMEU
Construction and General Division National Secretary Dave Noonan said that the
cost of Australia’s building and construction crisis was now clear, and
unfortunately often homeowners would likely be the ones to foot the majority of
the bill.
“Australia’s
building and construction crisis will cost a staggering $6.2 billion to fix
apartments they’ve already paid for.
“This
includes the cost of remediating water leaks, fire safety breaches, structural
failure and combustible cladding, and costs associated with increased insurance
premiums, legal fees and alternative accommodation.
“In some
cases, the costs of this remediation has been up to $165,000 per dwelling –
enough to sink many families.
“Tens of
thousands of families, many of whom have purchased their first home, are now
stuck with the crippling cost and mental anguish of owning homes that they may
not be able to live in, are unsafe and cannot afford to repair.
Mr Noonan
said Australia’s building and construction crisis was brought about by a range
of factors the union has been raising concerns over for many years.
“This is the result of the construction industry’s
obsession with ‘deregulation’ at any cost, and poor oversight by government.
“It’s the
result of years of not enforcing building standards and of allowing industry to
‘self-approve’ with little or no oversight. Often, it has fallen on the
union to blow the whistle.
Mr Noonan
also said that a national problem required a national solution and that the
union was willing to work with government to resolve these important issues for
the community.
“This
national crisis in construction can only be resolved through close consultation
with workers and the Construction Forestry Maritime Mining and Energy Union
will continue to play a constructive role in developing solutions for our
industry.
“We’ll be
producing detailed policy solutions and will work with the Federal and State
governments across Australia over the coming months. Now is the time to
come together – not silence dissent.
