News that economists predict that the construction of new homes will decrease by somewhere between 129,000 and 232,000 in the next three years is very bad news for those hoping for an economic recovery. The typical new Australian home is constructed of material mainly made in Australia and put together by a wide workforce of " tradies " who are self employed. Any time there is a building downturn it quickly slows as the spending habits of families dependent on building work tighten.
Just think what is involved in the construction of a new home. Sand and cement for the slab. Timber for the frame. Glass for the windows and either bricks or sheet cladding for the outer skin. In todays homes the roof is either tiles or galvanised iron, and all those materials are mainly products of Australian manufacturing.
When it comes to fitting out there is a mix of imported and locally produced products. Piping to convey water and electrical cable for the electricity system. Gyprock for the internal walls, and numerous doors. All the cupboards and fitting out for the kitchen and laundry, and the stove and hot water equipment, and then paint for decoration.
Housing is a specialist labour market. Carpenters, plumbers, electricians compete on price to provide their services and the " builder " is really a project manager who cobbles together competing tenders to bring the construction forward in an orderly manner. Housing remains one of the last labour intensive industries on the planet. We still build homes by putting one brick on top of another.
The reason the economists are so pessimistic is because the Australian population growth is sixty percent dependent on migration. They expect the closed borders because of the coronavirus to linger over the next three years and there is a doubt whether the intake of overseas students studying at our universities will return to their previous level. Without those injections of new people the demand for new homes will subside dramatically.
The typical Australian " tradie " usually services several builders and also seeks private work from the public. In recent years he - or she - earns above average money and calls upon other itinerant workers for labour when work is plentiful. They often employ apprentices, who learn their trade under their tuition. They contribute an important segment to the employment statistics.
A very important sector of the workforce is employed in manufacturing the materials used in home construction. If home numbers drop the timber industry will certainly lay off workers and this will have a big impact on country towns. It is surprising the extent of city manufacturers who are reliant on the building industry to market their product. A building industry slowdown immediately is reflected in unemployment statistics.
That is something the growing number of people starting to ignore wearing masks and staying apart to hinder the spread of the virus need to consider. The Australian economy will not recover and reach the level experienced before the coronavirus unless both incoming migrant numbers - and the building of houses to accommodate them - returns to normal.
It seems that the building industry is key to Australia's industrial health !
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