The Australian construction sector is grappling with a significant productivity downturn, as highlighted in a recent report by Arcadis. Workers are now averaging only 2.8 productive days per week, a stark contrast to the six days recorded before the pandemic. This decline has been attributed to various factors, including labour shortages, supply chain disruptions, and increased regulatory requirements.
Despite an expanded workforce, the reduced productivity has led to heightened construction costs and project delays.Inflation rates ranging from 6% to 10% have further exacerbated affordability challenges, pushing cities like Sydney, Brisbane, Melbourne, Perth, and Adelaide up in the global construction cost rankings. Sydney now ranks as the 45th most expensive city globally for construction, while Adelaide stands at 71st.
The Arcadis report also notes that while construction-specific inflation is expected to stabilise in 2025, deflation is unlikely, indicating persistent cost pressures. Public sector investments continue to drive activity, whereas private sector involvement is waning due to concerns over cost and value. Notably, clients are shifting data centre investments to more affordable markets like India.
The report emphasises the need for improved productivity in design, procurement, and construction to overcome risks and ensure project viability. It also highlights the importance of addressing the current industrial relations environment, which significantly impacts construction costs.
Large-scale residential and commercial projects, including Olympic infrastructure in Queensland, are poised to sustain market activity in the coming years. However, the industry must navigate these challenges to maintain momentum and meet the growing demand for infrastructure development.
In summary, the Australian construction industry faces a complex landscape marked by productivity challenges and rising costs. Strategic interventions and policy reforms are essential to enhance efficiency and ensure the sector’s long-term sustainability.