Australia’s Construction Industry “On Brink of Collapse”

Australia’s Construction Industry “On Brink of Collapse”. By Nick Corbishley.

Australia’s construction industry, which accounts for 13% of Australia’s GDP and one in ten jobs, is unsustainable and on the brink of collapse, according to Joe Barr, the CEO of John Holland, one of Australia’s biggest infrastructure firms and a wholly owned subsidiary of China Communications Construction Company (CCCC).

“I won’t sugar coat it,” he told The Australian Financial Review. “Tier one contractors in Australia are not making any money, and governments across Australia keep having successive project cost blowouts.”

The underlying message was not exactly subtle: Unless the government recognizes the pressures the industry is under and allows construction companies to renegotiate contracts that are either behind schedule or beset with cost overruns, companies could begin dropping like flies. Bailouts, while not explicitly mentioned in the interview, may also be on the docket.

It’s a message that has been conveyed by captains of all kinds of industry in all kinds of countries since Financial Crisis 2 began. As the economy freezes, companies suddenly see their revenues and earnings drop precipitously. Out of force of habit, they then ask the government to make up the difference.

In the case of Australia’s construction industry, it was already in trouble before the virus crisis hit. By the tail-end of last year, a multi-year boom had begun to turn to bust.

And companies in the sector are now beginning to panic.

“We are in the midst of Australia’s biggest infrastructure boom, but as an industry, we are teetering on the brink of collapse,” Barr said. “While [the government has] projects worth hundreds of billions in planning along the east coast, it is unclear if there will be an industry left to build them.”

Sounds like bailouts are arriving just in the nick of time, and the construction industry is crying poor to government again. But disruption due to the virus is real. Our next door neighbor is an electrical contractor with a few employees, and they’ve nearly had to stop work because their supplies of gear — mainly from China — have dried up.