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Finding ways to build a better future

By Graham Cooke - posted Thursday, 8 August 2013


There is now general agreement among politicians, economic forecasters and business leaders that Australia's mining boom is over. Chinese growth is slowing and will slow further; its demand for our mineral recourses has levelled off and because successive governments operated on the assumption China's appetite was insatiable and there was no need to diversify into other markets, we squandered the opportunities it presented to save for a rainy day.

But that's another story. The question is what, if anything, can replace mining as a main driver of Australia's future growth.

Well, the ideas being bandied around seem to be coalescing on that old favourite, the construction industry - and indeed it has been a bulwark of the economy in the past.

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Construction is labour intensive; it creates jobs in the non-academic sector and has spin-offs that benefit other industries ranging from building suppliers to sandwich bars. But unlike mining, it does not bring in vast revenues from overseas. Rather it liberates funds locked up in other areas within the domestic economy, including personal savings and future earnings through mortgages in the housing sector; company profits, and government taxes in commercial building and infrastructure. As such, construction 'booms' can be illusionary and have to be carefully managed if they are simply not robbing Peter to pay Paul.

The other more immediate problem is that at the moment construction is not in a healthy state. The Housing Industry Association (HIA) paints a bleak picture of the residential sector – 25,000 fewer homes being built every year than a decade ago; an industry that has shrunk every month for the past three years; thousands of jobs at risk; a tax regime that is making the building of new homes unaffordable.

The news in the commercial sector is not much better. Property Council Chief Executive Peter Verwer says that vacancy rates across the nation's office market rose from 8.4 per cent at the beginning of the year to 10.1 per cent in July.

"There is no surprise that weak office space demand mirrors Australia's lacklustre economic performance," Verwer says.

"The decline in white collar jobs growth to a third of the level experienced before the Global Financial Crisis has severely blunted demand and business expansion plans."

HIA Managing Director Shane Goodwin says that Australia has a growing population and logically there should be significant demand for new housing.

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He cites red tape, an inflexible industrial relations system and disproportionate levels of taxation as choking off what should be natural growth - and certainly the reliance of state governments on construction as a revenue raiser has been a persistent HIA grouse over many years.

But even at these lower levels, the construction industry generated $305 billion in total income, contributed $99 billion to the Australian economy and employed close to a million people during 2011-12, according to figures released by the Australian Bureau of Statistics (ABS).

ABS Director of Integrated Collections William Milne said that the industry employed hundreds of thousands of tradespeople – carpenters, bricklayers, electricians, plumbers and so on.

"Overall, construction contracting and sub-contracting activity generated income of $233 billion," Milne says.

However, economic forecaster BIS Shrapnel says the sector is not recovering fast enough to replace the momentum being shed by the mining industry.

The company's Associate Director, Kim Hawtrey, says the coming year will be a crucial test.

"We're really in for a nail-biter because the upswing in building that the economy needs will be coming through, but it's going to be uneven and it's going to be slower to get going than usual," Hawtrey says.

So what is needed to give the sector a much-needed push along? For the HIA and Master Builders Association the key messages are lower taxation and less regulation. Some changes, like HIA's call for a return to individual contracts, is probably whistling in the dark. Others are unlikely to be well received by cash-strapped state and territory governments. It seems that everyone wants the industry to succeed, but not at any cost to their treasuries. At best we can expect some tinkering around the edges.

Given that, it is time for some creative thinking and a better use of the enormous pool of rich talent present among Australia's top builders, home designers and architects.

The construction industry should become much more export-orientated, especially in our immediate region, where the burgeoning economies of South-East Asia need quality commercial buildings and the middle classes this increased wealth is creating want homes to match their new status.

Our experience in transporting and building basic housing in remote areas during the mining boom could be translated into decent homes for workers in the region with more modest means, but with aspirations for something better than living in a slum.

Further opportunities present themselves in India and, down the track - but not too far down the track - Africa.

Tragedies like the collapse of the factory building in Bangladesh have become all too common. After years of passive acceptance, protests are mounting against sloppy building codes and corner cutting. Beleaguered jurisdictions are looking for answers.

In Australia we can build in conditions ranging from tropical rainforests to arid deserts to Alpine heights. It is time to show the rest of our region just how good we are.

But construction, like mining, is not a long-term fix for Australia's prosperity. Surely we have learnt that lesson after the promises of first agriculture and now mining have flared and faded. Australia's salvation lies in diversity, especially among the 96 per cent of the nation's businesses who are categorised as 'small businesses'. Somewhere among them are people with the ideas that can be developed into the 'the next big thing'.

Finding them, encouraging them, helping them into production, has to be the work of government. A government prepared to take risks for the greater good.

I wonder if either of the main contenders in the current election campaign is up to that task.

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About the Author

Graham Cooke has been a journalist for more than four decades, having lived in England, Northern Ireland, New Zealand and Australia, for a lengthy period covering the diplomatic round for The Canberra Times.


He has travelled to and reported on events in more than 20 countries, including an extended stay in the Middle East. Based in Canberra, where he obtains casual employment as a speech writer in the Australian Public Service, he continues to find occasional assignments overseas, supporting the coverage of international news organisations.

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