Building homes, offices, factories, wheat silos, milking sheds, shearers’ quarters, roads, railways, bridges, tunnels and airports has been central to Australia’s post-war economic growth. Until, that is, the 2013 election.
Now, builders are going broke at an alarming rate. And the nation’s net assets are rapidly diminishing. Last week’s construction data from the Australian Statistics Bureau — as well as other documents — reveal the magnitude of the sector’s current extraordinary decline.
Capitalist construction collapsing
Construction in the private sector (table 1, column G) has increased annually since the ABS series began in 1976 with few interruptions. There have only been four year-on-year declines greater than 4.0%. They were in 1982-83 during the ’80s recession, in 1990-92 during the early ’90s global downturn, in 2000-01 during the Asian meltdown, and over the last two years during the current global trade and profits boom.
The first three of these historic setbacks were followed by immediate strong resurgences. No such recovery is in sight today.
The level of private construction in the March quarter, the ABS revealed, was worth just $36.5 billion in chain volume units, seasonally adjusted. That is the lowest level since June 2011 — at the depths of the global financial crisis.
Poor public participation
Construction by the government sector has similarly declined.
When we examine the total of private and public construction (table 1, column S) we find, in the last 40 years, just three year-on-year declines worse than 4.0%: 1990-92, 2000-01 and the last two years. Intriguingly, there was no significant drop-off in construction during the GFC of 2009-2013 — due to the effective stimulus spending on infrastructure.
Total private and public construction in the March quarter was worth just $46.7 billion. Apart from the September quarter last year — which was an equally dismal $46.5 billion — that was the lowest since March 2011.
Causes of this collapse include subdued demand for housing due to real wage declines, absence of industry-development strategies, volatile business confidence, the surge in bankruptcies and the lack of public funds for infrastructure due to rampant tax avoidance.
The knock-on effects of the collapse are several. They include job stagnation, lower company revenue, subdued GDP growth and the loss of national net worth.
The contribution construction has made to GDP growth over the last two quarters — at 8.08% and 8.11% — are the lowest since 2006. That’s according to the ABS national accounts released last month.
Corporate collapses
Construction companies relying solely on construction are seriously struggling. Several have recently gone into liquidation.
Big corporations with diverse activities are doing better. CIMIC Group Limited reported on Tuesday an impressive lift in its half-year 2017 revenue from $4913.7 million to $6279.4 million. That’s up 27.8%. Not bad. The contribution from construction, however, was just 5.3%. Fortunately, CIMIC has other, more profitable activities.
Forlorn future forecasts
In its last three federal budgets, the Coalition has signalled its abandonment of long-term infrastructure investment. The Parliamentary Budget Office (PBO) reported in 2015 on the impact of ex-treasurer Joe Hockey’s 2015 budget. This projected infrastructure investment at a puny 1.4% of total government outlays in the year 2025-26.
The latest PBO report on Treasurer Scott Morrison’s May budget, released this month, revises this down to just 0.8% in 2027-28.
Admirable aspirations abandoned
Two groups are entitled to be dismayed at this data from the ABS, the PBO and elsewhere. First are those who accepted assurances by Tony Abbott and others in Opposition that the Coalition would excel in this sector.
Abbott affirmed frequently that:
“I want to see cranes in the sky and bulldozers on the ground because that means economic growth.”
And again:
“We will give our country the national infrastructure that we need, and ladies and gentlemen, I hope that in a few years’ time people will say of Tony Abbott, ‘he was an infrastructure Prime Minister’.”
The second are those who had hoped that replacing Tony Abbott and Joe Hockey with Malcolm Turnbull and Scott Morrison would lead to a turnaround.
The opposite has eventuated. The latest ABS data shows private and public construction over the last six quarters of the Abbott/Hockey period fell below that of Labor’s final six quarters by 5.1%. But it gets worse.
The decline in activity over the last six quarters under Turnbull and Morrison has been another 9.4% below that of Abbott and Hockey.
This should not surprise. Most key areas of the economy have worsened under the Coalition compared with outcomes through the Labor years. And worsened further since the 2015 change of leadership.
The only good news is corporate profits — which are booming. Except, that is, in construction.
As someone who watches the industrial auctions I would suggest two other areas where liquidations suggest that industries may be in trouble are the solar industry (no surprise with Tony Abbott’s policies from when he gained power, but solar power businesses STILL seem to be dropping like flies), and recently a number of careers training businesses seem to be failing in a very short period.
Alan, it seems like you’re trying to give us as many reasons as possible to vote Labor. And yes, you make a really solid, empirically qualified case, above all highlighting the Coalition’s utter failings in the critical area of corporate tax collection. But the question I think we’re all asking now is, how is Labor better? Not just in corporate taxation (although in that too), but in purpose: How isn’t Labor just trying to be better neoliberal economy managers than the Coalition? In a word, beyond economic indicators, what’s the point of a Labor government? It’s hard not to conclude on recent evidence, for example, that it’s merely to obtain very well-remunerated corporate lobbying employment after a stint in the filth of the ALP trenches.
Thanks, Will.
Yes, analyses such as this inevitably elicit accusations of spruiking for Labor. Unavoidable, it seems.
In response, two things.
Objectively, the best administration in recent memory – not just in Australia but worldwide – was not Labor but a coalition of Labor, the Greens and several independents. That was probably critical.
That Government’s record reveals substantial achievement in areas other than just neoliberal economic management, notably social justice and foreign affairs.
Personally, my recent party participation has not been with Labor or the Greens, but one of the minor parties.
And thank you for the reply, Alan. Let’s say you’re not partisan (comrade). Is it possible though that you’re nonetheless a victim of outrageous optimism in the sustainability of unenforced capitalism?
Partisan is an acceptable descriptor, Will, but for parties with a record of delivering just outcomes rather than simple left/right orientation.
Yes, outrageously optimistic is also fair. The empirical evidence tends to support an intelligent blend of free enterprise, direct government engagement and private/public partnerships. Can be delivered.
Victim? Yeah, nah …
Will, the point of a Labor government is that it won’t be a LNP government.
Anything they achieve beyond that is a bonus.
Hi Dogs, you could say exactly the same thing about the Coalition though: they actually stand for little else except forming a non-ALP government. With both sides playing “just keep the other lot out”, our nation’s politics has been reduced from a debate about societal goals to a popularity contest between alternative neoliberal management teams. Hence Alan’s constant refrain that the Abbott/Turnbull government has been ‘hopeless’ – rather than utterly vision-less! – because the latter applies equally if not more so to the current ALP opposition (so memorably once described by Rundle as “the laziest bunch of political rent-seekers God ever gave suck to.”)
Given your previous, apparently unabashed, urbanoid boosterism may we also assume that you are also of the ‘grow, baby, grow’ persuasion generally?
Like cancer?
An elegant sufficiency is preferable to satiation which inevitably leads to a visit to the vomitorium, aka recession/depression.
Enough is enough and we already have way beyond that.
GDP growth between 1.5% and 2.5% globally is sustainable for the foreseeable future, AR. Maybe a bit higher if we can move further towards renewable energy.
Boosterism? Yes, but for programs and parties which deliver just outcomes for all and against those which shift wealth and income to the rich.
Urbanoid? No, mine is rural existence these days, AR. Have the scars from last Autumn’s vendange to prove it.
Be interesting to see these numbers on a state basis, as personally as a Victorian it doesn’t feel like construction has slowed down. If anything it feels like particularly the government is building more than I can ever remember
Table 2 here shows value of building work done by sector – public and private – for states and territories:
http://abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/8752.0Mar%202017?OpenDocument
Your hunch is quite correct, Amark. Victoria is the only state or territory to show an increase – a pretty strong one, actually – in the March quarter this year.
Those figures can’t be coming from Sydney, it’s on giant construction zone here. One might add that not much of it is productive, being either tollways or the almost certainly ineffectual light rail project stuffing up large parts of Sydney where a viable bus service was operating.