Event: Denita Wawn interview with Chris O’Keefe, 2GB
Date: Friday, 31 March 2023, 3.15pm AEDT
Speakers: Chris O’Keefe, host 2GB; Denita Wawn, CEO Master Builders Australia
Topics: insolvencies, housing, interest rates, supply constraints, inflation
Chris O’Keefe, host 2GB: We’ve also received some worrying news about the building sector, construction sector because Lloyd Group has gone into administration. Now it’s a fairly big construction company, Lloyd Group and it’s the second one to go down in 24 hours. Porter Davis which mainly builds homes in Victoria and Queensland. But Porter Davis has also gone bust. And Lloyd Group, 59 projects underway, 200 staff, work stopped. The Group is behind dozens of school buildings in Sydney and liquidators won’t tell us the details of the uncompleted developments and who will take over. But it asks the question, is our building sector in trouble? Well, Denita Wawn, she is the CEO of Master Builders Association and she’s on the line now. Denita, thanks for your time.
Denita Wawn, CEO Master Builders Australia: Good afternoon.
Chris: Two construction firms closing in 24 hours. This isn’t a trend is it?
Denita: Well certainly the trend at the moment is showing that the insolvencies in our industry are on par with the average of the last ten years. Nevertheless, there is fragility and volatility in the industry at the moment. That has been as a consequence of businesses working with predominantly with fixed price contracts that were set pre-covid. We’ve seen massive inflationary increases on building products. We’ve seen significant labour shortages which have all meant an awful lot of increased costs that are not covered by those fixed-price contracts. They have to be borne by the builder. And as a consequence, some of these liquidations that are now happening at the moment are a reflection of that fragility that we’ve experienced over the last 12-18 months.
Chris: Should we expect more?
Denita: We always know, unfortunately, that in any business we will see insolvencies. We know it’s fragile. We know it’s also on about par with average. So, we do expect more but that is typical, unfortunately, of the industry. But it is no different at this stage to what is has been over the last ten years. The focus of course at the moment has to be on those workers, on those contractors, on those clients. And we, of course, as an industry association promoting business best practice in the industry.
Chris: Is interest rates having any impact?
Denita: Absolutely. Interest rates are having a massive impact. Every time there is an interest rate hike, we see less and less people looking at our display homes, looking and signing contracts for a new home. So between the significant increase in the cost of buildings coupled with interest rates, there is something on the like of sales at the moment for volume builders are down well in excess of less than 50 per cent on what they were seeing this time last year. So we are desperately concerned that is not much in people’s books for the calendar year 2024 to build, and that’s going to exacerbate an already difficult housing supply market, as we are seeing at the moment for both rental and purchase.
Chris: Denita, it’s often said that if construction stops, Australia stops. Do you think the Reserve Bank should have a long, hard think about what they’re doing to your sector when they sit around the board table on Tuesday?
Denita: Well, we are of the view that there should be a pause. But it’s more than just the Reserve Bank. They have had to do what they have needed to do to try and push down that inflation rate which has just as big an impact on our industry as increases in interest rates. But we are now turning our minds to governments. Governments need to look at what impact their regulations; their policies have on the cost of building homes, and on the cost of building social infrastructure. And that includes things like industrial relations laws and the changes that we’ve seen. It relates to the cost of planning and the need for more flexible planning and titled land. The list goes on, Chris. So we are now putting a lot of pressure on governments to do their bit to reduce the costs. Because you are absolutely right, every dollar spent in building means three dollars back in the economy of this country. Which is the biggest multiplier of any industry in this country.
Chris: Denita, I appreciate your time.
Denita: Absolute pleasure, thank you.
Chris: Denita Wawn, she is the CEO of the Master Builders Association.
Dee Zegarac | National Director, Media & Public Affairs
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