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Event: Denita Wawn interview with Rebecca Livingston, ABC Brisbane Mornings
Date: Tuesday, 14 March 2023, 10.15am AEST
Speakers: Rebecca Livingston, host ABC Brisbane Mornings; Denita Wawn, CEO Master Builders Australia
Topics: skills, building and construction industry, housing
E&OE
Rebecca Livingston, host ABC Brisbane Mornings: The race is on to get a lot built in Australia right now. We need more houses. There’s not enough for the number of people who live here. 100,000 people homeless. So, we need social and affordable homes. Lots of first-home buyers want to get into the market and then you move into bigger infrastructure projects. I mean just here in Queensland – cross river rail, Brisbane metro, Brisbane live arena, Queen’s wharf. That’s before we talk about the Olympics even. Multiple stadiums, multiple venues around the place. That, of course, there’s roads and whatnot that need to be kept up to scratch. So to get all of this done, you need skills, you need tradies, you need building companies to manage it all. And the building industry says continued rate rises have forced building and construction activity to slow, which makes it harder to deliver the housing and infrastructure we need. In fact, just yesterday another local builder closed its doors on the Sunshine Coast, and that’s never good news. Denita Wawn is the CEO of Master Builders Australia. Denita, good morning.
Denita Wawn, CEO Master Builders Australia: Good morning Rebecca.
Rebecca: How do interest rate rises affect building and construction?
Denita: It slows sales down as simple as that. We now have this really interesting situation at the moment where inflation is high and so quite rightly the RBA is putting up interest rates to try and curb inflation. But that then creates a scenario where the cost of building goes up and interest rates make mortgages harder to pay. And so, we’re now seeing a significant decline in building sales which will be reflected in the 2024 building activity. And it’s certainly on par for our forecasts where we’ll see a dramatic decline in the number of houses to be built next year which is the reverse of what we need.
Rebecca: Yes, the reverse of what we need. But, as I understand it, builders weren’t able to keep up with that demand, were they? Is there any benefit to sales slowing?
Denita: Well, we’ve had an interesting situation where we had a very high peak of demand over COVID. It was not just about government stimulus but the fact that Australians used to spend a hell of a lot of money – $55 billion – on overseas travel. They were stuck in their homes, so there was this massive demand for building. And as a consequence, we’ve had to as an industry meet that demand when borders were closed, and so there was a shortage of skills, shortage of materials. And so it took a long time to get that building done. And unfortunately, at the moment, we’re seeing a lot of activity but no money to be made because they are dealing with fixed-price contracts that were signed pre all those increases going up.
Rebecca: Yeah, a profitless boom, as Master Builders Queensland described it to me. Denita, just in the past week, we’ve seen another two building companies shut up shop – PBS and National Construction Management. Any idea of how many builders have collapsed in the last 12 months?
Denita: We’re seeing a collapse, but this was not different to the average of the number of insolvencies that we normally see. We’re slightly above a 10-year trend but not as dramatic as we were anticipating. This is particularly given the provisions that were put in through COVID; for the tax office, for example, not to pursue debt. So we’re seeing this scenario where the tax office is now pursuing debt. You’re seeing builders undertaking fixed-price contracts and a profitless boom, as MBQ described. And therefore, it’s putting a huge amount of pressure on them. But the numbers are showing that it’s not as dramatic as it’s being played out in the media at the moment. But nevertheless, it’s not good news for either builders or their clients.
Rebecca: Yeah, but that is such an important context to have. That the trend of building companies crumbling is not significantly higher in the course of the last 10 years. That’s such an important perspective to include in the conversation.
Denita: That’s right. And certainly, it’s not good, and we feel for every single one of those builders and their clients and their subcontractors. It’s never good for anyone if a business goes bust. But we do have to put it into perspective that it’s not that far above the 10-year average.
Rebecca: Can you put a figure, approximately, on how many builders have collapsed?
Denita: Look, I haven’t got it on hand at the moment, but as I said, it is just slightly above average for the last 10 years.
Rebecca: When you look at the building industry across the country, who is doing well?
Denita: Well, at the moment, the industry is very busy without necessarily making money. The big issue for us at the moment is that they work through these remaining pre-COVID contracts and get to the other side where they are working on the newer contracts that take into account the inflationary prices. Certainly, commercial building and industrial building is doing fairly well because it’s such a huge amount of infrastructure needed, as you said earlier on. The concern we’ve got at the moment is for the housing builders, where we’re seeing a massive decline in private investment for owner-occupiers and investors. And that is why we need to address the gap in that market. So, it’s important that the building industry, many of them are still holding firm, and it’s been very, very difficult for them. But the industry is not in crisis. We are just assisting those trying to work through those difficult periods of time.
Rebecca: You’re listening to Denita Wawn, the CEO of Master Builders Australia. How refreshing. What a relief it is to hear an organisation say we are not in crisis. Because I feel like there are crises across so many different sectors at the moment. Still really keen to hear from you. If you’ve been on a building site recently, just give me a sense of what day-to-day work is like on a building site. Whether it’s residential, whether you’re building apartments and a skyscraper or a bigger piece of infrastructure. Give me your view from the work site this morning. 1300 222 612 or send me a text 0467 922 612. Denita, am I right that most worksites still have commercial radio rather than ABC radio playing on them?
Denita: I think you’re right, but I think these days it might be a streaming provider that is the one that is played more than anything else. Certainly, from the sites I’ve been visiting lately.
Rebecca: Okay, yeah, because I still walk past, and I see the big protected sound systems. Well, alright, when you say the sites that you’ve visited because we hear about so much pressure and demand for tradies and site inspectors and building managers. What is life like on a work site these days? Is there a real sense of like, ‘okay let’s get cracking because we can’t even keep up with the projects we have’?
Denita: Yeah huge amount of pressure at the moment because of the delays we’ve seen with materials and shortages of staff. It’s meant that people are under a massive amount of pressure to meet the time requirements in their contracts. Otherwise, they get hit with liquidated damages. And so a huge amount of pressure to stack up the trades to come through and get that work done. So the pressure is immense at the moment but the positive side that we need to see is that despite all of these concerns at the moment, you are absolutely spot on, we will need a huge amount of construction activity, whether it’s commercial, civil or residential over the next 10 years with the forecast population increases. And so, it’s a great time, I’ll give a bit of a plug to the building and construction industry for people to look at a job with us. We’ve identified that we’ll need nearly 500,000 new entrants into the industry in the next four years to meet the demands we will have in the future. So, huge opportunities to work in the industry. And as a consequence, despite all of these headaches in the short-term at the moment, the longer term is looking far more positive.
Rebecca: You need 500,000 people in the next four years?
Denita: New entrants, absolutely. Simply because we need skilled people to build everything we need for population growth around the country. It’s an extraordinary number, but nevertheless, the forecasts are indicating that is what we are going to need to accommodate people retiring and deal with the extra demand. So as a consequence, certainly encouraging people as they are considering their career to consider building and construction. And that’s for both men and women.
Rebecca: Where are they going to come from? Every industry, every sector is desperately in need of staff. And you know, often we look at this parochially. Queensland tries to attract people from other states. You’re Master Builders Australia, how realistic is it that you’ll have 500,000 new entrants over the next four years?
Denita: I’m concerned that we’re not so we need to be better. And we certainly are in some of our promotional work around attracting more people into the industry and put us ahead of other industries. So, we’ll compete very hard against other industries. But simple arithmetic shows that we simply do not have enough people of working age to meet the demand we need. And hence that’s why we think it’s so important that the federal government is looking at skilled migration and improving skilled migration both in terms of the time it takes but also the number of people in the skilled migration area to attract more people to the country regardless of where they end up living.
Rebecca: And Denita, can I ask a question that’s come up a couple of times recently when I’ve spoken to various politicians about demand for say, something like Olympic infrastructure versus demand for labour in social and affordable housing? Are the tradies who work on each of those projects different?
Denita: They are, yes, because of the different types of work. There is some level of interchangeability between commercial and residential, but generally, it doesn’t occur to the extent that people might think. Although interestingly enough with the shortages that we’ve got and the demand to get houses built, we’ve seen a decline in workers in commercial going to resi because the money has been particularly good, which is not necessarily the case under normal circumstances. But no, you do need different types of skills, particularly high-rise versus residential. That’s why we’re really keen to see, at the moment, we’re discussing the development of an industry skills council that the federal government is funding. And that’s going to be really critical to the work they do once they are set up to actually look at the pockets of types of work that we need and whether or not we need to look at the way in which we have our training worked out so we can get people skilled into the right qualifications that we need for the future of the industry.
Rebecca: And when you break down demand, is it kind of in those three sectors? Is it commercial, government and residential?
Denita: Yeah, it’s commercial, civil infrastructure and residential.
Rebecca: Civil. So civil is government-funded projects?
Denita: Generally, yes. So transportation and so forth, so roads etc. So it’s generally government funded. Generally, commercial can range anything from high-rise residential right through to schools and hospitals and so forth. So there’s a breadth of work available out there and a huge amount of work to do. Because at the end of the day, we build a lot more houses but without the infrastructure around it to support that community then it creates problems in itself. So, it’s got to be a holistic approach on how we develop our new suburbs and make sure that we have the built infrastructure available for the community.
Rebecca: And roughly, what’s the split on that demand – commercial, civil and residential?
Denita: It’s pretty much predominantly, I think at the moment we are looking at around about 40 per cent residential, the rest civil and commercial. But that’s the important thing about making sure that we have many people with interchangeable skills as we possibly can because there are always peaks and troughs in the industry and so therefore, we need to ensure that people are multi-skilled so they can have transferrable skills.
Rebecca: Yeah, but that’s really interesting. There’s a greater demand for residential builds. As you say, 40 per cent and then maybe 30 for civil, maybe 30 per cent for commercial as well. Are we going to get it all done, Denita? We’ve got an Olympics we’ve got to host in less than a decade.
Denita: I hope so because we need to. It’s as simple as that. We talk about the fact that we need a million homes built between 2025 and 2030 to house all Australians. And the simple fact is that we need to achieve it so we need to put in the systems in place to ensure that we can build and build on those things that we need. Hence the reason why migration is so important. That’s why we need to encourage more people into trades and it’s part of the industry’s job to do that not just governments. And so we’ve got a number of programs on hand that are ensuring that we are all working collectively to get more people so we can meet those demands.
Rebecca: Denita, fascinating to talk to you this morning and I look forward to speaking again soon. Thanks so much for your time.
Denita: Pleasure, thanks Rebecca.
Media contact:
Dee Zegarac | National Director, Media & Public Affairs
0400 493 071 | dee.zegarac@masterbuilders.com.au