Supply chain issues hurting construction in Australia and New Zealand

05 November 2021

Australia and New Zealand’s construction markets challenged by supply chain issues and rising costs

Sydney Opera House is located in Australia’s biggest city, but construction challenges are being faced throughout Australia and New Zealand.

Long lead times and rising freight costs are placing pressure on construction markets, amid ongoing supply constraints and labour shortages in Australia and New Zealand, according to a report from consultant Townsend and Townsend.

The report on Australia and New Zealand found that global supply chain issues caused by surging demand, supply shortages and supply bottlenecks continue to push up the cost of key building materials such as steel, timber and electrical materials. This is placing further pressure on Australia and New Zealand’s already constrained construction markets.

Another factor increasing pressure on the industry is the skilled labour shortage across both countries with international and state border restrictions hindering people’s ability to apply for jobs.

For the Australian market specifically, the rising cost of key building materials is one of the biggest challenges being experienced currently. Steel costs have surged by up to 40%, and timber and electrical materials costs by up to 30%. Additionally, freight costs continue to climb to record highs, with Australia’s ocean freight index spiking by 38.6% in the three months to June 2021.

According to the report, “Skilled labour shortages are being felt across most markets, with domestic and international border restrictions placing further pressure on the industry. Currently, there is no set date to lift border restrictions for skilled workers entering Australia, however, it has been flagged as the next priority after Australian citizens and permanent residents.”

In New Zealand, over the medium term, the construction market outlook is positive, however, ongoing supply chain constraints and worsening skills shortages are creating considerable challenges for the short-term outlook.

Regardless of the challenges faced, construction in the region continues and the forecast for 2022 is positive. Construction cost escalation forecasts for non-residential projects in 2021 have been revised up to 5% for Auckland and Perth, 4.5% for Brisbane and Sydney, and 4% for Adelaide, Christchurch, and Melbourne.

As one of the most significant contributors to carbon emissions, the way that the construction industry constructs, manages, and operates built assets is a central focus in the race to reach net zero carbon (NZC).

Throughout Australia and New Zealand, state governments and individual organisations are championing the drive to NZC by 2050 whilst focusing on the challenges currently faced by the construction industry.

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