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How to position your company to catch the construction wave

Posted by: Richard Owens at July 12, 2021

To get a sense of the construction boom currently underway in Australia, all you need to do is step outside in any of our major cities and look up. Cranes litter the skylines in Sydney, Melbourne, and Brisbane, particularly in inner city areas.

However, this building growth isn’t just happening in our big cities – it’s also taking place in the suburbs. The Housing Industry Association (HIA) recently forecast that this already record year of construction is likely to overshoot forecasts significantly, with more than 143,000 new builds predicted for 2021, on top of high renovation activity.

This led HIA economist, Angela Lillicrap, to comment recently that this will keep builders busy until the second half of next year, with this level of activity not likely to be seen again for many years, if not decades.

Infrastructure builds need better public-private collaboration

As we mentioned in our previous blog, it’s not just housing that’s going through a boom – infrastructure construction is also taking off. This is driven by Australia’s forecast economic growth, record-low interest rates, and a recovery in the labour market.

This sector has been given a further boost by the recent 2021-22 federal budget, which allocated an additional $15.2 billion commitment for major infrastructure projects across the country. This forms part of an overall $110bn investment pipeline over 10 years.

This infrastructure spending is a key plank in the government’s plan to help the country bounce back from the coronavirus pandemic, with over 130 major infrastructure projects now underway. 

Here are the top 5 in terms of scale:

– WestConnex (NSW), $16 Billion
– Sydney Metro (NSW), $12 Billion
– Melbourne Metro Tunnel (VIC), $11 Billion
– Melbourne to Brisbane Inland Rail (National), $9.3 Billion
– Bruce Highway Upgrade Program (QLD), $8.5 Billion

A big unanswered question, though, is whether the public and private sectors are working closely enough together to deliver on this massive boost to our economy.

Some issues constraining the financing and delivery of the infrastructure our communities need include the need for favourable regulation, legal, and tax frameworks. The private sector is also wanting a more equitable allocation of risk, as well as reduced bid costs, and less red tape.

Government has shown some initiative in helping businesses recover from the coronavirus. In its May State Budget, for example, the Victorian Government announced that initiatives to help taxpayers have been brought forward to 1 July.

These include an increase in the tax-free threshold for payroll tax from $650,000 to $700,000 and a decrease in the payroll tax rate for regional employers from 2.02% to 1.2125%. Additionally, from 1 July, the tax-free threshold for payroll tax lifts from $650,000 to $700,000.

While these general initiatives are a step in the right direction, there is still a long way to go before we see true public-private collaboration in the construction sector.

Construction industry trends to watch

While all this construction growth is an overall good news story for Australia, there are several factors that could hamstring activity. We’ve all seen in the news how global shortages in construction materials and high steel prices are starting to impact us locally, resulting in construction project delays and increasing costs.

Other factors which we need to keep an eye on are a shortage of skilled overseas workers, the rise in demand due to the HomeBuilder scheme, the ‘Black Summer’ bush fires that destroyed softwood plantations, and increased on-site cleanliness and safety protocols as a result of COVID-19.

Construction industry must embrace digital disruption for growth, including AI

One way the local construction and engineering industries can help neutralise the effects of these very real practical challenges is to innovate by embracing digital disruption.

According to Deloitte, digital construction tools like asset tracking, connected time clocks, computer vision, AR/VR, real-time data analytics, predictive maintenance, and automation are about to make big breakthroughs in these industries.

Using digital, connected construction, builders and engineers can now cut downtime, optimise asset utilisation, get predictive insights, and trigger automated business processes. Together, this equals increased productivity and bigger profits.

Artificial intelligence (AI) is one of the digital tools poised to provide a breakthrough in construction. Logistical inefficiency is one of the biggest killers of productivity in the construction industry and it’s here that AI is making big inroads.

Examples where AI is improving productivity and profitability are the optimising of work schedules, improving workplace safety, and keeping an eye on construction site security.

Watch out for this new payday solution

We’ve been watching the latest employee pay solution with interest. Called ‘Earned Wage Access’, solutions like Paytime let staff access their earned wages as and when they need them, rather than waiting for pay day.

While this might sound like a loan, it simply gives staff access to money they’ve already earned in real time – there is no interest charged, or repayments required. We like the innovative way this helps release people from the ‘wait to payday’ situation and adds value through budgeting and financial counselling options.

This idea is gaining traction across a number of major brands around the world, including McDonalds, Dominos, and Bupa. Benefits include a lift in staff productivity, a reduction in employee turnover and attrition, and an improvement in employee engagement.

How Rebus Capital Partners can help with financing for construction

If you need capital to help your business embrace innovation and capitalise on the current construction and infrastructure boom, talk to us here at Rebus Capital Partners.

We provide an independent, unbiased capital review, so you can be confident you’re getting focused time with a business financing specialist.

Richard Owens

The Trustee for the Rebus Capital Partners Unit Trust ABN 88 452 904 420. Authorised Credit Representative 523233 under Australian Credit Licence 481728.