Economic stimulus needed as pandemic stalls the pipeline

New data released today from one of the building industry’s leading peak bodies shows a significant stalling of construction projects as a result of the coronavirus pandemic emphasising the need for immediate economic stimulus in one of the economy’s biggest employing sectors.

A survey by the Australian Institute of Architects of its members revealed that almost two-thirds (64.87%) of respondents have had projects stalled as a direct result of COVID-19.

Projects affected ranged in scale with the biggest impacts felt on projects valued between $1million and $5 million (30.48%) and $10 million to $50 million (15.75%).

Uncertainty caused by the pandemic was cited as a significant reason for the disruption to project pipelines. Clients’ reticence to commit and issues with financing, including a lack of investor confidence and slowing financial approvals from lenders, were key factors behind the slowdown.

However, town planning delays remained the most prevalent factor holding up the progress of projects, despite government initiatives to fast track approvals as a way of stimulating Australia’s economic recovery.

Institute CEO Julia Cambage said the survey results were consistent with recently released ABS data showing a significant drop off in residential approvals.

“These findings have serious implications for jobs, not only in architecture but also in the broader construction sector which employs nearly 1 in 10 Australians,” Ms Cambage said.

“The number of projects that have been put on hold or postponed indefinitely indicates that the pandemic will continue to have a significant negative impact on jobs beyond the short-term pain currently being felt.

“Clear opportunities exist to stimulate activity in the sector in ways that will deliver immediate and longer-term benefits, especially in the residential sector, as outlined in our Economic Stimulus submission.

“We urge governments to consider further stimulus measures to protect people’s livelihoods. Incentivising people to improve the energy efficiency of their homes, paired with a program of upgrades to public buildings is one compelling example.

“Further substantial investment in social and affordable housing is another priority area that has yet to be fully addressed.”

Alarmingly for architects, almost 1 in 8 survey respondents indicated they had lost their job or suffered a change in their employment status as a result of the economic impacts from COVID-19.

Nearly one-third of those surveyed (27.27%) indicated that their practice had been forced to lay off or stand down staff with the profession’s unemployment rate rising by 2.35%.

In addition to an overall drop in aggregate employment levels, the survey also highlighted a change in employment mix with a move to more casual and part-time employment. As full-time employment decreased by around 10% (from 69.09% to 59.72%) there was a corresponding increase in part-time and casual employment, rising to 13.58% and 2.35% respectively.

The survey was conducted in June 2020 and comprises data from 428 responses.

Summary of key findings

  • 87% of respondents (consistent across practice size) reported they have had projects that have stalled as a result of COVID-19.
  • 68% of respondents indicated either they had become unemployed or had a change in their employment status as a result of COVID-19.
  • 27% of respondents indicated that their practice had been forced to lay off or stand down staff. Among these the hardest hit cohort was large practices where 69.39% of respondents reported forced lay offs or stand downs.
  • 18% of respondents indicated that their practice had lost earnings as a result of the pandemic.
  • 63% of respondents indicated that government relief initiatives have been extremely or somewhat helpful.
  • There was a measurable shift in employment status with full-time employment decreasing from 69.09% to 59.72% and a corresponding increase in part-time and casual employment, to 13.58% and 2.35% respectively.
  • The increase in part-time employment status as a result of COVID-19 was consistent across genders. Women increased by 6.96% to 17.39% and men by 6.1% to 9.54%, reflecting the generally higher rate of part-time employment for women pre-pandemic.
  • 59% of registrants reported they were able to negotiate a reduction in practice overheads, with 45.67% of respondents reporting they haven’t tried or needed to negotiate a reduction.
  • 30.39% of respondents indicated they are having supply chain issue due to delays from importing building materials from overseas – including, carpet, tiles, joinery, stone, steel, light fittings, windows, furniture and building facades, computers and equipment.

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