The Construction Productivity Challenge in Australia
Construction workers in Australia are building less today than they were in 1990
Productivity improvement is essential for economic growth and higher living standards in Australia. Despite its importance, construction productivity has failed to keep pace with other industries, costing Australia an estimated $62 billion per annum in lost work.
- Structural challenges in the industry, such as fragmentation, lack of knowledge transfer, and project-based work, hinder the adoption of innovative practices and technological advancements. Procurement processes that favour the lowest cost further discourage investment in productivity-enhancing solutions.
- Adversarial risk allocation and state-based regulatory differences increase inefficiency and costs, reducing opportunities for collaboration and standardisation across projects and jurisdictions. Moves towards collaborative contracting could help overcome these hurdles.
- Investment in workforce development, skills, diversity, and employee wellbeing is crucial to improving productivity and reducing high rates of turnover, stress, and safety incidents.
Chart 1: Construction industry productivity is worse today than it was in 1990
Productivity has become a key talking point among economists in the lead-up to this week’s Economic Reform Roundtable in Canberra. Productivity is the term used by economists to describe the ratio between inputs and outputs for a given industry or economy. Improving productivity is fundamental to economic growth and improving the living standards of Australians, as productivity growth creates more value in the economy without a corresponding increase in inputs. Boosting the productivity in the construction industry would enable the industry to deliver more houses, hospitals, schools, and infrastructure without a corresponding increase in the number of workers or the quantity of materials and equipment.
The construction productivity challenge
Australian construction productivity has lagged the gains seen in other industries. Productivity is worse today than it was in 1990, which means the average construction worker is building less today than the average worker was building 35 years ago. We estimate that the lost opportunity from stagnant construction productivity growth costs Australia $62bn in lost work every year. Solving this lost productivity challenge would help reduce project timeframes, costs, and the ongoing skills shortage that continues to hamper the construction industry.
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