Slow vaccination hampers construction recovery in Australia and New Zealand

Australia and New Zealand’s construction outlooks improved over the second quarter of this year but slow vaccination programmes, rising costs from supply chain pressures and labour shortages are creating considerable challenges, says consultant Turner & Townsend in its latest market report.

Government stimulus helped grow Australia’s pipeline of construction work while the private sector continues to recover. In New Zealand, the construction industry has continued to feel the impacts of the pandemic despite restrictions easing and low case numbers.

While the construction outlook looks positive for both countries, there are increasing concerns over the surge in building material costs owing to global supply chain bottlenecks.

“We expect this to result in a high level of construction cost escalation over 2021 for all markets across Australia and New Zealand. Adding to this pressure is the increasing skills shortages being felt across the region, which is not expected to ease until international borders reopen,” the company said.

Its construction cost escalation forecasts for non-residential projects in 2021 have been revised up to 4.5% for Perth, 4% for Auckland and Sydney, and 3.5% for Adelaide, Brisbane, Christchurch and Melbourne.

Australia’s economic recovery experienced better than expected economic growth over the last quarter, helping boost confidence which paves the way for a stronger and swifter economic recovery.

In New Zealand, after contracting over the fourth quarter of 2020, the economy returned to growth in Q1 of 2021, driven by a booming housing market and strong employment and retail spending.

The slow Covid-19 vaccination roll-out in both countries will continue to be a downside risk for the economic outlooks, Turner & Townsend said.

Image: Qantas A330s parked at Sydney Airport, grounded amid the pandemic in January 2021 (Nick-D/CC BY-SA 4.0)

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