Supply constraints push costs up by 5% in parts of Australia, New Zealand: Turner & Townsend

In Australia, construction activity has been buoyed by big public sector projects like the Sydney Metro (Courtesy of Sydney Metro)
Construction activity in Australia and New Zealand continues at pace in the third quarter but long lead times and rising freight costs are exacerbating supply constraints and labour shortages and pushing up the cost of steel, timber and electrical materials, says consultant Turner & Townsend.

Australia’s ocean freight index rose by 38.6% in the three months to June 2021, it found.

In both countries, international and state border restrictions fuelled skilled labour shortages.

The company predicts non-residential project costs in 2021 to rise 5% in Auckland and Perth, 4.5% in Brisbane and Sydney, and 4% in Adelaide, Christchurch, and Melbourne.

Despite this, it says the outlook is positive, with public sector work buoyant and the private sector expected to recover in line with international borders opening.

Australia’s economy expanded by 0.7% in the second quarter of 2021, after an upwardly revised 1.9% in the first quarter.

“Despite growth easing over Q2, the full impact of the COVID-19 lockdowns across New South Wales and Victoria are yet to be felt and are expected to result in the economy contracting over Q3,” Turner & Townsend said. “Following this, the economy is expected to return to growth over Q4, as COVID-19 restrictions ease across the country.”

In New Zealand, the economy expanded by 2.8% over the second quarter, up from 1.4% growth in the first, led by an increase in retail trade and the accommodation and food services industries.

“With the reimplementation of lockdowns amid the outbreak of the Delta strain of COVID-19, growth is expected to slow over Q3,” the company said.

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