End of the Tunnel
Master Builders Australia
Although Wilhelm is unable to forecast a rosy new dawn, he does have a cautiously optimistic view from his Canberra office of the prospects for many of the association’s members.
The industry – both residential and non-residential sectors – has faced very tough conditions over the last two years. Indeed, “the only positive in the whole sector is engineering construction associated with the resources boom,” says Wilhelm. Is there any positive prospect? “There is a very mixed picture which suggests some sort of recovery is about to take effect but no one is confident it will be a boom-style recovery but a soft one; better certainly than bumping along the bottom. In terms of timing, we don’t expect anything tangible until mid-year at the earliest.”
Understandably, there is still negative sentiment among investors and potential buyers (particularly first-timers). Wilhelm is in a good position to see if the trends are uniform across Australia. “No, it’s very patchy,” he explains. “Of the states that are looking more optimistic, Western Australia is well placed and there are early signs that New South Wales might be starting to flicker.”
NT is benefiting from the resources sector input but the market in South Australia, Wilhelm believes, is probably the least well placed at present to improve in the short term. “There is also an expectation that Queensland will start to pick up quite soon,” he adds.
MBA represents builders large and small, down to the sole trader, and is “renowned for providing a full range of services, assisting the big companies who may in particular require advice on complex industrial relations services as well as the one-person operator who is looking more for contractual or business advice,” Wilhelm explains. The organisation also offers invaluable opportunities for networking.
Industry wide, Wilhelm estimates that some 60,000 jobs have been lost in the industry and there is an expectation that this fall has not ended. However, and significantly, although the industry has seen many corporate casualties, MBA membership has fallen only slightly, suggesting that members of this peak body may be among the hardier, more stable and even better quality builders. Also, “it’s in tough times when you need your association most,” acting as an umbrella, advisor and sometimes, “a shoulder to cry on.”
Wilhelm is wary of the notion that hard times have prompted a ‘clear-out’ of the industry. But he accepts that companies with sound balance sheets and good business plans, that have planned for a downturn, who have a focus on customer service and delivering value for money, “are the companies that, regardless of which sector, are able to weather the economic storm.”
This drive toward a greater focus on customer service and satisfaction is one that MBA has been leading for some time. “Because there are so many new entrants into this industry all the time, it is important that those new entrants should realise that the technical capability of putting up a house – although it is an important part of the job – is only one component. There are other equally important aspects such as understanding cash flow and more importantly, in terms of meeting the market and making sure the needs of the client are always uppermost in their business plan.”
This is the only way to run a sustainable and profitable business, he suggests. There is a lot more to this game than putting bricks on top of each other or putting up a frame; it is no longer sufficient to be a technician. Business skills are vital to existence, whether the economy is good or bad.
The lengthy election period is not helping any recovery of markets as investors and house-buyers tend to hang back in such conditions. “We expect this election cycle to be no different,” Wilhelm says. He politely (and not surprisingly) will not be drawn on the possible effects of the industry on the outcome of the September stoush but says, “we have been constantly lobbying governments and oppositions on many issues. At a high level we have been reminding both government and the Coalition of the important role of this industry in terms of its ability to kick-start an economy.”
Indeed, many independent and international analyses have recently shown the Australian economy slowing to a considerably reduced growth pattern over the next year or so and it is MBA’s view that the government could use the construction industry responsibly to help stimulate the economy, particularly the housing sector. MBA has been banging this drum for some time and “we will be accelerating our efforts in the current months.”
Wilhelm concedes that the current government has listened to some of the arguments from the industry, for example in the area of labour. “It has been supportive in terms of making sure that overseas skilled migration can supplement labour shortages in the industry – especially in the mining sector and in remote areas where, despite best efforts by companies to recruit people from the east coast, they have been unsuccessful.”
The judicious use of 457s as a very important supplementary measure to deal with the short-term skills shortages experienced by the industry may not be liked by the unions but “the reality is that because of the cycles and because of the insufficient number of apprentices entering the industry, for long-term sustainability the industry does need to rely from time to time on skilled migration to fill its labour needs.” Otherwise, he warns, you end up with massive inflationary pressures that stoke interest rates and wage levels, house prices rise and affordability suffers and a vicious circle is created. It’s nothing new and it’s not rocket science; “If you don’t have an adequate labour force, it follows that labour costs go up, construction costs rise and next thing you know there is an economic recession.”
MBA believes the nation needs to do something to reduce its carbon footprint. As for the Carbon Tax, Wilhelm asserts, “we are not climate-change deniers. The issue we have is the policy architecture and cost impost it would impose on the industry.” The association – and the broader industry – is far from the dinosaur it has been painted as in some quarters, he adds, but is worried about the effectiveness of the tax as implemented. “We have supported an emissions trading scheme and a market-based approach. For the critics who have pigeon-holed us as climate-change deniers: they are wrong.”
As it happens, this was also the week when a Melbourne crane driver was snapped snoozing on the job 20 storeys up, so it seemed a good idea to ask Wilhelm if the drive for health and safety might have lost prominence during the savage economic climate. Not at all, he says. “Occupational health and safety remains front and centre. The industry is working internally and with the government to raise its performance outcomes. It is in no one’s interest to have unsafe worksites. The cost to a company of a death or serious injury is massive.”
To be sure, no company deliberately tolerates shoddy safety practices. “Therefore MBA is deeply disappointed with the building unions when they seek to politicise unfortunate death or serious injury. Safety is a responsibility for everyone. Employers must take responsibility and they do. But in the end the employees themselves must be attuned to the safety risk that they need to manage themselves. Individuals’ responsibility to themselves and others is part of the total safety culture.”
Good times or bad, MBA is constantly knee-deep in new regulations, helping to draft them, lobbying for change or just explaining their impact to the membership. “This industry is always being inundated with more regulation and legislation,” Wilhelm says. “They are all big-ticket items,” although for the industry overall, he singles out industrial relations and its red tape as an issue that becomes more profound in a downturn when profitability and costs are more critical.
But he still believes in the industry and its ability to come through this and any other downturn in good shape, despite all the negatives. “It is a great industry. It is still a major contributor to the economy, a major employer – the largest employer of young people in terms of apprentices. It is going through a very tough period but it has the robustness to come through this slow patch. What we say to government is that we don’t need to be more regulated.”
This is not so much a plea for de-regulation as for a more sympathetic hearing. Constantly increasing regulation somehow assumes something is badly broken or wrong. But it’s not. The building industry, says Wilhelm, should be freed up a little more to get on with one of its major functions: growing the job pool for young Australians in particular.