Commercial construction spending Australia (2020-21 budget)

This has been the most crucial budget in modern history – delivered against the backdrop of a global pandemic and recession. Federal Treasurer Josh Frydenberg announced the government’s stimulus strategy to rebuild Australia’s economy on the 6th of October 2020. Many of us working in construction watched with bated breath to see what we can look forward to – after dealing with widespread job losses and lower productivity due to COVID-19 restrictions around the world. Still, it’s worth noting: as an essential service, we’ve fared better than most sectors. This is exactly why federal and state governments should invest heavily in building projects, to best support our national recovery (construction accounts for around 10 per cent of the Australian economy, which is no small amount). Does the 2020 federal budget do enough to meet this goal? There’s been a mixed response. Overall, yes, this budget is a saving grace for millions of workers who are worried about their jobs. “Hundreds of thousands of small building and construction businesses will now have hope that they can stay afloat,” according to Denita Wawn, CEO of Master Builders Australia.

“The Budget will support the industry as the accelerator of economic recovery. It is going to support the country to build its way out of recession.”

But for some others, it falls short of expectations… Keep reading to find out the reasons behind the praise and criticism.

Infrastructure spending

Infrastructure has once again received the biggest slice of budget pie for the construction sector. New and accelerated projects will receive $14 billion over four years. For the next decade, $110 billion will be spent on land, transport and community infrastructure – to support local jobs and businesses (this is an increase of $10 billion for the infrastructure investment pipeline). Let’s look at some of the key infrastructure spending:

• $7.5 billion on rail and roads
• $4.5 billion for upgrading the National Broadband Network (announced before this budget)
• $2 billion for upgrading roads
• $1 billion for local roads, street lighting and footpaths
• $5 billion to help regional areas recover from drought
• $2 billion into the National Water Infrastructure Development Fund for regional Australia (10 year program)
• $50 million for farmers to upgrade their water infrastructure
• $250 million to improve recycling infrastructure

Projects include:

• Western Sydney Airport
• Dungowan Dam project
• Ettamogah Rail Hub
• Bruce Highway Upgrade
• Molonglo River Bridge
• Newcastle Inner City Bypass
• Wyangala Dam
• Western Australia Bus Lane Program
• Dungowan Dam
• Tasman Bridge upgrade
• Fast-tracking of energy infrastructure such as Marinus Link and Project Energy Connect

Criticism of infrastructure spending: Although infrastructure spending has expanded by $10 billion, this will be spread over a decade. It’s also not clear what funding is new. An example of this confusion: Former New England MP Tony Windsor tweeted that the Bolivia Hill New England Highway was previously funded by the Gillard government in 2013, and isn’t a recent funding allocation. BIS Oxford Economics chief economist Sarah Hunter also told the ABC that it wasn’t easy to figure out what’s new in the budget, compared to previous allocations, or projects that have been pushed forward. On the other hand, she said there could a silver lining to this: “But if the federal money frees up money that the states had already allocated and they’re able to use it elsewhere to drive the recovery, then that can be positive,” she added. Another point of contention: There’s a lack of big infrastructure projects – the likes of which have helped our economy recover from difficult periods in the past. Think back to World War II (the Harbour Bridge and Snowy Mountains Scheme) and The Great Depression (Somerset Dam and Story Bridge). Federal Opposition Leader Anthony Albanese says this is a missed opportunity:

“And in spite of a Budget drowning in red ink, there were no new game changing infrastructure projects funded.”

However, this might not be the worst thing, depending on how you look at it. Tony Shepherd, chairman of Infrastructure South Australia, believes the economy will recover faster with smaller projects that are ready to start without delay. He told The Business. “The problem with big infrastructure projects is they take two or three years from when you hit the go button to when you actually get people employed in the field.” On this note, it’s crucial that projects (regardless of size) aren’t delayed for many years before finally getting approved. There are concerns over the backlog of projects in both the residential and non-residential sectors. And a final concern from one critic: Are some accelerated construction projects really being fast-tracked? The Fifth Estate reports that Tasmanian Shadow Treasurer David O’Byrne questions why the Marinus Link project has been given a fast-tracked timeline of 2024, when it was previously promoted as being “shovel ready” for 2023.

Strong investment in skills and training for apprentices

Wonderful news: young people who want to work in construction can look forward to a fair amount of support from this budget. There’s significant investment in skills and training for apprentices, as well as incentives for hiring. First, an extra 100,000 apprenticeships are expected to be created by the Supporting Apprentices and Trainees Wage Subsidy Scheme, which will be extended until the 30th of September 2021. This will enable more small to medium businesses to claim up to $7000 per quarter when they hire an apprentice who meets the eligibility criteria. There’s also the JobMaker Hiring Credit – a fresh initiative for businesses that hire a new worker aged between 16 and 35. To be eligible, the employee must be claiming JobSeeker and work at least 20 hours each week. Businesses that meet the criteria can claim:

• $200 a week for every eligible employee aged 16 to 29
• $100 a week for every eligible employee aged 30 to 35

This is expected to support around 450, 000 positions, and will cost $4 billion from 2020 to 2023.

More support for women in construction too

The government is investing $240 million over the next five years to support employment for women. Although this move has been criticised as not doing enough for female workers in general; women in male-dominated industries like construction are set to benefit from various programs. Organisations like Master Builders Australia will receive funding to expand programs that create more opportunities for women. Another $24.8 million will create new STEM industry cadetships and advanced apprenticeships. This is important, because female construction workers don’t always get a fair go in the building industry, due to gender barriers (although many of these are unintentional).

Tax incentives and business concessions

• Eligible construction workers will benefit from personal tax cuts over two years.
• More businesses will meet the criteria for the instant asset write-off scheme, which has been expanded to cover organisations with an annual turnover of up to 5 billion (the amount was $500 million earlier this year).
• Loss carry back: “Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019–20, 2020–21 and 2021–22 financial years to a prior financial year’s income tax liability in the 2018–19, 2019–20 and 2020–21 financial years.” However, this only applies to corporate entities, so 60 per cent of small businesses that are struggling because of COVID-19 could miss out on this support.

Improving the energy efficiency of buildings

The government will spend $52.2 million on making commercial and residential buildings more energy efficient over five years, in a bid to reduce emissions and support the energy supply. This move has been welcomed by the Property Council of Australia, although they’ve called it “a modest commitment in the overall scheme of things.” Suzanne Toumbourou, Executive Director of the Australian Sustainable Built Environment agrees there is room for improvement. She says that government building retrofits are missing from this plan, even though they make up around 30 per cent of commercial spaces in Australia.

“Many of these buildings, like hospitals and schools, are in dire need of upgrading, and making them more energy efficient would reduce the energy costs of operating them, easing pressure on budgets at a crucial time. At the same time, retrofitting and renovating these buildings has the potential to employ large numbers of Australians, while boosting skills in areas like the installation of energy efficient technology.”