Australia & New Zealand combined are projected to see minimal GDP growth in the remainder of 2020:
The projected economic information is serious, both countries could face unprecedented economic declines and unemployment rates in July & August.
The economic impact and fallout of the COVID-19 on Australia’s & New Zealand’s construction sectors still needs to be fully recognized, it will most probably take 2 or 3 months for the dust to settle & clearer picture emerges. The reality is that many construction projects will be delayed, deferred or worst case situation withdrawn, this situation short term could drive up construction unemployment rates in both countries.
COVID-19 will hinder CAPEX spending and delay current construction projects. Australia and New Zealand in their two centuries of existence have never ever experienced an economic tsunami / earthquake of this scale.
The Australian dollar continues to weaken against the US Dollar currently at 1.52, the problems it is experiencing with China does not bode well for Australia’s construction sector in the next 3 to 6 months.
The construction supply chain has been totally interrupted, deliveries to sites have been delayed from 2 to 10 weeks or even longer and costs on some specific items have increased by 3% to 7% from pre-COVID-19 levels.
Chinese vendors are discounting some of their material costs in an effort to maintain their market share, this is something we will discuss in our next newsletter.
Social-distancing requirements, smaller work crews, safety measures and the wearing of personal protection items is expected to lower future productivity of construction worker by 10% to 40% going forward in Australia & New Zealand.
The need of personal protection items, disinfectant, temperature checks on the workforce, possibly additional site COVID-19 compliance staff, together with larger site offices and break rooms will add costs to all future construction projects. This and the labor productivity loss will mean more direct and in-direct man-hours causing projects to take longer to complete is the reality of COVID-19 going forward.
The Government of New Zealand is preparing to invest considerable funds on infrastructure / public works projects to minimize current and future unemployment that is forecast to exceed 10% of the workforce.