Reforms Key to Solving Australia’s Construction Worker Crisis

On construction sites across Australia, seasoned tradespeople are working well past traditional retirement age, their expertise increasingly precious in an industry facing its most severe talent drought in decades. Meanwhile, vocational education completions in construction trades have plummeted by 55 per cent compared to previous peaks despite desperate industry demand. This workforce reality is sparking urgent conversations as property developers, government officials and construction firms confront a troubling equation: 1.2 million homes to build by 2029, but a rapidly dwindling pool of human resources to build them. With construction costs soaring by 40 per cent since the pandemic and productivity growth stagnating at just 1 per cent annually over two decades, Australia’s ambitious housing targets are being undermined not by lack of demand or financing, but by the question of who will do the building. Grattan Institute housing and economic security program director Brendan Coates says critical shortfalls exist across construction, engineering, architectural services, project management, finance, and community housing operations. “The construction industry is currently short over 200,000 workers and will need at least another 90,000 additional skilled tradespeople in the next three years just to keep up with current demand,” Coates said at the National Housing Solutions Summit this month. Industry bodies estimate that at least 500,000 additional trades workers must enter the construction industry by 2029 just to maintain current construction demands—a figure that doesn’t account for the Government’s housing target or the transition to net zero. ▲ Grattan Institute housing and economic security program director Brendan Coates. The Housing Industry Association (HIA) estimates an additional 83,000 skilled workers will be required specifically to deliver the Government’s housing target. Yet recent data from the Australian Bureau of Statistics revealed construction sector job vacancies have increased by 33.5 per cent since January of 2020. Oxford Economics head of construction and infrastructure consulting Adrian Hart says the ageing workforce compounds these challenges. “There’ll be a lot of retirement soon that’s going to hit hard,” Hart said at the recent Oxford Outlook summit. “A lot of tradies still in the game are hanging on by their fingernails.” This demographic trend is concerning given the construction industry’s physical demands and the declining pipeline of younger workers ready to replace those ageing out of the sector, Hart says. These shortages are affecting costs and affordability, HIA senior economist Matt King says, with “trades prices running at an annual growth rate of 3.4 per cent, which is much higher than the 2.0 per cent average over the decade prior to the pandemic”. ▲ Oxford Economics head of construction and infrastructure consulting Adrian Hart. Migration a solution? Coates says migration represents a critical part of the solution, though he says there are relatively few recent migrants working in construction. “About 25 per cent of the workforce is born overseas, but only 2.8 per cent of all construction workers arrived in Australia in the last five years. That’s nearly half the rate we see for the overall population,” he says. The Federal Government recently reversed its position on skilled migration for construction workers, adding building trades to its Core Skills Occupation List after initially excluding them in December 2023. The new Skills in Demand visa program will offer successful applicants a four-year stay with potential for permanent residency. However, Master Builders Australia chief executive Denita Wawn criticised the exclusion of machinery operators from the list, despite these roles commanding salaries well above the temporary skilled migration income threshold. “You can’t build houses, schools, hospitals or roads without crane, bulldozer and excavator operators, who have not made the cut,” Wawn said. Coates proposes several changes to improve migration pathways for construction workers. These include eliminating occupation lists that focus on job codes rather than actual skills and abolishing labour market testing, which adds uncertainty, delays and costs. ▲ New Zealand has more than doubled their intake of apprentices over the past seven years. He also suggests reducing the sponsorship burden on employers and reviewing skills assessment requirements, which can cost $9000 and take up to 18 months for trades such as electricians. “For countries where we’re confident in their training standards, like New Zealand, we could recognise their licenses directly,” Coates says. “We could also create pathways for people with construction experience abroad who may not fully meet Australian requirements to come to Australia and complete their training while working.” New Zealand offers a compelling case study, having grown its construction workforce by 50 per cent over seven years, with the migration share doubling. This translates to an additional 20,000 workers, which in the Australian context would equate to about 100,000 extra workers in a short period. “They achieved this partly by removing labour market testing and making it easier to bring in workers,” Coates says. Domestic training pipeline While migration offers immediate relief, building the domestic training pipeline remains essential for long-term workforce sustainability. ▲ Vocational education completions in construction trades have plummeted by 55 per cent. The completion rates for construction apprenticeships remain troublingly low, with only about half of those who start apprenticeships completing them. “The Government has introduced incentive payments—$10,000 for apprentices and $5000 for employers—in priority occupations, including construction trades,” Coates says. Meanwhile, New Zealand has more than doubled their intake of apprentices in a very short period, growing from 5000 to over 10,000. Hart wants to see more policy changes to attract more people to the industry, alongside a greater focus on productivity improvements. “We need to be attracting a lot more people into this sector and policy needs to be directed into this,” he says. “This is ultimately going to be the way we’re going to really try and hit some of those targets that we need to hit.” Gender diversity A significant untapped resource exists in addressing the construction industry’s gender imbalance, Coates says. “The construction industry is the most gendered workforce in the Australian economy. Only 14 per cent of workers are women, and this is especially acute in skilled trades, where the percentage of women approaches zero,” Coates says. Infrastructure Australia’s chief executive, Adam Copp, reinforces this point. “In order to attract new workers to the industry and retain the ones we have, government and industry need to address the underlying cultural issues that are holding productivity back and driving people, particularly women, away from a career in construction,” Copp says. ▲ The sector struggles to attract women, limiting its talent pool, Coates says. The maths is straightforward: excluding half the potential workforce in an industry with increasing demand inevitably creates labour shortages. Without comprehensive action across migration, training, and industry culture, Australia risks falling well short of its housing targets with serious implications for housing affordability and the broader economy. “If we are serious about solving the housing crisis, we need a coordinated approach to workforce development,” Coates says. “By addressing training, skills, and innovation challenges, we can not only deliver on our immediate targets but also build a sustainable, resilient, and thriving workforce to carry the industry forward for many years to come.”

Reforms Key to Solving Australia’s Construction Worker Crisis

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