Effects of Global Financial Crisis on Construction Industry in Australia

Davinder Saini
[COMPANY NAME] [Company address]
Topic - The effects of the global financial crisis on the
construction industry in Australia

Topic - The effects of the global financial crisis on the construction industry
in Australia
Executive Summary
The GFC (Global financial crisis) has a negative impact on the engineering construction and
house/office building industry in Australia. The report aims to present the effects of GFC on
the construction industry in Australia. This report highlights both the positive and negative
impacts of GFC on the Australian construction industry. The housing construction industry
has improved after the GFC as its construction index rose by 2.9 points. On the other hand,
the GFC has a negative impact on property prices, youth labour market, building construction
supply chain, unemployment and availability of skilled manpower. The report findings
revealed that the demand for construction, real estate, property, design and architecture
workers has fallen by 19.8% over the last year due to the downturn in the housing market
industry. Moreover, the rapid decline in house prices is a major area of concern because the
national price has fallen by 5.1% in 2018 which is more than the annual drop occurred in
2009 i.e. 4.6%. The demand for construction, real estate, property, design and architecture
workers has fallen by 19.8% over the last year due to the downturn in the housing market
industry. This report presented that employment has grown at a decent clip during 2012-2014
while the professional’s hiring has been reduced in 2018.
Contents
Executive Summary................................................................................................... 1
Introduction............................................................................................................. 1
Global financial crisis 2009.......................................................................................... 2
Positive impacts of GFC on the construction industry in Australia......................................2
Negative Impacts of the Global Financial crisis on the Australian construction industry..........3
1. Decline property prices..................................................................................... 3
2. Youth labour market........................................................................................ 4
3. Skills shortage................................................................................................. 6
4. Building construction supply chain......................................................................7
5. Unemployment................................................................................................ 8
Conclusion............................................................................................................... 9
References.............................................................................................................. 10
Appendix............................................................................................................... 12

Introduction
The Global Financial Crisis (GFC) can be defined as a structural flaw related to the financial
system. There are various factors/causes of GFCs such as housing price fluctuation, exchange
rate, trading partner growth, current accounts, global imbalance, credit tightening,
international reserves etc. which provides an idea about the impact of the global financial
crisis. Australian construction industry faced various problems during the occurrence of GFC
in 2009. As a consequence of GFC, the unemployment rate and shortage of skilled labour
have been increased rapidly. However, it was highly challenging for the Australian
construction industry to fulfil the demand of customers and complete large construction
projects on time due to the occurrence of the global financial crisis. It has been estimated that
an Australian construction industry would face a global economic crisis in 2019. The report
aims to critically examine the important and diverse economic issues which have been faced
by the construction industry in Australia in 2009. This report is going to discuss both positive
and negative impacts of GFC on the construction industry in Australia. This report is highly
significant as it presents the current construction market trends in context to the problems
faced by the industry during previous GFC.
Global financial crisis 2009
An Australia construction industry has been significantly contributed to the economic
outcome by providing business opportunities and employment (Torres-Machí et al., 2013).
House/office building and engineering construction are main activities performed by the
construction industry in Australia. Global financial crisis occurred in 2009 is one of the most
important economic events which adversely affected different business markets all across the
world. India, Japan, Australia, New Zealand, Canada, the UK, China, Spain are main
countries which adversely affected by the global financial crisis. It occurred in July 2007
when U.S. investors began to withdraw money from banking/financial organizations due to
lack of faith in the mortgage properties. In 2009, the construction industry was adversely
targeted by the financial crisis and unavailability of credits. It has been found that the
employment rate in the construction sector declined by 8.2% at the recession time (financial
crisis) in Australia (The Global Financial Crisis and regional Australia, 2009). Moreover, the
industry had registered its seventeenth consecutive month of declining employment at the end
of August 2009. As a result of the financial crisis, residential and commercial construction
has dropped significantly on the Gold Coast. Road and rail, housing, education and

community infrastructure are the main four components of NBESP (National Building
Economic Stimulus Plan) which adversely affect the construction sector at the time of the
global financial crisis. Excessive leverage, liquidity crunch situations, conflicts of interest,
taxes and subsidies are the main factors of the global financial crisis (Horhota, 2009). The
total merchandise trade in Australia decreased by 11.6% during the global financial crisis in
2009 (Huy, 2014). There is no doubt that the recession (Global Financial Crisis) officially
ended at the end of 2009 but the construction industry in Australia has struggled a lot to come
back to its pre-GFC level. According to the Australian Bureau of statistics data, the financial
global crisis would occur in 2019. In the following section, the impact of GFC (Global
Financial Crisis) on the Australian construction industry has been represented based on the
recent industry trends in a detailed manner:
Positive impacts of GFC on the construction industry in Australia
The GFC has put some positive impacts on the construction industry in Australia. At the time
of recession, the housing construction activity remains resilient. It has been observed that the
housing industry association performance of construction index rose by 2.9 points in the
July/August 2009 which showed the improvement in housing construction activity.
Moreover, it has been expected that the low-interest rates and population demands can
improve housing construction activity in an effective way. Moreover, residential construction
activity drives the economy of Australia after the ending of the global financial crisis (Kraal
and Yapa, 2012).
Negative Impacts of the Global Financial crisis on the Australian
construction industry
It has been estimated that the global financial crisis will 2019. In this report, the impact of the
global financial crisis occurred in 2009 has been investigated along with recent trends of the
Australian construction market.
1. Decline property prices
The decline in business investment and household consumption are signs of the emerging
financial crisis (Kraal and Yapa, 2012). The GFC occurred in 2009 has slow down the
economic growth of Australia as the overall housing construction has declined on the Gold
Coast. The findings of various researchers showed that falls in housing price are a sign of the
global financial crisis. In the current scenario, properly prices in Australia has been declining
continuously and it has been estimated that the global financial crisis will come soon.
According to the Australian Bureau of Statistics data, the house prices fell by 2.4% in the