A 1% rise in construction productivity would add $1.25 billion to GDP: PwC’s Jeremy Thorpe on how to achieve that

The construction industry is huge, and its poor productivity performance feeds through to governments, businesses and consumers.

That’s the finding of a new PricewaterhouseCoopers report on Australia’s productivity challenges, which singled out the construction industry as being in dire need of improvement.

Construction is responsible for 6.9% of Australia’s GDP, and employs 1.043 million people, nearly 10% of all employees. 

But according to the report, “the Australian construction industry is a laggard saved from additional scrutiny only by the productivity malaise that has beset other Australian industries”.

Economist and PwC partner Jeremy Thorpe tells SmartCompany that a lack of new technology in the sector is a large part of why it’s so unproductive.

“We still have people with their shirts off, sitting around on construction sites, interrupted by the rain,” he says.

“It doesn’t make sense in the modern world. The more you systematise, and do construction off-site, the more you can limit that kind of waste.

“Bathrooms are the prime example. Can you make it offsite and drop it in on the day? It needs new skills, and the mining boom has placed pressure on the industry, causing skills shortages.”

Industrial relations is the “hairy issue in the room”, but isn’t going to be solved by one thing, like the reintroduction of the Australian Building and Construction Commission, Thorpe adds.

“It can’t be up to government, unions or industry to solve it on their own. They have to work together, and unfortunately, it’s quite an adversarial sector.”

The size of the construction industry means any small gain in productivity would add huge value to other industries in the Australian economy. A 1% rise in productivity, PwC writes, would generate $1.25 billion in savings.

The report looked broadly at Australia’s total productivity as well as that in the construction sector, and highlighted that Australia’s overall productivity growth is still low.

“Labour productivity has picked up over the last five or so years,” Thorpe says.

“But multifactor productivity, which is a measure that combines labour and capital productivity, is still very low.

“Some of that is distorted by the mining industry – when you’re building mines, they’re not immediately productive.”