Global supply chains, incomes and jobs

Many Australian businesses have been increasingly worried about the offshoring of manufacturing production to Asia in general and to China in particular. Led by the rapidly falling communication and coordination costs, the various stages of building construction (or any other manufacturing activity) need not be performed near to each other anymore. The lower cost of building products available from overseas cannot be disregarded when Australian builders now bid for projects in an increasingly competitive market. Utilising a growing volume of imported products leads to reduced final costs for buildings, creating greater value for construction clients and home owners. Extending the supply‐chain trade globally can bring great benefits but also new risks.

The findings of this research project indicate that while direct competing imports by the construction sector remained fairly constant over the last decade, the suppliers and producers in the manufacturing industry supplying to the construction sector have increase the use of imported products by an average of 50%. Rising manufacturing costs in Australia has resulted in either the relocation of production capacity to lower cost locations overseas (eg. commercial air conditioning systems) or to close manufacturing lines domestically as in the case of ceramic sanitary wares and rock-wool insulation. Preliminary evidence points to a total value of imports amounting to between 15% and 20% of the total construction cost of a commercial building in the city today.

The study did not find evidence of a direct loss of employment in the construction industry but further work is required to characterise the impacts of an increasingly global supply chain on incomes and manufacturing jobs.

This project was funded via the Brookfield Multiplex Research Program.