Master Builders Victoria Industry Update – Supply Chain Issues
Deteriorating market conditions due to the COVID-19 pandemic has resulted in reduced capacity in supply chains for building products in both Australia and overseas, pushing up prices and putting added financial pressure on struggling Victorian builders and tradespeople.
This situation has been exacerbated in Victoria due to the recent circuit breaker lockdowns, especially as many small builders and tradespeople were not permitted to work inside occupied premises.
Other Causes of Supply Shortages
Other conditions contributing to the current supply shortages in Australia include bushfires and cyclones, timber mill fires, a train derailment in the Nullarbor, shipping delays due to the Suez Canal blockage, and a worldwide shipping container shortage.
This unfortunate overlap of world events had led to real pressure on the domestic building sector within Victoria and across Australia. These factors have already resulted in large price increases for both products and trades, as well as substantial delays and unavailability of stock.
When Will We See Improvements?
It is important to note that, while there is a limited amount of materials at present, demand is still not expected to peak for another few months. With a pipeline of new homes to be built and international borders not expected to reopen for a while, this issue may continue for months to come.
Our members are reporting that wait times for many products have blown out from weeks to months. And there have been examples of the prices of some products, such as timber, increasing by as much as 50 per cent this year.
Issues for Builders
Master Builders Victoria is concerned about builders who have entered contracts and cannot absorb ever increasing costs which, by law, cannot be passed onto consumers. These issues are very damaging for small businesses trying to manage limited cash flow.
Of concern across the building and construction industry is the risk of increased insolvencies due to supply shortages. Builders must order supplies because of the long wait times, and this in turn, leads to an increase in liabilities and a greater risk of insolvency.
State and Federal Government incentives for the building and construction industry, such as the HomeBuilder Grant, have delivered a much-needed boost in the face of the COVID-19 pandemic. These incentives have generated billions of dollars in economic activity and helped to secure the viability of thousands of businesses and jobs through this pandemic.
However, the international supply chain constraints were unforeseen and these are now having a critical impact on our industry, which may adversely affect the broader Australian economy if not addressed.
Master Builders Victoria is continuing to work with all levels of government and industry partners to seek potential solutions to these supply chain challenges.
In the meantime, we are asking all consumers to be patient with builders and tradespeople and for builders to be patient with suppliers during these unprecedented times.
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