1 00:00:05,880 --> 00:00:08,640 Speaker 1: Welcome to the Fear and Greed Daily Interview. I'm sure, Ailmer. 2 00:00:08,920 --> 00:00:13,520 Speaker 1: The construction sector in Australia, particularly residential construction, not just 3 00:00:13,600 --> 00:00:16,960 Speaker 1: provides houses for millions of Australians, but also provides tens 4 00:00:16,960 --> 00:00:20,239 Speaker 1: of thousands of jobs for both skilled and low skilled workers, 5 00:00:20,600 --> 00:00:24,000 Speaker 1: as well as providing significantly to economic growth. But for 6 00:00:24,000 --> 00:00:25,919 Speaker 1: the past couple of years, all we seem to hear 7 00:00:26,200 --> 00:00:28,920 Speaker 1: about it is that there aren't enough homes being built. 8 00:00:29,040 --> 00:00:32,960 Speaker 1: On top of that, vice leaked from Treasury yesterday shows 9 00:00:32,960 --> 00:00:35,040 Speaker 1: that the Federal government's goal of one point two million 10 00:00:35,120 --> 00:00:38,360 Speaker 1: homes over the next five years is unlikely to be achieved. 11 00:00:38,760 --> 00:00:40,800 Speaker 1: To help me understand where the sect is up to 12 00:00:41,200 --> 00:00:43,360 Speaker 1: in what it needs from government and others, I welcome 13 00:00:43,440 --> 00:00:47,680 Speaker 1: Jocelyn Martin, Managing Director of HIA. Jocelin, Welcome to Fear 14 00:00:47,680 --> 00:00:48,040 Speaker 1: and Greed. 15 00:00:48,280 --> 00:00:48,800 Speaker 2: Thanks Sean. 16 00:00:49,479 --> 00:00:51,560 Speaker 1: It's just every year. I think the first of July 17 00:00:51,680 --> 00:00:54,440 Speaker 1: was the anniversary from when the government committed to build 18 00:00:54,440 --> 00:00:57,040 Speaker 1: one point two million homes under the National Housing Accord. 19 00:00:57,760 --> 00:00:58,840 Speaker 1: What's happened since? 20 00:00:59,560 --> 00:01:02,840 Speaker 2: Well, I mean, simple mass is two hundred and fifty 21 00:01:02,880 --> 00:01:05,560 Speaker 2: thousand homes a year and we're well short of that. 22 00:01:06,240 --> 00:01:08,319 Speaker 2: I think in the last twelve months we've built just 23 00:01:08,440 --> 00:01:11,720 Speaker 2: under one hundred and seventy thousand homes, so we're not 24 00:01:11,880 --> 00:01:14,880 Speaker 2: on track to build one point two million homes at all, 25 00:01:15,600 --> 00:01:19,440 Speaker 2: and obviously every year we don't do that increases the 26 00:01:19,480 --> 00:01:23,399 Speaker 2: target for the years to come. So you know what 27 00:01:23,520 --> 00:01:29,840 Speaker 2: has happened since, well, essentially nothing. We're still working on 28 00:01:30,080 --> 00:01:36,240 Speaker 2: improvements to barriers, to housing supply, skills, shortages, you name it. 29 00:01:36,680 --> 00:01:39,480 Speaker 2: Those barriers still exist, so we were a lot of 30 00:01:39,520 --> 00:01:42,360 Speaker 2: work to do if we're actually are going to even 31 00:01:42,400 --> 00:01:42,920 Speaker 2: come close. 32 00:01:43,240 --> 00:01:45,360 Speaker 1: Okay, I want to go through some of those issues 33 00:01:45,400 --> 00:01:50,320 Speaker 1: because we kind of bandy them around without maybe understanding them. 34 00:01:50,720 --> 00:01:55,080 Speaker 1: Let's start with land supply, and given with such a 35 00:01:55,080 --> 00:01:58,880 Speaker 1: big nation, is the problem that the land supply and 36 00:01:58,920 --> 00:02:01,640 Speaker 1: the places people want to live. There's not much there 37 00:02:02,200 --> 00:02:04,640 Speaker 1: and probably too much outside that. What is the land 38 00:02:04,680 --> 00:02:05,240 Speaker 1: to place you. 39 00:02:06,080 --> 00:02:08,760 Speaker 2: Well, I think many of our builders will say that 40 00:02:08,760 --> 00:02:11,520 Speaker 2: that's actually the heart of the issue, is available land. 41 00:02:12,160 --> 00:02:16,040 Speaker 2: It takes a long time for greenfield land to come online. 42 00:02:16,400 --> 00:02:20,720 Speaker 2: The approval process is very lengthy. The delivery of the infrastructure, 43 00:02:20,919 --> 00:02:24,240 Speaker 2: the sewer, the water, the power that is needed to 44 00:02:24,639 --> 00:02:29,040 Speaker 2: put homes there is actually fraught with a range of 45 00:02:29,080 --> 00:02:34,600 Speaker 2: different approvals. You're relying heavily on organizations such as Sydney 46 00:02:34,600 --> 00:02:38,760 Speaker 2: Water to actually deliver that infrastructure in a timely way, 47 00:02:39,400 --> 00:02:42,760 Speaker 2: and so you know, a lot of the problems start 48 00:02:43,000 --> 00:02:45,720 Speaker 2: with the availability of land and the speed at which 49 00:02:45,720 --> 00:02:47,400 Speaker 2: that land can come to market. 50 00:02:48,080 --> 00:02:50,560 Speaker 1: Are we being reasonable when we complain about it? 51 00:02:50,639 --> 00:02:50,720 Speaker 2: Like? 52 00:02:50,880 --> 00:02:54,040 Speaker 1: Is it of inefficient? You mentioned Sydney Water, but all 53 00:02:54,160 --> 00:02:58,440 Speaker 1: cities have the same infrastructure requirements. Is it just hard 54 00:02:58,480 --> 00:03:01,600 Speaker 1: to do or some places better than others when it 55 00:03:01,639 --> 00:03:04,639 Speaker 1: comes to electricity, gas, water, etc. 56 00:03:05,280 --> 00:03:08,320 Speaker 2: Yeah? Look, I don't think it's easy to do, but 57 00:03:08,400 --> 00:03:12,760 Speaker 2: I think it actually could be much much more streamlined. 58 00:03:13,160 --> 00:03:15,480 Speaker 2: I mean, at the moment, a lot of the approvals 59 00:03:15,520 --> 00:03:19,520 Speaker 2: are kind of sequential. So you know, for instance, you 60 00:03:19,600 --> 00:03:23,800 Speaker 2: can apply for an address if you like on a subdivision, 61 00:03:23,800 --> 00:03:26,639 Speaker 2: you have to wait for that land to be ready 62 00:03:26,680 --> 00:03:29,360 Speaker 2: to do that. You could actually put in a DA 63 00:03:29,880 --> 00:03:33,639 Speaker 2: and concurrently with the land being developed, which would already 64 00:03:33,680 --> 00:03:37,120 Speaker 2: speed things up. So are there any states doing better 65 00:03:37,160 --> 00:03:41,920 Speaker 2: than others? Look? Overall, I think South Australia has actually 66 00:03:42,040 --> 00:03:45,200 Speaker 2: managed to make some improvements to their planning system in 67 00:03:45,320 --> 00:03:49,440 Speaker 2: order to bring land online much quicker. But certainly in 68 00:03:49,560 --> 00:03:52,960 Speaker 2: areas such as New South Wales and Victoria, very little 69 00:03:53,000 --> 00:03:54,680 Speaker 2: improvement at this stage. 70 00:03:54,960 --> 00:03:57,480 Speaker 1: What about local planning rules and building codes? Everyone complains 71 00:03:57,520 --> 00:04:00,000 Speaker 1: about those as well. Are they still a major issue? 72 00:04:00,400 --> 00:04:04,680 Speaker 2: Well, there was a very significant release of the National 73 00:04:04,680 --> 00:04:08,080 Speaker 2: Construction Code. It was NCC twenty twenty two, although I 74 00:04:08,080 --> 00:04:11,320 Speaker 2: think it really hasn't been released in a couple of 75 00:04:11,360 --> 00:04:13,560 Speaker 2: states like South Australia have put a freeze on it 76 00:04:13,600 --> 00:04:17,520 Speaker 2: for instance, But it was a significant release that included 77 00:04:17,760 --> 00:04:23,520 Speaker 2: a lot of measures around climate and also around accessibility, 78 00:04:23,960 --> 00:04:27,160 Speaker 2: and so I think that that was definitely a huge 79 00:04:27,160 --> 00:04:31,360 Speaker 2: impost on the industry. It actually was a very it's 80 00:04:31,400 --> 00:04:34,840 Speaker 2: a very complicated document now it is actually very hard 81 00:04:34,880 --> 00:04:36,840 Speaker 2: for a lot of builders to actually know whether they're 82 00:04:36,839 --> 00:04:39,800 Speaker 2: doing the right thing, and it has added a lot 83 00:04:39,839 --> 00:04:43,120 Speaker 2: of complexity to the building process and it's also probably 84 00:04:43,160 --> 00:04:47,080 Speaker 2: reduced the amount of consumer choice it's available too. So 85 00:04:47,240 --> 00:04:50,640 Speaker 2: for instance, things that you can't build on particular blocks, 86 00:04:50,720 --> 00:04:55,440 Speaker 2: you know, with certain orientations, you know, you can't have 87 00:04:56,240 --> 00:04:58,720 Speaker 2: the sized home that you necessarily want, or the layout 88 00:04:58,720 --> 00:05:01,239 Speaker 2: of the bathroom exactly how you would like it because 89 00:05:01,279 --> 00:05:05,760 Speaker 2: of those changes. And so our reckoning is that it's 90 00:05:05,760 --> 00:05:08,719 Speaker 2: probably added up to thirty or forty thousand to the 91 00:05:08,760 --> 00:05:12,159 Speaker 2: cost of a new home through those changes to the NCC. 92 00:05:13,240 --> 00:05:15,719 Speaker 2: The other issue, I guess is that, you know, it 93 00:05:15,839 --> 00:05:18,159 Speaker 2: is part of the red tape and the compliance that 94 00:05:18,200 --> 00:05:20,919 Speaker 2: the builder has to make, and there's a lot of 95 00:05:20,960 --> 00:05:25,560 Speaker 2: stakeholders that are influencing the National Construction Code, and I 96 00:05:25,600 --> 00:05:28,880 Speaker 2: think in some ways it's lost its way. It's actually 97 00:05:29,040 --> 00:05:32,320 Speaker 2: no longer a bible for how to build a home. 98 00:05:32,360 --> 00:05:35,039 Speaker 2: It's actually the answer to climate change, the answer to 99 00:05:35,680 --> 00:05:40,359 Speaker 2: answer to accessibility, the answer to insurance, and it's trying 100 00:05:40,360 --> 00:05:42,680 Speaker 2: to be all things to all people. And I think 101 00:05:42,720 --> 00:05:45,880 Speaker 2: that it's meant that it's ended up being much much 102 00:05:45,880 --> 00:05:48,920 Speaker 2: more complex, and indeed many of the things that are 103 00:05:48,920 --> 00:05:52,840 Speaker 2: coming in with it are actually now you know, diminishing. 104 00:05:52,880 --> 00:05:55,440 Speaker 2: There's diminishing returns to a lot of those changes. Now 105 00:05:55,440 --> 00:06:00,000 Speaker 2: it's just not financially viable to introduce those changes. 106 00:06:00,839 --> 00:06:06,640 Speaker 1: Stay with me, Jocelin, we'll be back in a minute. 107 00:06:09,640 --> 00:06:13,160 Speaker 1: I'm speaking to Jocelyn Martin, managing director of HIA. Before 108 00:06:13,200 --> 00:06:16,080 Speaker 1: the break, we were talking about more about red tape, 109 00:06:16,200 --> 00:06:19,440 Speaker 1: What about things like skills shortages? Is it still an 110 00:06:19,480 --> 00:06:20,719 Speaker 1: issue in Australia. 111 00:06:20,880 --> 00:06:22,600 Speaker 2: So if we were to build the one point two 112 00:06:22,680 --> 00:06:25,640 Speaker 2: million homes that is the target that the government have said, 113 00:06:25,720 --> 00:06:27,920 Speaker 2: and indeed there's probably the amount of homes that we 114 00:06:27,960 --> 00:06:31,919 Speaker 2: need before we actually impact affordability. Our estimation is that 115 00:06:31,960 --> 00:06:35,320 Speaker 2: we need about eighty three thousand people right now additional 116 00:06:35,400 --> 00:06:38,239 Speaker 2: to what we have in the industry, and that's across 117 00:06:38,279 --> 00:06:42,799 Speaker 2: all trades, mainly carpenters, brick layers, electricians and plumbers, but 118 00:06:42,920 --> 00:06:47,680 Speaker 2: still across all trades and in all states. So it's 119 00:06:48,480 --> 00:06:52,440 Speaker 2: at the moment where they're not building enough homes, say 120 00:06:52,520 --> 00:06:55,800 Speaker 2: in Victoria, for instance, we are seeing our volume builders 121 00:06:56,120 --> 00:06:59,800 Speaker 2: sort of meet the needs of the current climate and 122 00:07:00,520 --> 00:07:03,160 Speaker 2: so they're actually reducing their need for trades. So if 123 00:07:03,160 --> 00:07:04,719 Speaker 2: you looked at it now, it wouldn't look like we 124 00:07:04,760 --> 00:07:08,000 Speaker 2: had a skill shortage in some areas, but in actual fact, 125 00:07:08,040 --> 00:07:10,200 Speaker 2: if we were to actually be building it the volume 126 00:07:10,240 --> 00:07:13,440 Speaker 2: that we need, we would be, you know, way short 127 00:07:13,520 --> 00:07:16,040 Speaker 2: of our skilled labor. And as we saw during COVID, 128 00:07:16,680 --> 00:07:22,640 Speaker 2: that caused delays because there just wasn't that available available trades, 129 00:07:22,680 --> 00:07:24,640 Speaker 2: and that increased costs for people too. 130 00:07:25,600 --> 00:07:27,680 Speaker 1: What about the cost of delivering a new home? So 131 00:07:27,760 --> 00:07:30,600 Speaker 1: we talk about productivity, and the government is big on productivity. 132 00:07:31,920 --> 00:07:35,400 Speaker 1: I'm sure cutting red tape would improve productivity, but is 133 00:07:35,400 --> 00:07:39,000 Speaker 1: there a role for the industry itself to be more 134 00:07:39,000 --> 00:07:40,960 Speaker 1: productive in how it builds homes. 135 00:07:41,600 --> 00:07:44,560 Speaker 2: Yeah, so the government of obviously come back to this 136 00:07:44,640 --> 00:07:48,280 Speaker 2: term talking about productivity as the productivity is a new buzzword, definitely, 137 00:07:49,080 --> 00:07:52,080 Speaker 2: and I think if you in talking to the Housing 138 00:07:52,120 --> 00:07:55,400 Speaker 2: Minister Clara O'Neil, she would say that productivity in our 139 00:07:55,480 --> 00:08:01,200 Speaker 2: sector obviously is related to the barriers planning and and 140 00:08:01,280 --> 00:08:05,000 Speaker 2: the construction code, but also, you know, having not enough 141 00:08:05,040 --> 00:08:10,040 Speaker 2: skilled labor, but also the fact that the industry doesn't 142 00:08:10,080 --> 00:08:15,920 Speaker 2: necessarily doesn't typically innovate as much as maybe it could. 143 00:08:16,680 --> 00:08:19,160 Speaker 2: I probably challenged that thinking, you know, there's a lot 144 00:08:19,200 --> 00:08:21,800 Speaker 2: of talk around the fact that we still build the 145 00:08:21,800 --> 00:08:25,080 Speaker 2: same way we have for sixty sixty years ago, whereas 146 00:08:25,200 --> 00:08:27,600 Speaker 2: I see a lot of improvements in the way that 147 00:08:27,640 --> 00:08:30,520 Speaker 2: we build our homes and the speed at which they 148 00:08:30,520 --> 00:08:33,440 Speaker 2: can bring them to market, and a lot of the 149 00:08:33,760 --> 00:08:36,680 Speaker 2: innovation has also happened at the design end as well, 150 00:08:37,200 --> 00:08:40,200 Speaker 2: and so I think that the industry still has a 151 00:08:40,240 --> 00:08:42,440 Speaker 2: lot of work to do in that area to be 152 00:08:42,600 --> 00:08:45,839 Speaker 2: more innovative. And to drive innovation. But I also think 153 00:08:45,880 --> 00:08:48,240 Speaker 2: that if an industry itself is not as profitable as 154 00:08:48,280 --> 00:08:51,240 Speaker 2: it could be, you're unlikely to get that reinvestment that 155 00:08:51,280 --> 00:08:54,280 Speaker 2: you need. I also think that the industry probably has 156 00:08:54,320 --> 00:08:57,720 Speaker 2: to be a better employer, particularly in terms of attracting women. 157 00:08:57,960 --> 00:09:01,640 Speaker 2: I mean, if we actually own employ fifty percent of 158 00:09:01,840 --> 00:09:05,439 Speaker 2: the available work or attrack fifty percent of the available workforce, 159 00:09:06,200 --> 00:09:08,320 Speaker 2: then we're actually always going to have a skill shortage. 160 00:09:08,360 --> 00:09:11,200 Speaker 2: And you know, it is a challenge because we compete 161 00:09:11,800 --> 00:09:14,959 Speaker 2: with industries that can offer working from home options, more 162 00:09:15,000 --> 00:09:17,720 Speaker 2: flexible work in terms of childcare and so forth, and 163 00:09:17,760 --> 00:09:19,920 Speaker 2: we've got to be alive to that and actually offer, 164 00:09:20,360 --> 00:09:23,280 Speaker 2: you know, try and figure out what our value proposition 165 00:09:23,559 --> 00:09:27,400 Speaker 2: to a female workforce is. And I think that's on 166 00:09:27,559 --> 00:09:30,200 Speaker 2: us too, as much as it is on the government 167 00:09:30,240 --> 00:09:33,319 Speaker 2: to kind of do promotional programs and so forth. I 168 00:09:33,360 --> 00:09:36,640 Speaker 2: think the industry itself has to kind of think how 169 00:09:36,679 --> 00:09:42,280 Speaker 2: it can actually improve itself as an employer for women 170 00:09:42,520 --> 00:09:43,360 Speaker 2: in the industry. 171 00:09:43,960 --> 00:09:47,920 Speaker 1: The other party in all this outside the industry and government, 172 00:09:47,960 --> 00:09:50,319 Speaker 1: of course, is the financier is the banks. And I 173 00:09:50,360 --> 00:09:52,200 Speaker 1: mean I have build a friends who are always complaining 174 00:09:52,200 --> 00:09:54,320 Speaker 1: that banks won't actually allow them to take out an 175 00:09:54,360 --> 00:09:58,800 Speaker 1: overdraft to fund the building they're doing. Is it getting 176 00:09:58,800 --> 00:10:00,240 Speaker 1: any better? I mean, I know some of the rules 177 00:10:00,240 --> 00:10:02,600 Speaker 1: are set by the regulator APRA, and it does make 178 00:10:02,600 --> 00:10:04,920 Speaker 1: it difficult for the banks, and I don't want a 179 00:10:04,960 --> 00:10:08,120 Speaker 1: bank bash here, but are the banks playing their role 180 00:10:08,280 --> 00:10:09,360 Speaker 1: looking after builders? 181 00:10:10,520 --> 00:10:13,520 Speaker 2: Look? I think that it is interesting to me that 182 00:10:14,160 --> 00:10:18,000 Speaker 2: a builder, when you think about it, underwrites the whole 183 00:10:18,160 --> 00:10:20,880 Speaker 2: entire project from start to finish, and the buck stops 184 00:10:20,880 --> 00:10:24,400 Speaker 2: with them essentially. So when we see situations like COVID 185 00:10:24,400 --> 00:10:27,800 Speaker 2: where build times extended, it became very very obvious who 186 00:10:27,920 --> 00:10:32,600 Speaker 2: was holding the biggest risk, and things like progress payments 187 00:10:32,600 --> 00:10:35,199 Speaker 2: and the speed at which progress payments. At the moment, 188 00:10:35,240 --> 00:10:37,840 Speaker 2: I think that model is still very very old fashioned. 189 00:10:38,120 --> 00:10:41,200 Speaker 2: It requires a lot of manual checking and a lot 190 00:10:41,240 --> 00:10:44,400 Speaker 2: of delays, quite frankly by the bank in terms of 191 00:10:44,440 --> 00:10:47,200 Speaker 2: providing that cash flow. Whereas the builder, on the other hand, 192 00:10:47,200 --> 00:10:51,120 Speaker 2: has seen the suppliers shorten their terms, so they're actually 193 00:10:51,160 --> 00:10:53,800 Speaker 2: now trying to meet shorter terms from their suppliers, but 194 00:10:53,880 --> 00:10:56,680 Speaker 2: at the same time still having that cash flow. The 195 00:10:56,720 --> 00:11:01,000 Speaker 2: pace of that cash flow go according to how it 196 00:11:01,040 --> 00:11:02,840 Speaker 2: has been for a long long time, So I think 197 00:11:02,840 --> 00:11:05,760 Speaker 2: the banks probably have a role to play in kind 198 00:11:05,800 --> 00:11:09,199 Speaker 2: of thinking about how they could modernize that that side 199 00:11:09,200 --> 00:11:12,080 Speaker 2: of things and adjust to kind of have some sort 200 00:11:12,080 --> 00:11:16,199 Speaker 2: of better flow, because I do think the builders are 201 00:11:16,320 --> 00:11:19,680 Speaker 2: holding the entire risk, and that became very obvious during 202 00:11:19,679 --> 00:11:23,080 Speaker 2: COVID the second that everything took a lot longer. It 203 00:11:23,200 --> 00:11:26,160 Speaker 2: was the builder that was actually the only one that 204 00:11:26,320 --> 00:11:29,360 Speaker 2: was exposed during that process. And I mean the consumer 205 00:11:29,440 --> 00:11:32,360 Speaker 2: ultimately obviously because they were left with a half built 206 00:11:32,360 --> 00:11:36,400 Speaker 2: home in some cases, but you know, it was basically 207 00:11:36,880 --> 00:11:40,760 Speaker 2: the entire risk through that process was on the builder. 208 00:11:41,080 --> 00:11:43,920 Speaker 2: I also think that in terms of assessing, you know, 209 00:11:44,440 --> 00:11:48,240 Speaker 2: mortgage capacity, the banks have got the very comfortable three 210 00:11:48,280 --> 00:11:52,120 Speaker 2: percent buffer. That means that first home buyers, of course 211 00:11:52,120 --> 00:11:55,120 Speaker 2: are being assessed on at a much higher rate than 212 00:11:55,200 --> 00:11:58,160 Speaker 2: what they actually may ever need to meet or at 213 00:11:58,240 --> 00:12:01,360 Speaker 2: least in the short term, and I think that reassessing 214 00:12:01,400 --> 00:12:04,280 Speaker 2: that buffer would be something that I think the banks 215 00:12:04,280 --> 00:12:06,319 Speaker 2: should probably consider as well. 216 00:12:06,840 --> 00:12:08,480 Speaker 1: Justin thank you for talking to Fear and Greed. 217 00:12:08,679 --> 00:12:09,480 Speaker 2: No problem. Thanks. 218 00:12:09,920 --> 00:12:12,880 Speaker 1: That was Justin Martin, managing director of HIA. This is 219 00:12:12,920 --> 00:12:15,360 Speaker 1: the Fear and Greed Business Interview. Join us every morning 220 00:12:15,640 --> 00:12:18,280 Speaker 1: for the full episode of Fear and Greed. Daily business 221 00:12:18,320 --> 00:12:20,679 Speaker 1: news for people who make their own decisions. I'm Sean. 222 00:12:20,720 --> 00:12:23,439 Speaker 1: I ALM enjoy your day.