A new home building plunge of more than 40 per cent has been forecast as the COVID-19 crisis sees major building group Fletcher Building slash its workforce by 1500.
The Housing Industry Association says half a million jobs are at risk in the next year based on the latest figures for new home starts in Australia.
“In 2018/19 the industry engaged over 1 million people to commence building almost 200,000 new homes. Next year we expect to start just 112,000 new homes leaving up to 500,000 jobs at risk,” HIA managing director Graham Wolfe said.
“The shock to the economy from the halting of overseas migration, the absence of student arrivals and uncertainty over the domestic economy will see the market at a lower point in December 2020, than it was during the 1990’s recession. It will then continue to decline though 2021, even with the return of overseas students and migration.
“This shock will reverberate through the residential building industry, up and down the supply chain. Employment in the sector is not expected to recover within the next two years.”
Fletcher cuts workforce 10 per cent
The HIA news came as Fletcher Building announced a COVID-19 company reset including a 10 per cent workforce cut – equating to about 1000 positions across New Zealand and 500 in Australia.
Fletcher Building’s Australian businesses include iPlex Pipelines, Rocla, Tradelink, ACP, Stramit, Oliveri Solutions, Laminex and Fletcher Insulation.
“While there is a lot of uncertainty over the economic outlook, we expect COVID-19 will lead to a sharp downturn in FY21 and potentially beyond,” chief executive Ross Taylor said.
“Looking to the next financial year, we are planning for an environment that will see a shrinking economy, substantially reduced customer demand across all our businesses and sustained lower levels of productivity.”
In terms of business outlook in Australia, he said residential approvals prior to COVID-19 had been showing signs of renewed growth from a base of around 150,000.
“Our base case is that we now expect approvals to fall by a further c15 per cent to c129,000 in FY21. In commercial and infrastructure, we expect a similar dynamic to that of New Zealand with the value of work done declining by similar percentages in both sectors.
“These are our base case estimates for FY21, though we acknowledge that there is a lot of uncertainty over the outlook and that actual activity levels may be materially different. We will be looking hard at the trends in activity over the next few months and will be ready to respond if needed.”