ABCC will do nothing for housing prices: Report

As the Senate continues to debate the proposed Australian Building and Construction Commission, new research from the Centre for Future Work challenges the government’s claim that construction labour costs have pushed up Australian housing prices.

Prime Minister Turnbull blamed construction workers and their union for the high cost of housing, when he re-introduced the ABCC bill in Parliament last month, claiming the bill would help “young Australian couples that can’t afford to buy a house because their costs are being pushed up by union thuggery.”

But new research from the Centre for Future Work shows there is no statistical correlation between construction unionization or construction wages, and the soaring cost of housing.

“The government’s claim that construction labour costs explain the rising price of housing has no basis in evidence,” Director of the Centre for Future Work, Jim Stanford said.

“The suggestion that restricting union activity in construction can somehow deflate the great Australian property bubble reveals a critical misunderstanding of the Australian housing market.”

The study provides detailed statistics regarding housing prices, union membership, wage growth, total construction costs, and replacement building costs.  The report finds that:

  • Construction wages have grown more slowly than the Australian average over the last five years.
  • Real wage gains in construction have been slower than real productivity growth, and hence real unit labour costs in construction have declined.
  • Construction labour accounts for only 17-22 percent of the total costs of new building.
  • Construction costs, in turn, account for less than half the market value of residential property.
  • Construction labour costs correspond to less than 10 percent of housing prices (and even less than that in Australia’s biggest cities).
  • Construction labour accounts for about the same proportion of a house purchase as real estate commissions and stamp duty.

“Homes in Australia are fast becoming unaffordable, even for the workers who build them. On average, a construction worker now needs 9.2 years of pre-tax earnings to purchase a median home – up 25 percent from just four years ago.

“If the government is genuine in its desire to make housing more affordable in Australia, it should turn its attention to the real causes of the problem. Better policy responses would include measures to cool off property speculation, more carefully regulate the banking sector, and reform property-related taxes,” Dr Stanford said.

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