The implementation of measures taken in respect of construction and infrastructure during the COVID pandemic period throughout Australia have been heavily criticised

The Commonwealth Government has released the independent report into Australia’s response to the COVID-19 pandemic.

The inquiry reviewed the Commonwealth Government’s response to the pandemic to identify lessons learned and to improve Australia’s preparedness for future pandemics.

It covered areas such as health, equity, border closures, economic recovery and support, planning and preparedness, the public service and trust and human rights.

In terms of the economic recovery, the report acknowledged that objectives to support this and assist people to get back into work were valid.

But it says that some measures were poorly considered and contributed to post-pandemic inflationary pressures.

Of particular relevance to the construction sector, the report criticised the Commonwealth HomeBuilder Program.

This offered Commonwealth incentives for new home construction and substantial renovations of existing homes.

It was introduced amid concerns from industry bodies amid the onset of COVID that the construction sector would collapse – potentially leading to a broader economic rout.

However, the report criticised aspects of the program along with other infrastructure related stimulus efforts.

It said that the program’s design failed to take into account the supply-side effects of the pandemic.

As a result, the program was a substantial factor behind industry overheating and construction cost inflation which has been evident since the onset of the COVID.

The report also found that a lack of consultation in respect of the HomeBuilder design created implementation challenges for states and territories.

Some requirements of the scheme were not fit for purpose whilst other terms lacked sufficient clarity and guidance.

In addition to HomeBuilder, the report criticised other aspects of Commonwealth related infrastructure stimulus spending that occurred during the pandemic.

In particular, it criticised efforts to promote a gas-fired economic recovery through which the Commonwealth Government undertook a range of measures to boost the supply chain of the east coast gas market.

This, the report says, was ‘short-sighted, expensive and contradictory to Australia’s commitment to reduce carbon emissions.

For one thing, the report noted that promoting gas was contrary to Australia’s need to decarbonise the economy (although many analysts see gas as maintaining an important role over the medium term in Australia’s clean energy future).

Beyond that, it noted that eastern Australia has already burned most of its low-cost gas, and gas prices are now too expensive to be viable.

The government’s policies, it says, were unlikely to reduce prices without significant ongoing cost.

Overall, the report was critical of the Commonwealth’s approach toward building and infrastructure stimulus measures.

“The bigger issue with the transition to recovery after the pandemic recession in mid-2020 came largely from a miscalculation of the nature of the economic recovery from the pandemic, which we now have a much better understanding of,” the report said, referring to government efforts to stimulate the economy during the pandemic.

“With the benefit of hindsight, many of the measures that were deployed ended up either not being necessary or adding to post-pandemic inflationary pressures. The supply-side effects of support measures during the pandemic, as well as the combined effect of related measures such as international border closures, were poorly considered or evaluated.

“There are clear indications that the stimulus measures to support the construction industry – in particular, HomeBuilder – contributed to overheating the industry and partially contributed to inflation in the post-pandemic period. The result was that the industry was significantly under-resourced, with a substantial backlog of construction work that needed to be completed.

“The government’s ‘gas-fired recovery’ strategy was also an example of narrowly focused and poorly designed policy with limited benefits for the manufacturing industry and jobs growth. Alternative approaches to infrastructure stimulus, such as investments in green or renewable technology, would have ensured any infrastructure or other stimulus spending would help to solve rather than contribute to the problem of global warming.

“These infrastructure stimulus measures aimed at supporting economic recovery were more focused on addressing demand rather than supply, demonstrating the government’s poor use of evidence and evaluation. However, demand recovered quickly while supply remained constrained. This added to imbalances in the economy during the recovery. We heard from many industries (see Chapter 24: Supporting industry) that they struggled to increase supply during the reopening due to uncertainty, ongoing restrictions and labour shortages. This failure of planning and preparedness during the pandemic undermined the economic recovery and added to supply-side constraints.”

However, building industry lobby groups have defended the HomeBuilder program.

“The Federal Government had a difficult job of keeping the economy afloat with targeted stimulus measures while keeping people safe during a period of uncertainty,” Master Builders Australia CEO Denita Wawn said.

“As the report rightly points out, there are strong links between the strength of the building and construction industry and the broader economy. At the time, the economy was facing a full-scale shutdown and a collapse in demand with a real threat of a recession.

“HomeBuilder effectively saved businesses and jobs during the height of the pandemic and was an appropriate support measure for the time, exceeding expectations.

“While HomeBuilder may have temporarily exacerbated labour and material shortages in the building and construction industry it is not the root cause.

“The inflationary challenges we are seeing play out in the building and construction industry today are predominantly the result of a decades in the making labour and housing supply shortage.

“Rental inflation remains one of the biggest inflation drivers today which is not attributable to HomeBuilder is the result of a chronic undersupply of rental housing.”

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