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Following the COVID-19 pandemic, Australia’s construction sector experienced a surge in insolvencies, as demonstrated below by Justin Fabo from Antipodean Macro:
Fixed-price contracts collided with skyrocketing material and labour costs, supply chain delays, rising interest rates, and weakening cash flow, fueling Australia’s post-pandemic building insolvency tsunami. This combination of events created a “perfect storm” that decimated margins and forced thousands of builders into insolvency.
Fixed-price contracts negotiated before COVID become unprofitable.
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The HomeBuilder stimulus prompted a surge in fixed-price contracts at a time when costs were rising. Many builders were later unable to complete these projects profitably.
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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.