Future forecasts: Construction and Property Services Skills

R E P O R T Future forecasts: Construction and Property Services Skills 2016 26 Prepared for Construction and Property Services Industry Skills Council May 2013 THE CENTRE FOR INTERNATIONAL ECONOMICS

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Future forecasts: Construction and Property Services Skills 2016 26 iii Contents Abbreviations Summary vii viii 1 Introduction 1 Context for this report 1 Report structure 2 2 Projected skills requirements in the CPS sectors 3 Skills projections for the CPS sector 3 More details on the projections 9 3 Contributions of the construction and property services sectors 17 Number of businesses in CPS sectors 18 Direct contribution of CPS sectors to the economy 19 Economywide perspective of CPS sectors 23 Implications for this study 27 4 Demand drivers short and long term perspectives 28 Underlying demand for housing 28 Housing affordability and consumer confidence 30 Increasing importance of non-residential construction 35 Property services 39 5 Key supply side factors short and long term perspectives 43 Demographics of the labour force 43 Long term macroeconomic conditions 44 Productivity in the construction sector 47 6 Macroeconomic drivers and modelling approach 52 Key macro drivers accounted of the analysis 52 Economywide approach 55 7 Strategic priorities and key issues 57 General reform agenda 57 Removal of government constraints on housing 59 Increasing productivity 62 Maintain and grow the CPS skill base 63 APPENDICES 71

iv Future forecasts: Construction and Property Services Skills 2016 26 A Review of other employment projections 72 DEEWR employment projections 72 AWPA employment projections 75 B Details on the construction and property services sectors 82 Structure of businesses operating in CPS sectors 82 Value of sales and value added 82 Total labour costs and employment 86 C Demographic and economic assumptions 89 Population and workforce 89 Household formation 93 Economic growth 94 D Detailed projections by CPS industry and occupation 97 References 105 BOXES, CHARTS AND TABLES 2.1 Projected employment change in CPS related occupations Australia 4 2.2 Projected employment change in CPS related occupations in 2015 16 5 2.3 Projected employment change in CPS related occupations in 2025-26 7 2.4 Projected total employment by state 9 2.5 Share of full-time employment in total employment 10 2.6 Projected total employment by industry 10 2.7 Projected total employment by occupation 11 2.8 Projected employment in CPS sectors 12 2.9 Projected employment in some CPS related occupations 13 2.10 Comparison of projected annual growth rates 15 2.11 Revision of IMF economic projection in April 2013 to previous projections 16 3.1 ANZSIC industry coverage at the 4-digit level 18 3.2 Number of national CPS businesses by turnover size 2010 11 19 3.3 Number of national CPS businesses by employment size 2010 11 19 3.4 National value of sales of the CPS sectors 20 3.5 National value added of the CPS sectors 20 3.6 Value added per person employed for construction 21 3.7 Value added per person employed for property services 21 3.8 CPS employment by industry for Australia 2010 11 22 3.9 CPS employment compared with population by state 22 3.10 Distribution between trades and non-trades in the CPS sector 23 3.11 Multiplier approach 24 3.12 Impact on residential building, construction and GDP under full employment 26 4.1 Reduction in houses as a share of new dwellings 30

Future forecasts: Construction and Property Services Skills 2016 26 v 4.2 National dwelling commencements 30 4.3 Westpac-Melbourne Institute consumer sentiment index 31 4.4 Household saving as a proportion of gross disposable income 31 4.5 Index of dwelling prices and average weekly earnings, Australia, 1994 2011 32 4.6 Average annual price growth for capital cities houses and project homes 32 4.7 REIA Home loan affordability Australia 33 4.8 Index of prices for housing construction and non-residential output 35 4.9 Increase in the value of non-dwelling (non-residential) construction 35 4.10 Investment in the NBN in nominal terms 36 4.11 Mining investment buildings and structures and total in current terms 37 4.12 Estimates of planned expenditure in mining in nominal terms 38 4.13 Committed investment in nominal terms 39 4.14 Planned mining expenditure by state 39 4.15 Value of production of property operators and real estate agent services 40 4.16 Value of production for building cleaning pest control and gardening services 40 4.17 Value of production for architectural and surveying services 41 5.1 Resident population and labour force projections 43 5.2 Trends in the age cohorts of labour supply 44 5.3 Changed youth employment, by industry 45 5.4 Construction industry workers, by state 46 5.5 Construction industry workers residential or non-residential construction 46 5.6 Multi-factor productivity in construction sector 1975 2012 47 5.7 Average annual growth in multi-factor productivity 48 6.1 Annual growth rate of Gross State Product 52 6.2 Annual growth of MFP by industry 53 6.3 Annual growth of Australian exports 54 6.4 Annual growth rate of residential building starts 55 6.5 Annual growth in investment in selected sectors 55 6.6 Modelling approach 56 7.1 Key findings of COAG Housing Supply and Affordability Report 60 7.2 Taxes on housing 60 7.3 Potential scale of inefficient or excessive tax on a dwelling 61 7.4 Age distribution of bricklayers relative to construction and the labour force 64 7.5 Age distribution of surveyors 65 7.6 457 visa applications granted by category for construction 65 7.7 457 visa applications granted by category for property services 66 7.8 Construction trades apprentices 67 A.1 Average annual growth rates of key labour force variables 73 A.2 DEEWR Projections of employment by industry 74 A.3 DEEWR Projections of employment by state 75 A.4 AWPA Employment by CPSISC occupation 76

vi Future forecasts: Construction and Property Services Skills 2016 26 A.5 AWPA Projected industry employment growth by industry 78 A.6 AWPA Projected industry employment growth by scenario 79 A.7 AWPA Projected state employment growth by scenario 79 A.8 AWPA Projected industry employment growth by scenario 80 A.9 AWPA Projected industry employment growth by scenario 81 B.1 Number of CPS businesses by turnover size 2010 11 83 B.2 Number of CPS businesses by employment size 2010 11 84 B.3 Sales and service income by CPS sector 85 B.4 Value added by CPS sector 86 B.5 Wages and salaries by CPS sector 87 B.6 Employment of the CPS sectors by industry and status 88 C.1 Population projections 90 C.2 Summary of population growth rates 91 C.3 Labour force as at June 2012 91 C.4 Workforce projections 92 C.5 Summary of labour growth rates 92 C.6 Changes to average household size, past five, 10, 15 years 93 C.7 Gross State Product forecasts 95 C.8 IMF WEO Economic Growth Forecasts of GDP 96 D.1 Projected change in CPS related occupations New South Wales 97 D.2 Projected change in CPS related occupations Victoria 98 D.3 Projected change in CPS related occupations Queensland 99 D.4 Projected change in CPS related occupations South Australia 100 D.5 Projected change in CPS related occupations Western Australia 101 D.6 Projected change in CPS related occupations Tasmania 102 D.7 Projected change in CPS related occupations Northern Territory 103 D.8 Projected change in CPS related occupations Australian Capital Territory 104

Future forecasts: Construction and Property Services Skills 2016 26 vii Abbreviations ABS ANZSCO ANZSIC AWPA CIE CPS CPSISC Australian Bureau of Statistics Australian and New Zealand Standard Classification of Occupations Australian and New Zealand Standard Industrial Classification Australian Workforce and Productivity Agency Centre for International Economics Construction and Property Services Construction and Property Services Industry Skills Council CPS Skills ANZSCO occupations of interest to this study DEEWR E-Scan GDP GFC ISC MFP NBN NHSC VET WH&S Department of Education, Employment and Workplace Relations CPSISC Environmental Scan Gross Domestic Product Global Financial Crisis Industry Skills Council Multifactor productivity National Broadband Network National Housing Supply Council Vocational Education and Training Workplace Health and Safety

viii Future forecasts: Construction and Property Services Skills 2016 26 Summary This study The Construction and Property Services Industry Skills Council (CPSISC) has commissioned the Centre for International Economics (the CIE) to independently develop a research document to inform and augment demand forecasts for the construction and property services sectors. Employment projections by industry, occupation, and region have also been produced by the Department of Education, Employment and Workplace Relations and the Australia Workforce and Productivity Agency to better inform government and industry decision making around skills formation. This report uses a similar approach but with a specific focus on construction and property services (CPS) sectors, making a detailed appraisal of each of the component CPS sectors out to 2015 16 and a snapshot at 2025 26. Because of the uncertainties around scenarios for key drivers of the national economy and the CPS sectors, a conservative approach was taken. Employment forecasts By 2015-16, additional skills will be required to respond to the projected uptick in construction, especially in the residential sector (p. 13). By 2025-26, the projected demand for CPS Skills (occupations of interest to this study) across Australia will be nearly 149 000 persons higher than in 2011 12, representing a 14.6 per cent increase. By 2015-16, an anticipated recovery in residential construction is expected to contribute to an increase in employment requirement of 45 000 persons, or 4.5 per cent, compared to 2011 12 levels. These increases are from a base of 1 million persons in CPS Skills, selected out of total employment in the CPS sectors of 1.7 million in 2011-12. These 45 000 additional persons, do not directly replace the gap caused by recent shortfalls in apprenticeship flows and aged attrition trends occurring over the next decade, which indicates a slightly larger skills gap will actually need to be filled. In terms of CPS employment by sector, non-residential building construction and heavy and civil engineering construction is projected to grow by 2.3 and 2.4 per cent per annum, while residential building employment would increase by 1.2 per cent per annum between 2012 13 and 2015 16. Construction services employment will grow by 1.4 per cent per annum for the same period. Overall, construction employment has above average growth during this initial period. However, as mining sector investment slows, the employment in the construction industry will grow by 0.98 per cent per annum between 2016 17 and 2025 26. Property services is forecast to grow at 0.82 per cent each year on average through to 2015-16 and at 0.65 per cent between 2016 17 and 2025 26. Over the longer term,

Future forecasts: Construction and Property Services Skills 2016 26 ix these projections not only reflect changes in construction but also activity levels in the property market and expenditure levels by final consumers. Although at lower growth levels beyond 2016, construction is set to continue as a key component of the economy and as an employer through to 2026 (p. 13) The CPS sectors will continue to provide stable and sustained employment growth through to 2025-26 compared to other sectors of the economy (p. 13). A key feature of the projections is that productivity change within both construction and property services are expected to be in-line with that recently observed. These business-as-usual projections do not identify any productivity shifts across the sectors as a result of new practices, or widespread adoption of new or existing technologies. The timing, level of adoption, and the savings of these technologies are important drivers of future employment forecasts but are difficult to quantify. In addition, no change in policy settings for CPS sectors have been incorporated. Projected employment growth rates are lower than those of DEEWR, and in the middle range of the scenarios reported by AWPA. For example, DEEWR projected the total employment in Australia will grow by 1.4 per cent per annum from 2011 to 2016, while our projection points to 1.1 per cent. These projections are a conservative and reliable starting point to quantify the future CPS skill requirements and would be potentially stronger if the appropriate policy priorities are given to construction, which will also improve the outcomes for property services. These priorities are identified below and in chapter 7 of the report. Size and contribution of the CPS sector Construction is the third largest contributor to trend annual GDP and is the third largest employer (p. 17 and 19). The CPS sectors, which include areas such as housing construction, security and real estate services, and surveying, are a vital component of the economy accounting for over 600 000 businesses, with more than two-thirds of these having a turnover of less than $200 000. In 2010 11, total value added by CPS sectors was estimated to be $141 billion. Construction contributed 62.6 per cent or $89 billion with value added of property services being $53 billion in nominal terms.1 The construction sector, on its own, is the third largest in terms of employment, accounting for over 1 million (seasonally adjusted labour force) or 8.75 per cent of total employed persons for 2011 12. Working proprietors, particularly sub-contractors, operating in small businesses make up a large proportion of the workforce for both construction and property services 1 The analysis was based on 2010 11 data from ABS Catalogue 8155.0 Australian Industry, rather than 2011 12 estimates of industry gross value added from the ABS Catalogue 5206.1 Australian National Accounts: National Income, Expenditure and Product. Australian Industry reports industry data at a higher level of detail (2-digit ANZSIC level) and also provides consistent data on a range of other industry variables.

x Future forecasts: Construction and Property Services Skills 2016 26 especially in construction services (trades workers) and in building cleaning and pest control. Trades workers and trained professionals form a large proportion of the overall skill base of CPS sectors. Prevailing economic conditions determine employment levels and demand for skills. Since the financial crisis, the performance of CPS sectors has been mixed. With subdued market conditions, growth and profitability in residential construction and construction services have been flat. This has contrasted with strong growth in engineering construction and associated professional services because of investment in the mining sector and public infrastructure. The performance of the property services is tied directly and indirectly to the construction sector, either through the flow of investment expenditures or related to the stock of dwelling and non-dwelling and engineering works (p. 39). Improving productivity and addressing skill shortages over the medium term has the greatest potential to benefit the CPS sectors, through expanding output and improving profitability, and to maximise the contribution that will flow on to the rest of the economy (p. 27 and 49). Removal of inefficient taxes on housing, such as state stamp duties, have scope to address affordability and stimulate demand for new housing with significant flow-on effects. For every dollar of extra activity in residential housing, national GDP increases by $2.26. Demand side drivers There are a wide variety of demand side drivers, and these affect the CPS sectors differently. Residential housing is a critical part of the equation. While it is expected that latent demand for housing will continue to be driven by population growth and incomes out to 2025 26, housing affordability will remain a critical issue. Factors that have contributed to falling affordability and consumer confidence will continue to be important, particularly those imposed by government regulation and taxes and by shortages in certain trades. Overall we expect growth in residential construction to be around 164 000 dwellings each year out to 2025-26, with a shift away from standalone housing. There will be more than half a million additional Australians in the resident population aged 60 or more by 2015-16. By 2025 26, there will be an additional 2.3 million Australians aged over 60who are likely to downsize their housing to provide funds for retirement (p. 28). The outlook for the non-residential construction sector remains positive going forward but at lower levels than previously forecast. The investment phase of the mining sector expansion, in concert with a substantial government expenditure program on infrastructure, has resulted in sustained growth in demand for engineering construction.

Future forecasts: Construction and Property Services Skills 2016 26 xi While there remains significant investment committed in the mining sector beyond 2016-17, a slowing of the global economy and falls in commodity prices could dampen these plans. Similarly, there remains significant public works in the pipeline, but this could be moderated by reduced government infrastructure expenditure caused by greater budgetary pressures. Non dwelling construction activity will continue to impact on labour supply for construction skills through to 2016 (p. 35 to 37). Property services is a diverse group of industries with not only direct sales linkages to investment activities by construction and to the capital stock base of the economy, but to industries in the wider economy and by final consumers. For example, services provided by security guards are used outside of the building and property sectors. Supply side drivers Challenges to the CPS sectors moving forward include slowing in the underlying labour force growth, and how structural change and productivity have the potential to affect affordability and to change skill requirements. An ageing Australian population should lead to a slowing in the growth of the labour force across all sectors and could result in a higher proportion of part time workers. This could be offset to some extent by higher anticipated levels of immigration and higher fertility rates as observed in recent trends. The age cohort between 15 and 24 years is forecast to increase at 65 per cent the rate of the entire labour force by 2025 26, increasing competition for the recruitment of new workers across all industries. This increased competition has already been demonstrated by the mining sector expansion over recent years. A slowdown in mining investment and a transition to the operational phase may provide the CPS sectors with an opportunity to attract young workers. Continued structural change within the Australian economy, including the impact of the high exchange rate, particularly on manufacturing, is likely to make more workers available to the CPS sectors. Productivity growth in the CPS sectors has the potential to benefit the wider Australian economy but also to address housing affordability and skill shortages. Two broad forms of productivity change were identified: maintaining ongoing productivity improvements from improving workplace practices (labour productivity) and industry consolidation (more effective utilisation of industry fixed costs); and significant structural change in the CPS sectors through the widespread adoption of new technologies or approaches such as pre-fabrication and information technology. Structural adjustment is unlikely to happen quickly in the construction sector. This is due to the structure of the firms in the industry, many of which are working proprietorships (p. 22 and 49).

xii Future forecasts: Construction and Property Services Skills 2016 26 A key finding of this report is that the CPS sectors will continue to rely on regular improvements in productivity, and are less likely to be affected by a one-off structural change. While techniques such as pre-fabrication have already been adopted in the nonresidential sector, the timing of widespread adoption in residential construction is not easily predicted. This is the result of the nature of the residential construction industries, where adoption of new technologies is likely to be slow and steady due to resistance by industry and consumers alike. However, based on trends in Europe, this could change quickly. For the wider CPS sectors, Building Information Modelling technology has the potential to improve efficiencies through the entire lifecycle of buildings. For other CPS sectors, such as surveying and geospatial services, significant improvements in technology that have improved access to, and processing of, spatial information could have a profound impact on the skills profile required. Macroeconomic drivers Models are used to help understand possible future scenarios and effects of changes. In this case, the modelling approach involved a wide range of information, data and assumptions: Gross State Product (GSP) growth and productivity growth; external demand for Australian goods and services, population growth, shocks specific to the CPS sectors; and the nature and structure of the labour market, such as full time versus part time, sectoral composition and geographical distribution of the labour force. Recent trends towards higher levels of net overseas migration and structural budget deficits will impact on the CPS sectors and the wider economy.(p. 54). Policy implications This report identifies that there are a number of key challenges for the CPS sectors going forward, including: improvement in the affordability of construction, especially in the residential sector; taking actions to address current and emerging skill shortages; and maintaining flexible and responsive workplaces such that productivity enhancing technologies can be adopted as required. Three primary areas, of specific actions that can be undertaken, were identified during the course of this study: the removal or reduction of inefficient taxes and other regulations for new housing including the reform of inefficient and costly infrastructure charges and levies; maintaining and improving productivity through ongoing structural adjustment and through the adoption of improved on-site practices that are responsive to changes in available technologies and to the needs of both workers and businesses; and

Future forecasts: Construction and Property Services Skills 2016 26 xiii maintaining and improving the skills base especially for construction and certain parts of property services. In terms of potential payoffs, the benefits for some actions are easier to identify than for others. The removal of half of the inefficient taxes and regulation could reduce the cost of new housing by around 10 per cent. An example of what could be achieved in the housing sector is the continuation of the gradual shift towards prefabricated housing or transportable housing, which has the potential to reduce the cost of a new dwelling by a minimum of 10 per cent excluding the purchase cost of land (see Miller 2011). Potentially, the impact on affordability and skills mix required for a shift toward prefabrication is large and scope for adoption appears to be limited by both demand and supply side factors. Apprenticeship starts have decreased and mature workers are set to leave the industry over the next 10 15 years (p. 63 and 67). Workforce development by industry, and in conjunction with government, will continue to be important (p. 68). Overall, it is critical that workplace and vocational training remains sufficiently flexible and responsive to structural changes in the CPS sectors that result from productivity enhancing developments that are underway now or likely to take place. Businesses should have ongoing access to skills through the 457 temporary visa program to address short term skill shortages, but this facility may not be effective to address longer term shortages across all occupations identified in this report. Strategies identified to maintain and improve the skills base are largely already in place, by: improving the attractiveness, effectiveness and relevance of vocational training by creating flexible study periods, alternative modes of delivery, and by continuously improving courses and their assessment to ensure they are relevant to the contemporary needs of both workers and employers; ongoing monitoring of licensing and other requirements for certain skill categories that better reflect the role of technology and other structural developments such as onthe-job training, while maintaining a necessary focus on consumer protection; extension of effective working lives, particularly in physically demanding occupations, through the use of improved work practices (labour saving technology) or through retraining with new skills to keep them in the industry: Promotion of initiatives that improve the business skills of workers that would complement the attainment of key competencies around trades and professions skills may also be of use. identification of factors that lead to low completion rates during apprenticeships and traineeships especially in construction and related trades.

Future forecasts: Construction and Property Services Skills 2016 26 1 1 Introduction The Centre for International Economics (the CIE) has been asked by the Construction and Property Services Industry Skills Council (CPSISC) to conduct research that will support forecasts of demand in Construction and Property Services (CPS) sectors. The key objective of the study is to forecast the labour requirement of the CPS sectors out to 2015 16 with a longer-term snapshot of sector demand through to 2025-26. In summary, the study aims to do this by: forecasting prospects for CPS sectors by state; by accounting for a range of drivers including general economic conditions, and where possible, industry specific developments such as changes in consumer preferences, technology, productivity and the regulatory environment. translating industry prospects into demand by detailed skill category; by linking demand for skills back to sectoral performance and by accounting for changes in technology and work practices that impact on the number employed. Specifically, key outputs of the research will be: identification of the significant role of the CPS sectors to the economy including the multiplier effect into the economy; forecasts of labour requirements for the CPS sectors out to 2015 16, as well as a snapshot of the sector demand as at 2025 26: including state by state forecasts by sector and by skill; identification of longer term structural shocks and risks for the sectors; consolidation of construction and property services occupations to the National Skills Needs lists for the medium term to 2015 16; and identification of the policy changes that may help the CPS sectors. This information will be then used to provide a priority list for policy change for the CPS sectors in terms of what the industry should be addressing and what government can do to ensure the economic strength of the CPS sectors. Context for this report A key document for the CPS sectors is the 2013 14 Environmental Scan (E-Scan) published by the CPSISC. The objective of the E-Scan is to provide Commonwealth and State governments and ISC stakeholders, with information about current and upcoming market conditions that will influence demand for skills and guide workforce development planning and future needs of CPS sectors.

2 Future forecasts: Construction and Property Services Skills 2016 26 As part of the context for the E-Scan and this report, a number of significant studies have already been completed that project future skills requirements by occupation and region across all sectors of the economy. Most notably, these studies are by: Department of Education, Employment, and Workplace Relations (DEEWR), Industry Employment Projections: 2012 Report; and Australian Workforce and Productivity Agency (AWPA), Resources Sector Skill Needs, Report 2012. These projections are inputs to a wide range of decision-making and planning documents regarding skills formation and labour productivity. For example, Future focus: 2013 National Workforce Development Strategy sets out a vision how Australia can position itself for growth in the Asian century, in a competitive global environment, where technology and patterns of work are rapidly changing. The results of both of these studies are summarised in appendix A of this report. Because of the respective approaches of both of these reports, those projections are necessarily designed to reflect broad sectoral trends that result from projected rates of growth, and at a regional and national level. That analysis is done within an economywide framework that recognises key linkages between industries and regions, especially through the perspective of demand for skills. Consultation indicates there is a more recent and relevant assessment underway in the property services sector relating to skill shortages for surveying and geospatial professionals (BIS Shrapnel, 2013). That report will be an example of a very detailed study looking at the demand-supply balance for one occupation which required detailed data collection and calculation methodologies. The scope of the current study provides projections of demand for skills with a strong construction and property services focus, but maintains the core of an economywide approach taken by the broader DEEWR and AWPA studies. However, the resulting projections could be further informed by evaluations at the specific occupational level, such as that for surveying and geospatial professionals. The projections presented in this report are based on best bet scenarios for key economic drivers of the national economy and for the CPS sectors. They also assume that government policies, especially those directly relevant to the CPS sectors, remain at their current settings. Therefore, this report aims to provide conservative, moderate and base level of projections for the CPS sectors. Report structure Details on the projected skills requirements across the CPS sectors is presented in chapter 2 of this report. These projections are the result of developing a realistic scenario for the Australian economy and, more specifically, for individual CPS sectors. This scenario draws together industry information drawn together across chapters 3 to 6 concerning the structure, contribution and recent performance and key drivers looking forward. Finally, chapter 7 outlines policy conclusions and future actions that can be taken by industry and government.

Future forecasts: Construction and Property Services Skills 2016 26 3 2 Projected skills requirements in the CPS sectors Determining the skill requirements in the CPS sector used an economywide approach. At a state level, the key drivers are population, gross product and demand for Australian exports. These were complemented by specific drivers for residential and non-residential construction, which then flow onto property services, and assumed no change in key government policy settings for the CPS sectors. The employment projections reported reflect a downward revision from previous studies, as a result of lower world, and domestic growth. As such, they represent a conservative and reliable start point to quantify the CPS Skills requirements going forward. Results are potentially better if the appropriate weighted policy priority is given to construction, which will improve the outcomes for property services. The projection of employment in the CPS sectors has two timeframes: a short term, annual, projection to 2015 16; and a long term snapshot to 2025 26. In this chapter, we will report the projections, and compare the results to those of DEEWR. The following chapters provide the detail behind the scenarios, and the trends that underpin the employment projections. Skills projections for the CPS sector By 2025-26, the projected demand for CPS Skills (skill categories of interest to this study) across Australia will be nearly 149 000 persons higher than in 2011 12, representing a 14.6 per cent increase. Table 2.1 shows that a recovery in the construction sector by 2015-16, particularly the residential sector, is expected to increase demand by over 45 000 persons or 4.5 per cent compared to 2011 12 levels. These increases are from a base of 1 million persons in CPS Skills, out of total employment in the CPS sectors of 1.7 million in 2011-12. These 45 000 additional persons, do not directly replace the gap caused by recent shortfalls in apprenticeship flows and aged attrition trends occurring over the next decade, which indicates a slightly larger skills gap will actually need to be filled. Projections out to 2015 16 indicate that employment for construction-based skills will increase faster than for property services because of the uptick for the industry, but out to 2025 26, employment growth between the sectors should move in line with each other reflecting a high degree of interdependency over the long term. A key feature of the projections is that productivity change within both construction and property services are expected to be in-line with that recently observed for these industries.

4 Future forecasts: Construction and Property Services Skills 2016 26 2.1 Projected employment change in CPS Skills related occupations Australia a ANZSCO Occupation 2012 13 2013 14 2014 15 2015 16 2025 26 persons persons persons persons persons 1331 Construction managers 2 400 2 260 4 260 4 903 12 987 2322 Surveyors and spatial scientists 394 570 894 1 114 3 740 2339 Other engineering professionals 147 224 367 480 1 785 3122 Civil engineering draftspersons and technicians 331 497 836 992 2 707 3311 Bricklayers and stonemasons 845 818 1345 1 618 4 326 3312 Carpenters and joiners 2 166 2 185 4 801 5 712 17 224 3322 Painting trades workers 859 1 183 2 211 2 657 7 740 3332 Plasterers 637 749 1 458 1 740 4 581 3333 Roof tilers 203 226 361 418 1 117 3334 Wall and floor tilers 359 531 941 1 126 2 794 3341 Plumbers 1 410 1 578 3 079 3 814 12 758 3996 Signwriters 56 107 165 225 889 3999 Other miscellaneous technicians and trades workers 203 356 548 702 2 432 4422 Security officers and guards 339 629 961 1 222 4 258 6111 Auctioneers, and stock and station agents 34 73 111 146 514 6121 Real estate sales agents 565 745 1 202 1 619 7 020 6219 Other sales assistants and salespersons 134 224 339 435 1 677 7121 Crane, hoist and lift operators 266 505 779 993 3 547 7129 Other stationary plant operators 435 1 027 1 567 2 161 9 328 8112 Commercial cleaners 1 333 2 356 3 607 4 758 18 402 8113 Domestic cleaners 172 225 342 446 1 814 8116 Other cleaners 113 180 272 349 1 317 8212 Concreters 521 670 1 383 1693 5 372 8215 Paving and surfacing labourers 189 326 520 640 2 140 8217 Structural steel construction workers 606 934 1 469 1 777 5 351 8419 Other farm, forestry and garden workers 118 216 331 451 1 837 8999 Other miscellaneous labourers 799 1 520 2310 2 997 10 799 Total 15 635 20 915 36 459 45 185 148 455 a Change from 2011-12 employment levels. Source: CIE projections. These business-as-usual projections do not identify any significant productivity shifts across the sectors, in addition to underlying productivity trends, as a result of new practices or widespread adoption of new or existing technologies. The projected changes in the level of employment in the CPS sectors, by occupation, are summarised in table 2.2 as at 2015 16, and in table 2.3 as at 2025 26 on both a state and Australia-wide basis. These projections depend on the base level of employment for each state and the relative growth rates of industries between states and territories. Queensland and Western Australia are expected to continue to grow at a faster rate than for Australia as a whole out to 2015-16 and through to 2025-26 in line with their exposure to the mining sector and population growth.

2.2 Projected employment change in CPS Skills related occupations in 2015 16 a ANZSCO Occupation NSW VIC QLD SA WA TAS NT ACT Australia persons persons persons persons persons persons persons persons persons 1331 Construction managers 3 369-3 169 2 646 637 1 558 10 148-297 4 903 2322 Surveyors and spatial scientists 347-153 377 66 468 14 17-21 1 114 2339 Other engineering professionals 186 12 120 49 106 3 4-1 480 3122 Civil engineering draftspersons and technicians 272-136 446 81 335 11 11-29 992 3311 Bricklayers and stonemasons 753-694 488 219 874 27 20-68 1 618 3312 Carpenters and joiners 3 534-3 429 3 365 690 1 589 107 137-281 5 712 3322 Painting trades workers 1 046-712 1 282 278 703 69 52-61 2 657 3332 Plasterers 684-721 810 231 721 46 25-56 1 740 3333 Roof tilers 237-130 166 42 99 6 12-14 418 3334 Wall and floor tilers 411-260 483 163 338 10 23-41 1 126 3341 Plumbers 1 764-1 307 1 630 438 1 223 96 87-117 3 814 3996 Signwriters 48 82 50 13 21 5 2 4 225 3999 Other miscellaneous technicians and trades workers 210 77 174 68 132 30 12-2 702 4422 Security officers and guards 383 212 286 71 196 24 31 17 1 222 6111 Auctioneers, and stock and station agents 43 46 22 14 17 3 2 0 146 6121 Real estate sales agents 404 510 350 81 114 50 35 76 1 619 6219 Other sales assistants and salespersons 101 127 95 33 61 9 1 8 435 (Continued next page) Future forecasts: Construction and Property Services Skills 2016 26 5

2.2 Projected employment change in CPS related occupations in 2015 16 a (continued) ANZSCO Occupation NSW VIC QLD SA WA TAS NT ACT Australia persons persons persons persons persons persons persons persons persons 7121 Crane, hoist and lift operators 208 47 317 55 347 11 10-1 993 7129 Other stationary plant operators 517 202 618 122 632 41 31-2 2 161 8112 Commercial cleaners 1 333 1 216 1 006 317 542 165 78 101 4 758 8113 Domestic cleaners 121 155 54 31 37 18 8 21 446 8116 Other cleaners 89 79 81 16 64 11 5 5 349 8212 Concreters 706-594 895 196 444 29 43-27 1 693 8215 Paving and surfacing labourers 116 130 242 31 79 34 10-2 640 8217 Structural steel construction workers 431-88 597 109 721 16 18-27 1 777 8419 Other farm, forestry and garden workers 165 92 78 36 45 17 7 10 451 8999 Other miscellaneous labourers 820 442 865 157 633 40 35 5 2 997 Total 18 298-7 963 17 541 4 245 12 096 902 864-797 45 185 a Change from 2011-12 employment levels. Source: CIE projections. 6 Future forecasts: Construction and Property Services Skills 2016 26

2.3 Projected employment change in CPS related occupations in 2025-26 a ANZSCO Occupation NSW VIC QLD SA WA TAS NT ACT Australia persons persons persons persons persons persons persons persons persons 1331 Construction managers 5 590-125 4 561 592 1 948 461 49-88 12 987 2322 Surveyors and spatial scientists 873 221 1 133 120 1 282 70 33 7 3 740 2339 Other engineering professionals 571 413 352 136 272 12 6 23 1785 3122 Civil engineering draftspersons and technicians 585 219 1 073 115 655 54 13-7 2 707 3311 Bricklayers and stonemasons 1 490 372 982 242 1 125 110 10-6 4 326 3312 Carpenters and joiners 6 511 982 6 208 713 2 148 619 86-43 17 224 3322 Painting trades workers 2 196 714 2 902 410 1 165 268 62 24 7 740 3332 Plasterers 1 272 322 1 548 262 971 188 21-3 4 581 3333 Roof tilers 447 103 354 46 134 25 7 1 1 117 3334 Wall and floor tilers 826 180 1 051 177 496 42 23 0 2 794 3341 Plumbers 3 729 1 793 3 812 707 2 187 371 142 18 12 758 3996 Signwriters 223 293 207 63 74 16 6 8 889 3999 Other miscellaneous technicians and trades workers 665 460 534 238 377 114 37 7 2 432 4422 Security officers and guards 1 385 790 933 226 630 88 108 97 4 258 6111 Auctioneers, and stock and station agents 160 153 80 52 52 10 6 1 514 6121 Real estate sales agents 2 001 1 754 1 907 498 452 132 104 172 7 020 6219 Other sales assistants and salespersons 448 456 411 161 159 26-3 20 1 677 7121 Crane, hoist and lift operators 676 424 1 082 177 1 117 44 23 4 3 547 (Continued next page) Future forecasts: Construction and Property Services Skills 2016 26 7

2.3 Projected employment change in CPS related occupations in 2025-26 a (continued) ANZSCO Occupation NSW VIC QLD SA WA TAS NT ACT Australia persons persons persons persons persons persons persons persons persons 7129 Other stationary plant operators 2 132 1 050 2 643 524 2 625 200 140 13 9 328 8112 Commercial cleaners 5 522 4 158 4 130 1 577 1 937 563 259 257 18 402 8113 Domestic cleaners 530 484 351 185 144 54 18 50 1 814 8116 Other cleaners 344 273 331 83 232 30 12 13 1 317 8212 Concreters 1 520 580 2 048 298 757 112 49 7 5 372 8215 Paving and surfacing labourers 380 473 808 93 238 116 30 2 2 140 8217 Structural steel construction workers 985 594 1 651 199 1 837 61 25-2 5 351 8419 Other farm, forestry and garden workers 685 347 355 169 166 64 20 32 1 837 8999 Other miscellaneous labourers 3 084 1 848 3 091 547 1 920 148 89 73 10 799 Total 44 828 19 332 44 537 8 611 25 097 3 996 1 374 679 148 455 a Change from 2011-12 employment levels. Source: CIE projections. 8 Future forecasts: Construction and Property Services Skills 2016 26

Future forecasts: Construction and Property Services Skills 2016 26 9 The projections for other states and territories are mixed and depend heavily on the underlying scenarios, particularly for the residential construction sector, which are outlined in more detail chapter 4 of this report. Of particular note is the projected fall in employment of nearly 8 000 persons for the CPS sectors in Victoria by 2015-16, and in particular, in occupations that are strongly linked to residential construction. This outcome is a function of the underlying scenario, where housing starts are projected to fall by around 17 per cent compared to 2011-12 levels. The high base of housing starts in 2011-12 and the projected oversupply in following years, particularly in the Victorian metropolitan area, are key drivers. To put this result in perspective, the fall of 8 000 persons represents only 3 per cent of the CPS employment base for 2011-12, which is then projected to recover to an increase of over 19 000 persons by 2025-26. More details on the projections Table 2.4 reports the total number employed and the growth rate from 2012 to 2026 for each state and territory as well as the nation. Total employment will increase by 1.15 per cent per annum, from 11.47 million in 2012 to 13.46 million in 2026. Consistent with the assumptions, resources rich states, such as Western Australia and Queensland, will continue to have a higher than average employment growth rate. 2.4 Projected total employment by state Total number of employed Annual growth 2011-12 2012-13 2013-14 2014-15 2015-16 2025-26 2012 16 2017 26 000s 000s 000s 000s 000s 000s % % NSW 3 594 3 642 3 679 3 717 3 754 4 183 1.10 1.09 VIC 2 867 2 887 2 905 2 936 2 965 3 307 0.85 1.10 QLD 2 335 2 363 2 397 2 436 2 466 2 802 1.36 1.29 SA 813 818 828 839 849 939 1.07 1.02 WA 1 295 1 326 1 348 1 366 1 384 1 582 1.68 1.35 TAS 233 235 238 240 243 271 1.09 1.11 NT 125 127 129 130 131 145 1.25 1.00 ACT 208 209 210 212 213 232 0.56 0.85 Australia 11 470 11 606 11 734 11 877 12 005 13 461 1.15 1.15 Source: CIE projections. Underlying these numbers is the fact that there are a large number of working proprietors in the industry, particularly in residential construction, many of whom are sub-contractors. Consultation with industry indicated that this part of the workforce may not be adequately measured by official labour force statistics in Australia. Chart 2.5 shows the projected split between full and part time employment. At a national level, the change in this composition reflects the progression of the workforce through age cohorts and structural shifts in employment by industry rather than any change in working hours for a specific occupation employed by industry by region. For example,

% 10 Future forecasts: Construction and Property Services Skills 2016 26 2.5 Share of full-time employment in total employment 90 80 2012 2016 2026 70 60 50 40 30 20 10 0 NSW VIC QLD SA WA TAS NT ACT Data source: CIE projections. people will tend to seek more part time work as they get older, regardless of the industry in which they are employed. Also, some industries (construction) are characterised by full time workers while others (in property services such as cleaning) rely on workers at lower hours. Overall, the composition of full-time and part-time employment at a state level as shown in chart 2.5 does not change significantly. Tables 2.6 report the projected employment by broader industry occupation categories. Employment in the mining industry will see the highest growth at 4.27 per cent per annum from 2012 to 2016, followed by that in financial and insurance services at 2.32 per cent and in agriculture, forestry and fishing at 2.27 per cent. These results reflect the structural changes that are likely to continue out to 2025-26. 2.6 Projected total employment by industry Total employment Annual growth 2011-12 2012-13 2013-14 2014-15 2015-16 2025-26 2012 16 2017 26 000s 000s 000s 000s 000s 000s % % Agriculture, forestry and fishing 333 339 348 356 364 447 2.27 2.06 Mining 265 274 288 299 314 498 4.27 4.72 Manufacturing 965 975 989 1 000 1 014 1 153 1.25 1.29 Electricity, gas, water and waste services 152 153 154 154 155 168 0.52 0.78 Construction 1 000 1 025 1 030 1 053 1 062 1 171 1.53 0.98 Wholesale trade 412 416 421 426 431 480 1.16 1.08 Retail trade 1 214 1 228 1 243 1 257 1 271 1 415 1.16 1.08 Accommodation and food services 769 783 800 815 831 1 013 1.97 2.00 Transport, postal and warehousing 563 573 586 597 611 767 2.06 2.30 (Continued next page)

Future forecasts: Construction and Property Services Skills 2016 26 11 2.6 Projected total employment by industry (continued) Total employment Annual growth 2012 2013 2014 2015 2016 2026 2012 16 2017 26 000s 000s 000s 000s 000s 000s % % Information media and telecommunications 228 232 236 241 245 291 1.74 1.74 Financial and insurance services 424 434 444 454 464 589 2.32 2.40 Rental, hiring and real estate services 211 212 212 213 214 224 0.34 0.45 Professional, scientific and technical services 910 919 922 930 934 991 0.68 0.59 Administrative and support services 399 401 401 403 404 420 0.30 0.41 Public administration and safety 707 710 712 715 716 730 0.29 0.20 Education and training 888 890 891 893 895 911 0.19 0.18 Health care and social assistance 1 361 1 370 1 377 1 385 1 391 1 452 0.55 0.43 Arts and recreation Services 211 215 219 222 226 262 1.64 1.49 Other services 459 461 464 466 468 489 0.52 0.44 Total 11 470 11 610 11 737 11 882 12 010 13 470 1.16 1.15 Source: CIE projections. Construction employment will grow by 1.53 per cent per annum between 2012 and 2016, higher than the national average, reflecting that there is significant investment spending during the period. However, as this investment expenditure slows after 2015-16, then the growth in construction employment will slow out 2025-26. Consistent with the assumption of moderate economic growth and even flatter growth in the residential building market, employment in rental, hiring and real estate services sector will grow by 0.45 per cent per annum during the projection period. It is important to note that other sub-sectors of property services, such as Surveyors and spatial scientists, are part of a larger industry Professional, scientific and technical services in table 2.6. Table 2.7 shows that demand for managers, technicians and trades workers and machinery operators and drivers are projected to grow faster than employment across all occupations. 2.7 Projected total employment by occupation Total employment Annual growth 2012 2013 2014 2015 2016 2026 2012 16 2017 26 000s 000s 000s 000s 000s 000s % % Managers 1 545 1 566 1 588 1 611 1 632 1 862 1.37 1.33 Professionals 2 515 2 537 2 554 2 576 2 594 2 810 0.78 0.80 Technicians and trades workers 1 691 1 716 1 734 1 761 1 781 2 012 1.31 1.23 (Continued next page)

12 Future forecasts: Construction and Property Services Skills 2016 26 2.7 Projected total employment by occupation (continued) Total employment Annual growth 2012 2013 2014 2015 2016 2026 2012 16 2017 26 000s 000s 000s 000s 000s 000s % % Community & personal services workers 1 114 1 126 1 136 1 148 1 158 1 270 0.96 0.93 Clerical and administrative workers 1 673 1 693 1 710 1 731 1 749 1 958 1.12 1.14 Sales workers 1 075 1 088 1 101 1 115 1 127 1 265 1.19 1.16 Machinery operators and drivers 780 792 807 821 837 1 012 1.77 1.93 Labourers 1 078 1 092 1 106 1 121 1 134 1 282 1.28 1.24 Total 11 470 11 610 11 737 11 882 12 010 13 470 1.16 1.15 Source: CIE projections. Employment in CPS related industries and occupations Table 2.8 reports CPS employment at a more detailed sub-industry level. Employment in non-residential building construction and heavy and civil engineering construction is projected to grow by more than 2 per cent per annum, while that in residential building by 1.2 per cent per annum between 2012 and 2016. Construction services employment 2.8 Projected employment in CPS sectors (ANZSIC) Total employment Annual growth ANZSIC Industry 2011-12 2015-16 2025-26 2012 16 2017 26 000s 000s 000s % % 30 Building construction 311.7 329.9 351.3 1.43 0.63 301 Residential building construction 240.4 252.1 258.0 1.19 0.23 302 Non-residential building construction 71.3 77.8 93.3 2.23 1.83 31 Heavy and civil engineering construction 103.3 113.4 137.2 2.36 1.92 32 Construction services 584.8 619.1 682.9 1.44 0.99 321 Land development and site preparation services 51.3 54.9 60.5 1.72 0.98 322 Building structure services 77.4 81.9 90.4 1.42 0.99 323 Building installation services 222.4 235.2 259.3 1.40 0.98 324 Building completion services 162.0 171.2 188.9 1.38 0.99 329 Other construction services 71.6 76.0 83.8 1.50 0.98 671 Property operators 36.1 37.0 39.4 0.60 0.64 672 Real estate services 120.1 121.7 127.7 0.34 0.48 692 Architectural, engineering and technical services 223.5 236.8 258.3 1.46 0.87 731 Building cleaning, pest control and gardening services 176.3 178.8 187.7 0.35 0.49 Total construction 999.8 1 062.5 1 171.5 1.53 0.98 Property services 556.0 574.4 613.1 0.82 0.65 Total construction and property services 1 555.7 1 636.8 1 784.5 1.28 0.87 Source: CIE projections.

Future forecasts: Construction and Property Services Skills 2016 26 13 will grow by 1.44 per cent per annum for the same period. Overall, construction employment should have above average growth during the period. However, as investment expenditure slows, the employment in the construction industry will grow by 0.98 per cent per annum between 2016 and 2026, which is lower than the national employment growth. Property services employment is projected to grow by 0.82 per cent per annum for the projection period out to 2015-16. Property services is a diverse group of industries with sales linkages to investment activities by the construction sector and to the capital stock base of the economy. In addition, parts of property services rely on sales to a large number of industries outside of construction and mining, such as the retail and financial sector, and on demands by final consumers. Over the longer term, these projections not only reflect changes in construction but also activity levels in the property market and expenditure levels by consumers more generally. The projections of employment by CPS sector shown in table 2.8 reflect assumptions around the key drivers (as detailed in chapters 4 to 5) and that significant structural adjustment within the sector is unlikely. Key uncertainties include likelihood of higher immigration and population growth, world economic outlook and budgetary positions of Australian governments have led to this conservative approach (see chapter 6). By 2015-16, additional skills will be required to respond to the projected uptick in construction, especially in the residential sector. Beyond 2016, the CPS will continue to provide stable and sustained employment growth through to 2025-26 compared to other sectors of the economy. Detailed employment projections by occupation and state In its 2012 Environmental Scan report, the CPSISC identified 36 high demand occupations (at ANZSCO 6-digit level). These occupations belong to 27 occupations at the 4-digit level. Table 2.9 reports our projections for these occupations. Detailed tables of employment projections by CPS occupations and by state are provided in appendix D. 2.9 Projected employment in some CPS related occupations Total number of employment Annual growth ANZSCO Occupation 2011-12 2015-16 2025-26 2012 16 2017 26 000s 000s 000s % % 1331 Construction managers 94.0 98.9 107.0 1.28 0.79 2322 Surveyors and spatial scientists 15.7 16.8 19.4 1.73 1.46 2339 Other engineering professionals 9.9 10.4 11.7 1.19 1.19 3122 Civil engineering draftspersons and technicians 14.7 15.7 17.5 1.64 1.04 3311 Bricklayers and stonemasons 29.2 30.8 33.5 1.36 0.85 3312 Carpenters and joiners 122.2 127.9 139.4 1.15 0.87 (Continued next page)

14 Future forecasts: Construction and Property Services Skills 2016 26 2.9 Projected employment in some CPS related occupations (continued) Total number of employment Annual growth ANZSCO Occupation 2012 2016 2026 2012 16 2017 26 000s 000s 000s % % 3322 Painting trades workers 47.0 49.7 54.8 1.38 0.98 3332 Plasterers 30.5 32.2 35.1 1.40 0.85 3333 Roof tilers 7.4 7.8 8.5 1.39 0.87 3334 Wall and floor tilers 17.3 18.5 20.1 1.58 0.87 3341 Plumbers 81.9 85.7 94.6 1.14 1.00 3996 Signwriters 6.6 6.9 7.5 0.84 0.93 3999 Other miscellaneous technicians and trades workers 17.6 18.3 20.1 0.98 0.91 4422 Security officers and guards 46.0 47.2 50.2 0.66 0.63 6111 Auctioneers, and stock and station agents 3.1 3.2 3.6 1.17 1.09 6121 Real estate sales agents 85.4 87.0 92.4 0.47 0.60 6219 Other sales assistants and salespersons 18.7 14.4 17.0 1.80 1.65 7121 Crane, hoist and lift operators 13.4 27.6 34.8 2.06 2.33 7129 Other stationary plant operators 25.5 161.1 174.7 0.75 0.82 8112 Commercial cleaners 156.3 23.6 25.0 0.48 0.57 8113 Domestic cleaners 23.2 14.3 15.3 0.62 0.66 8212 Concreters 32.4 34.1 37.8 1.28 1.03 8215 Paving and surfacing labourers 10.2 10.8 12.3 1.54 1.31 8217 Structural steel construction workers 22.9 24.7 28.2 1.89 1.36 8419 Other farm, forestry and garden workers 11.4 11.9 13.2 0.97 1.11 8999 Other miscellaneous labourers 58.1 61.1 68.9 1.26 1.21 Source: CIE projections. Total 1 014.5 1 059.7 1 163.0 1.10 0.93 Comparison with the DEEWR projections Table 2.10 compares the CIE projections to the DEEWR projections (Appendix A summarises and reviews the employment projection by DEEWR). From this table, the projected growth rates from this report are persistently lower than those of DEEWR. For example, DEEWR projected that the total employment in Australia will grow by 1.4 per cent per annum from 2011 to 2016, while our projection points to 1.1 per cent. The difference in growth rate is more obvious for the CPS sectors. DEEWR projected that employment in construction and property services will grow by 2.4 per cent per annum and 2.1 per cent per annum, respectively, compared to 1.5 per cent and 0.8 per cent in the CIE projection.

Future forecasts: Construction and Property Services Skills 2016 26 15 `2.10 Comparison of projected annual growth rates ANZSIC Industry DEEWR (2011 16) CIE (2012 16) % % 30 Building construction 1.8 1.4 301 Residential building construction 2.1 1.2 302 Non-residential building construction 1.3 2.2 31 Heavy and Civil Engineering Construction 3.1 2.4 32 Construction services 2.5 1.4 321 Land Development and Site Preparation Services 2.4 1.7 322 Building structure services 1.3 1.4 323 Building installation services 3.0 1.4 324 Building completion services 2.9 1.4 329 Other construction services 1.8 1.5 671 Property operators 1.1 0.6 672 Real estate services 1.0 0.3 692 Architectural, Engineering and Technical Services 3.6 1.5 731 Building Cleaning, Pest Control and Gardening Services 0.9 0.4 Total construction 2.4 1.5 Property services 2.1 0.8 Total construction and property services 2.3 1.3 Total national employment 1.4 1.1 Source: DEEWR (2012) and CIE projections. DEEWR (2012) does not provide details of its projection methodology, especially the underlying assumptions, which makes it difficult to compare the results and to understand the difference between them. However, it is most likely that the differences come from different perceptions of future economic conditions. When DEEWR made the projections, it would rely on then available information on the Australian and global economies, and at that time there was relatively high confidence on the economic growth. This outlook has been changed when the IMF revised downward its world economic outlook in April 2013. As shown in chart 2.11, for example, the IMF s forecast in April 2013 of the GDP growth in Australia between 2013 and 2017 is 0.2 to 0.5 percentage points lower than its previous forecast in April 2012. As a result of the conservative approach taken, the projections presented in the report can be considered to be a conservative and reliable start point to quantify the CPS Skills requirements going forward. The demand for employment by industry and by skill would be potentially at higher levels if the appropriate weighted policy priority was given to significant constraints facing the construction sector, which in turn, will improve the outcomes for property services.

% 16 Future forecasts: Construction and Property Services Skills 2016 26 2.11 Revision of IMF economic projection in April 2013 to previous projections 0.2 0.0 2013 2014 2015 2016 2017-0.2-0.4-0.6-0.8-1.0-1.2-1.4 revision to 2012/4 revision to 2011/9 revision to 2012/4 revision to 2011/9 revision to 2012/4 revision to 2011/9 World Advanced economies Australia Note: Change in GDP growth rate forecast. Data source: IMF (2011, 2012ab) World Economic Outlook.

Future forecasts: Construction and Property Services Skills 2016 26 17 3 Contributions of the construction and property services sectors The CPS sector encompasses skills-based occupations across a diverse mix of industries across the economy. The contribution of the sector is substantial in terms of employment, value added, and number of small businesses. Since the global financial crisis, the contribution of individual sectors has reflected structural change within the sector. Two critical dimensions are the importance of trades and professional based skills and the reliance on working proprietors. After accounting for the direct and indirect contribution of the CPS sectors, maintaining and improving productivity and removal of inefficient taxes were identified as being critical to maximising this overall contribution. The CPS sectors are an important part of the Australian economy, contributing significantly, directly and indirectly, to overall economic activity and employment. The construction sector, on its own, is the third largest in terms of employment accounting for 1.005 million people or 8.79 per cent of total employed persons for the year ending August 2012.2 In terms of contribution to Australian GDP, construction accounted for $107.7 billion of gross value added in 2011 12 (using trend chain volume measures) representing 7.4 per cent of gross domestic product.3 The direct contribution of the property services sector is more difficult to account for because these industries are not grouped conveniently in one broad category in the labour force survey or the national accounts. The analysis in this chapter accesses 2010 11 data from ABS Catalogue 8155.0 Australian Industry, rather than 2011 12 estimates of industry gross value added that are available from the ABS Catalogue 5206.1 Australian National Accounts: National Income, Expenditure and Product. The choice to use the 2010-11 data was made because not only does Australian Industry report industry data at a higher level of detail (2 digit ANZSIC level) but it also provides consistent data on a range of other industry variables such as sales and service income, industry value added and employment that are relevant to this analysis. Therefore a more complete dataset can be used than would otherwise be the case. The starting point for the analysis is defining the CPS sectors as being characterised by 24 construction sub-sectors and eight property services sub-sectors as shown in table 3.1. 2 ABS Catalogue 6291.0.55.003 Labour Force, Australia, Detailed, Quarterly ending August 2012. 3 ABS Australian National Accounts: National Income, Expenditure and Product, Catalogue no. 5206.0, Industry Gross Value Added, Trend Chain volume measures.

18 Future forecasts: Construction and Property Services Skills 2016 26 3.1 ANZSIC industry coverage at the 4-digit level Construction Property services a 3011 House Construction 2911 Solid Waste Collection Services 3019 Other Residential Building Construction 2919 Other Waste Collection Services 3020 Non-Residential Building Construction 2921 Waste Treatment and Disposal Services 3101 Road and Bridge Construction 2922 Waste Remediation and Materials Recovery Services 3109 Other Heavy and Civil Engineering Construction 6711 Residential Property Operators 3211 Land Development and Subdivision 6712 Non-Residential Property Operators 3212 Site Preparation Services 6720 Real Estate Services 3221 Concreting Services 6921 Architectural Services 3222 Bricklaying Services 6922 Surveying and Mapping Services 3223 Roofing Services 7311 Building and Other Industrial Cleaning Services 3224 Structural Steel Erection Services 7312 Building Pest Control Services 3231 Plumbing Services 7313 Gardening Services 3232 Electrical Services 7712 Investigation and Security Services 3233 Air Conditioning and Heating Services 3234 Fire and Security Alarm Installation Services 3239 Other Building Installation Services 3241 Plastering and Ceiling Services 3242 Carpentry Services 3243 Tiling and Carpeting Services 3244 Painting and Decorating Services 3245 Glazing Services 3291 Landscape Construction Services 3292 Hire of Construction Machinery with Operator 3299 Other Construction Services (nec.) a Note that part of property services ANZSICs may not be in the terms of reference. Source: ABS ANZSIC classification and the terms of reference. In addition to these core CPS sectors, there are also sectors that have been identified as being important in terms of employment of CPS occupations. At the 2-digit ANZSIC level these are: 27 Gas supply; 28 Water supply, sewerage and drainage services; and 94 Repair and maintenance. Number of businesses in CPS sectors The CPS sectors have a low level of concentration in comparison to the rest of the economy, despite a small number of large, highly visible, companies in the industry. Table 3.2 shows that over 60 per cent of all businesses in CPS sectors have a turnover over of less than $200 000. Detailed tables by 4-digit ANZSIC can be found in appendix D of this report.

Future forecasts: Construction and Property Services Skills 2016 26 19 3.2 Number of national CPS Skills businesses by turnover size 2010 11 All businesses With less than $200 000 turnover no no % Construction 351 995 224 747 63.8 Property services 261 780 191 288 73.1 Total CPS 613 775 416 035 67.8 Source: ABS Catalogue no 8165.0. Within these businesses, there are a range of ownership and employment structures. Table 3.3 shows that around 70 per cent of individual businesses rely on working proprietors only (non-employing), more so in the property services sector, while businesses with less than 20 employees account for over 90 per cent of total businesses with employees in CPS sectors. This dataset indicates the importance of businesses with one or two employees, one of which may be an apprentice or trainee, to the CPS sectors. 3.3 Number of national CPS Skills businesses by employment size 2010 11 Non employing Less than 20 persons All businesses Non-employing Less than 20 persons a no no no % % Construction 217 617 126 621 351 995 61.8 94.2 Property services 213 558 44 287 261 780 81.6 91.8 Total CPS Skills 431 175 170 908 613 775 70.2 93.6 a In total businesses with employees. Source: ABS Catalogue no 8165.0. Direct contribution of CPS sectors to the economy A detailed representation of the CPS sectors was built up from 2-digit ANZSIC level data from the ABS Australian Industry publication. It is important to note that this data provides a time series in nominal terms and, as a result of its methodology, will yield estimates that may not be directly comparable to other ABS sources. Chart 3.4 estimates that the value of sales or equivalent to the value of production of the CPS sectors for 2010 11 was $398 billion in total with construction accounting for $297 billion or 74.7 per cent of the total, and property services accounting for $96 billion. This leaves $4 billion contributed by industries outside of construction and property services. Industry value added better reflects the direct contribution to GDP through the total value of wages and operating surplus. In 2010 11, total value added by CPS sectors was estimated to be $147 billion (chart 3.5). The CPS sectors were therefore responsible for 10.5 per cent of nominal GDP of $1 404 billion for 2010-11.

20 Future forecasts: Construction and Property Services Skills 2016 26 3.4 National value of sales of the CPS Skills sectors a 500 Related CPS industries Property services Construction 400 $ billion 300 200 100 0 2007-08 2008-09 2009-10 2010-11 a Sales and service income. Data source: ABS Catalogue 8155.0, published 27 June 2012, and CIE calculations. 3.5 National value added of the CPS Skills sectors a 160 140 Related CPS industries Property services Construction 120 100 $ billion 80 60 40 20 0 2007-08 2008-09 2009-10 2010-11 a Includes wages and earnings before tax and interest. Data source: ABS Catalogue 8155.0 published 27 June 2012, and CIE calculations. Therefore, the contribution of property services to GDP is proportionally higher than construction because of its higher value-added to sales ratio (57 per cent) compared to construction (30 per cent). This reflects the higher input of labour, especially skilled labour, into the total value of output in each sector. On a per person basis, value added in construction has been steady recently (chart 3.6), while for property services it has been steadily increasing, in nominal terms (chart 3.7). Over this period, the purchasing power of income, as reflected by the consumer price index, fell by an annual average rate of 2.9 per cent.

$ 000s per person employed Future forecasts: Construction and Property Services Skills 2016 26 21 3.6 Value added per person employed for construction a 200 150 30 Building construction 31 Heavy and civil engineering construction 32 Construction services 100 50 0 2006-07 2007 08 2008 09 2009 10 2010 11 a Nominal terms. Data source: ABS Catalogue 8155.0 published 27 June 2012. 3.7 Value added per person employed for property services a $ 000s per person emplyed 200 150 100 50 Property operators and real estate Professional, scientific and technical services Building cleaning and pest control Public order, safety and regulatory services (private) 0 2006-07 2007 08 2008 09 2009 10 2010 11 a Nominal terms. Professional scientific and technical services as indicative of Architectural and surveying services and Public order, safety and regulatory services (private) as being representative Investigation and Security Services. Data source: ABS Catalogue 8155.0 published 27 June 2012. Heavy and civil engineering construction was the big winner (increasing by 5.2 per cent each year in real terms). Value added per person for construction services declined in real terms over the period 2006 07 to 2010 11 this indicator fell by 11 per cent. Property services as a group increased strongly at an average annual rate of 1.3 per cent in real terms with building cleaning and pest control the standout increasing by 4.3 per cent each year in real terms.

22 Future forecasts: Construction and Property Services Skills 2016 26 3.8 CPS employment by industry for Australia 2010 11 1000 750 000s persons Per cent Working proprietors Employees 500 250 0 Residential Nonresdiential Construction Construction services construction Property operators and real estate Architectural and surveying services Building cleaning and pest control Investigation and Security Services Data source: ABS Catalogue 8155.0, published 27 June 2012. As shown in table 3.3, the CPS sectors are dominated by a very large number of small firms, many of which rely on owner-managers or working proprietors, many of whom are sub-contractors. Chart 3.8 shows the importance of this group to overall employment in the CPS sectors. With a total of 1.72 million persons in CPS sectors, 1.08 million are employed in construction and 641 000 in property services and: working proprietors accounted for 20.6 per cent of total employment in construction but in property services they account for 42.7 per cent; and building cleaning and pest control are two areas dominated by working proprietors who account for 55 per cent of total employment. It should be noted here that for construction, this source estimates total employment of 1.077 million for 2010 11 while the Australian Labour Force estimate is 1.035 million. Regional dimension There are differences between the states in terms of employment in the CPS sectors (chart 3.9). 3.9 CPS employment compared with population by state 40 Per cent of total CPS employment Per cent of total population 30 20 10 0 NSW VIC QLD WA SA TAS NT ACT Data source: ABS, 2011 Census data via Tablebuilder.

Per cent Future forecasts: Construction and Property Services Skills 2016 26 23 For instance, NSW accounts for around 32 per cent of Australia s population, but only around 28 per cent of employment in the CPS sectors. In Victoria the ratios are similar to each other both around 25 per cent. While in Queensland and Western Australia the relationship is reversed the percentage employed in the CPS sectors is greater than the per cent of Australia s population that they represent. It is difficult to avoid the conclusion that this difference is due, in part, to the large impact that mining has in both Queensland and Western Australia. Skill dimension Within the CPS sectors there are differences between whether a sector is considered a trade or not. Of the 37 sub-sectors identified in table 3.1, the first 22 have been classified as trades and the remaining 15 have been classified as non-trades. As a proportion of the total employment in the CPS sectors, there is a difference between trades subsectors and non-trades by state. Tasmania has the highest proportion in trades, 76 per cent while NSW has the least, 71 per cent (chart 3.10). This is, in part, driven by the higher proportion of residential and non-residential property operators in New South Wales. 3.10 Distribution between trades and non-trades in the CPS sector 100 Trades Non-trades 75 50 25 0 TAS WA VIC NT QLD ACT SA NSW Data source: ABS, 2011 Census data via Tablebuilder. Economywide perspective of CPS sectors The construction and property services sectors interact with the rest of the Australian economy through a complex web of connections. These interactions are significantly beyond those direct contributions identified above. The CPS sectors can be viewed in two parts: one that adds to or replaces the capital stock of the economy; and a sector that services the ongoing requirements of that capital stock.

24 Future forecasts: Construction and Property Services Skills 2016 26 In terms of sales in the CPS sectors (where CPS sector output is used), construction and parts of property services are responsible for the formation and sale of new capital stock for the economy that: enables other industries to maintain and increase their productive base; and provides households with accommodation. The remainder is more concerned with the support for existing capital stock including operation and maintenance activities such as cleaning and other services. In addition to these sales linkages, the CPS sectors are also linked to the rest of the economy through their purchases of goods and services and by their contribution to overall demand for labour. Traditionally, economic multipliers have been used to conduct this type of analysis, but are restricted in how they can be used (box 3.11). Economywide models have been used to correct the limitations of multipliers and to capture and explain these forward and backwards linkages with other industries, consumers and the rest of the world. An economywide modelling approach is used in this report. 3.11 Multiplier approach A common approach to estimating the impact of one industry on the wider economy is the use of so-called economic multipliers. For example, a one dollar increase in activity in construction leads to an x dollar increase in gross domestic product (GDP), or one job created in construction leads to y jobs in the whole economy. There are some significant constraints with the concept of economic multipliers, including that they: are a one-way measurement, that is, it reflects the impact of one industry on the whole economy. In many cases the impact of the macroeconomic conditions or changes in the supply of labour on a specific industry is also of interest; over-simplify economic interactions. Changes in the activity of one industry may be caused by different drivers, and so lead to very different values of the multiplier; assume that relative prices do not change between the outputs of industries or for factors of production such as labour, capital and land; do not account for constraints faced by the industries such as the availability of skilled labour or specialist capital. The direct and indirect effect To estimate the total contribution to the Australian economy, a without the CPS sectors scenario would need to be developed. Because of the integral nature of this sector to the wider economy, such a scenario is difficult to imagine. One alternative scenario would be to assume that all outputs and services of the CPS sectors were imported from overseas.

Future forecasts: Construction and Property Services Skills 2016 26 25 This scenario could then be applied to an economywide model to identify the impact on other industries and overall economic activity as shown by gross domestic product and aggregate employment. Such a scenario would require a large number of assumptions, many of which may not be realistic. Rather than this type of analysis, a more practical and instructive approach would be to examine the marginal contribution of the sector to the rest of economy. That is, what happens to the interaction between the CPS sectors and rest of the economy when key performance drivers are changed, with all other factors held constant. These drivers are those that impact on the size of the sector and how it interacts with the rest of the economy, including changes in: productivity; labour availability; taxes; and demand. A detailed study has already been completed by CIE (2012) for the Housing Industry Association Limited (HIA) focussing on residential construction. In this report, a general equilibrium model of the Australian economy, CIE-REGIONS, was used to quantify the relationship between construction and the wider economy under different assumptions about the Australian labour market, and with different causes of the changes in construction and other industries and the whole economy. The measure used to report the economywide impact was an impact ratio that was calculated by relative changes in the gross value of production of the construction or residential building industry and the gross domestic product (GDP). Each of the scenarios were conducted under two employment scenarios: a tight labour market where there is close to full employment and a slack market where all workers in all occupational groups can be acquired at the going wage rate. Chart 3.12 summarises the CIE s modelling results of the impacts of a range of economic changes focusing on national residential building, construction and GDP under a situation of full employment. As expected, productivity growth in the rest of the economy (outside of construction) has the largest impact on the size of construction and the economy as a whole, given a scenario of full employment where labour supply is constrained. This change has the largest impact on residential and construction activity and arises from a sizeable increase in GDP and flow-on to the demand for housing. However, achieving this productivity is out of the control of the CPS sectors. Of more relevance, a 1.0 per cent multifactor productivity increase for the construction industry (including residential and non-residential construction) was estimated to increase national GDP by $2.36 billion a year. That is, one dollar of additional construction activity resulted in $4.75 of additional GDP due to construction passing on lower costs to the rest of the economy and also freeing up resources to be used elsewhere, primarily in the mining sector. While causing the construction sector to expand by 0.39 per cent, the productivity improvement also enables mining to expand by 0.62 per cent, manufacturing by 0.07 per cent and the rest of the economy by 0.34 per cent.

26 Future forecasts: Construction and Property Services Skills 2016 26 3.12 Impact on residential building, construction and GDP under full employment Higher productivity in rest of the economy Higher demand for residential building Higher productivity in manufacturing Cutting inefficient tax Higher construction productivity Higher productivity in residential building Higher productivity in mining Residential building Construction GDP Lower transport price Lower rate of return Lower energy price 0.0 0.5 1.0 1.5 2.0 2.5 Data source: CIE (2012) for Housing Industry Association Limited. A 1.0 per cent total factor productivity increase for the residential housing sub-sector alone is estimated to increase national GDP by $863 million a year. The flow-on impact is similar, being $4.19 of additional GDP per increased dollar of activity in residential activity. Similarly, in terms of relevance to the CPS sectors, a reduction in inefficient taxes on residential housing that would lower the cost of residential building by approximately 1.0 per cent would raise residential building activity by around 0.6 per cent. In a previous report, the CIE found that taxation accounts for a sizeable proportion of the cost of new and existing housing and apartments. This change would also increase GDP by $780 million. For every dollar of extra activity it created in residential housing, it would expand national GDP by an estimated $2.26. A 1.0 per cent increase in the demand for new residential housing investment has a very different impact to a 1.0 per cent increase in productivity or a reduction in inefficient taxes. Rather than causing other industries to expand, a 1.0 per cent increase in residential housing investment demand causes mining and manufacturing to contract by 0.2 and 0.04 per cent respectively. Under a situation of full employment, an increase in housing can only occur by diverting resources away from other industries. %

Future forecasts: Construction and Property Services Skills 2016 26 27 How these results transfer to property services The performance of the property service sector is linked directly or indirectly to the construction sector, either through the flow of investment expenditures or related to the stock of dwelling and non-dwelling and engineering works. While generally property services has a higher level of value added per unit of output, and is more reliant on working proprietors, it would be expected that the majority of the lessons from flow-on effect in construction will apply and that both of these sectors will naturally move together. Sensitivity analysis All the results above assume full employment and a tight labour market. Under a situation of less than full employment, an easing of the labour constraint, impacts change and generally increase. For example, under a scenario of less than full employment a 1.0 per cent increase in construction sector multifactor productivity would increase GDP by 37 per cent more than under the full employment scenario. Essentially, expansion in construction and other sectors could take place more cheaply. Moreover, the flow-on impact would be greater, instead of each dollar in construction activity leading to $4.75 in GDP, the comparable GDP increase is an estimated $5.21. Implications for this study Improving productivity over the medium to long term has the greatest potential to benefit the CPS sectors, through expanding output and improving profitability, and to maximise the contribution that will flow on to the rest of the economy. This is especially the case for residential construction where productivity improvements that partially address affordability issues, then flow on to the rest of the economy. Removal of inefficient taxes on housing has a significant impact on addressing affordability, but with limited flow-on to the rest of the economy. Recent performance shows the resilience of the CPS sectors over the past five years in the face of flat demand, especially in the residential sector. A significant factor is the capacity of small to medium sized businesses with working proprietors to absorb lower levels of profitability. However, in the long term this capacity may also constrain their ability to restructure and adopt productivity improvements that are widespread across the industry. While the modelling shows that with less than full employment the impacts of productivity improvements and other changes may be larger, in the long term Australia s labour supply is expected to remain relatively tight. In addition, employing more people involves substantial additional costs such as costs of training, risks in employing people, relocation, immigration hurdles, search and placement costs and the need for higher wages or lower incomes taxes to induce people into employment. These additional costs are borne by both individual industry groups, such as the CPS sectors, and the wider economy.

28 Future forecasts: Construction and Property Services Skills 2016 26 4 Demand drivers short and long term perspectives Market conditions in residential construction have been challenging since the global financial crisis. While population growth will ensure strong underlying demand for housing out to 2025-26, low consumer confidence and affordability will constrain dwelling starts for the short to medium term. In contrast, there has been a distinct shift in the importance of the non-residential construction sector as a result of the significant and large scale investments by government in public infrastructure and the mining sector. While these investments may slow as a result of budget pressures, and a shift to operational phase in the mining sector, they will continue to drive strong demand for construction and property services beyond 2020. Property services is a diverse sector that is strongly linked to investments in the residential and non-residential construction and to the stock of buildings and other capital assets in the economy. Performance of the sector will continue to depend on relative exposure to each market segment. Underlying demand for housing The underlying demand for housing is determined by the number of households, which, in turn, changes in population size and demographics and housing preferences. The National Housing Supply Council (NHSC) estimates that under their medium scenario by 2025, the number of Australian households will have grown by 2.5 million, primarily driven by population growth (NHSC 2011). Population growth forecasts used in this report are underpinned by net migration growth of 220 000 each year. The most recent estimates from the Department of Immigration and Citizenship estimate net overseas migration at 232 000 persons (see appendix C). There will be more than half a million additional Australians in the resident population aged 60 or more by 2015-16. By 2025 26, there will be an additional 2.3 million Australians aged over 60who are likely to downsize their housing to provide funds for retirement. The number of households in 2011 12 is estimated to have been over 9 million. In the subsequent four years to 2015 16, it is estimated that the number of households would need to increase by around 659 000 (165 000 each year) to meet underlying demand. In the period from 2015 16 to 2025 26, it is estimated that the number of households will increase by around 1.633 million (163 000 each year).

Future forecasts: Construction and Property Services Skills 2016 26 29 In total, the number of Australian households is expected to grow at an average rate of 164 000 each year between 2011-12 and 2025 26. The projected increase in the underlying demand for dwellings also partially reflects the modest reduction in the size of the average household, which is a key variable. At a national level, the 2011 Census indicated that the average size of Australian households had not reduced further between 2006 and 2011. However, the ABS predicts that average household size will continue to fall from 4.5 in 1911 to between 2.4 and 2.5 people per household by 2031 (ABS 2012). The ageing of the population, as well as the longer life expectancy of women over men and the delay of marriage, are some of the factors that underpin the projected growth in one person households (ABS, 2012). These social factors are expected to result in the increase in single person households by around 40 per cent or 1 million to approximately 3.4 million households in 2025 26. This represents the fastest projected increase of all household types. The number of Australians aged over 70 years is projected to grow to 3.5 million or 16 per cent of Australia s population by 2025 26. While many will continue to live as couples, around one third of those older than 75 years are expected to reside alone (ABS, 2012). In addition, couples without children are expected to increase at a faster rate than families with children. These demographic changes, without accounting for any additional changes in consumer tastes, are expected to result in a change in the level and composition of housing demand. The ageing of the population is anticipated to result in an increased demand for semidetached housing and flats relative to separate housing. According to modelling of housing demand by the ANU, the relative demand for new flats and semi-detached housing in 2024 is expected to be higher than for new separate houses across Australia, particularly in Western Australia and South Australia (McDonald and Temple, undated).4 Historically, the percentage of new dwellings that are houses (rather than semi-detached dwellings and flats) has been greater than 80 per cent. Many forecasts continue to assume that the composition of new dwellings will remain relatively consistent over time. However, industry knowledge and data held by HIA suggest there has been a more significant change in the composition of new dwellings. According to the HIA, houses represent approximately 65 per cent of new dwellings while the remaining 35 per cent is comprised by semi-detached dwellings and apartments. HIA data suggests that over the past decade, there has been a decrease in the relative demand for houses by around 0.9 percentage points each year (see chart 4.1). At the time of preparation this report, we were aware that ABS are in the process of rebasing estimates of dwelling numbers back to 2007-08. At this time, the exact size of the adjustments are not known, however we expect that forecasts on a percentage change basis will remain accurate. 4 Exceptions include Sydney, where the demand for separate housing remains stronger and Brisbane where the relative demand does not vary between dwelling type.

30 Future forecasts: Construction and Property Services Skills 2016 26 4.1 Reduction in houses as a share of new dwellings 80% Houses as a share of new dwellings (%) Multi-units as a share of new dwellings (%) 70% 60% 50% 40% 30% 20% 10% 0% 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 Note: 2012 13 and 2013 14 are forecasts. Demand varies widely between states due to land availability and demographic factors. Data source: Actual data supplied by HIA. Forecasts by CIE. Housing affordability and consumer confidence The number of households implies the level of potential demand for housing, and it is expected to increase by approximately 165 000 dwelling each year. However, it is unlikely that the actual demand for housing will be sufficient to meet this requirement. In the past decade, the construction of new dwellings has only reached these levels in 2003 04 and 2009 10 (see chart 4.2). The number of dwellings expected to be constructed over the next three years averages 148 000 each year based on recent trends. 4.2 National dwelling commencements 200 180 160 140 120 100 80 60 40 20 Houses Multi-units 0 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14f Note: 2012-13, 2013-14and 2014-15 are forecasts; other years reflect data of actual housing starts. Data source: HIA Housing Forecasts March 2013.

Per cent Index Future forecasts: Construction and Property Services Skills 2016 26 31 This can partly be attributed to weak confidence with the consumer sentiment index lower than those levels observed since the recovery from the GFC (see chart 4.3). 4.3 Westpac-Melbourne Institute consumer sentiment index 140 120 100 80 60 1983 1987 1991 1995 1999 2003 2007 2011 Data source: RBA, Statistical Table G8, GICWMICS. As a result of this lack of confidence, there has been an increase in the rate of savings as households seek to reduce, rather than increase, household debt even after consideration of (chart 4.4). 4.4 Household saving as a proportion of gross disposable income 20 15 10 5 0-5 1983 1988 1993 1998 2003 2008 Data source: ABS, 5206.0, Series: A2302912L and A2302828W. Without higher wage growth, which is likely to require significant economic reform to promote higher productivity in the economy, affordability is unlikely to improve without government and industry strategies to lower costs. In addition, over the long term, capacity constraints in particular labour shortages in the CPS Skills sectors are expected to limit the capacity to meet the annual increase in potential demand.

32 Future forecasts: Construction and Property Services Skills 2016 26 Changes in affordability since 2000 Chart 4.5 shows dwelling prices and average weekly earnings from 1994 to 2011. 4.5 Index of dwelling prices and average weekly earnings, Australia, 1994 2011 400 Index of house prices in capital cities Index of earnings per full time worker 300 200 100 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Note: Dwelling prices are an average over eight capital cities. The index year is 1994. Earnings are the weekly average for all adults working full time ordinary hours. Data source: ABS 6416.0 House Price Index: Eight Capital Cities, ABS 6302.0 Average Weekly Earnings 2012.Updated from original chart citied in the National Housing Supply Council, State of Supply Report 2011. This chart suggests that the average wage has not increased proportionately to the average price of a house. The average increase in established houses and project homes from 2002 to 2012 is shown in table 4.6. On average, prices have increased by more than 6.2 per cent while project homes have increased by 3.9 per cent. However, if removing the past few volatile years, price growth in established houses was 7.5 per cent Australia wide, and 4.8 per cent for project homes. This includes significant price growth in excess of 14 per cent for homes in Perth, Hobart and Darwin. On the other hand, average wage growth has been between around 4 per cent each year over the period. 4.6 Average annual price growth for capital cities houses and project homes 2002 2012 2002 2009 City Established houses Project homes Established houses Project homes per cent pa per cent pa per cent pa per cent pa Sydney 2.9 3.2 2.2 3.1 Melbourne 8.0 2.8 8.2 2.8 Brisbane 7.7 4.7 11.9 6.1 Adelaide 7.8 3.3 10.6 3.9 Perth 10.4 6.7 17.9 10.2 Hobart 8.6 4.8 14.2 6.5 Darwin 11.6 6.8 14.8 8.8 Canberra 6.8 3.5 8.3 4.1 Weighted average of eight capital cities 6.2 3.9 7.5 4.8 Source: CIE. Raw data from ABS 6416.0.

Future forecasts: Construction and Property Services Skills 2016 26 33 The affordability of Australian housing in recent times is characterised by three distinct phases (Fox and Finlay 2012): during the mid-1980s where there was a relatively stable price to income ratio; from the late 1980s to the early 2000s which saw an increased ratio; and from 2003 to present where there has been a flattening of the ratio (and more downwards trend recently). The difference between prices and earnings should not be relied upon as the only indicator of affordability or housing demand. Chart 4.7shows that at a national level, home loan affordability has improved since 2010 although being a significantly lower levels than those observed during the 1990s and the early 2000s. 4.7 REIA Home loan affordability Australia a 55 50 45 Index 40 35 30 25 20 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 a The Home Loan Affordability Indicator is the ratio of median family income to average loan repayments. An increasing value reflects improving affordability of housing loans. Data source: REIA. Interest rates were a key driver of the recent improvement. Further cuts are seen as indicative of, or concurrent with, worsening economic conditions and inflation below target levels. However, there is some scope for autonomous interest rate reductions by commercial banks as their cost of funding decreases and stability returns to financial markets, as has happened over 2012 (RBA 2013). There is scope for lower house prices, but the catalyst for this is not obvious. House prices have generally been steady over the past few years, and over the past year there has been a slight increase in most capital cities (RP Data-Rismark 2013). Changes in the taxpayer base and possible implications As shown above, owners of dwellings have experienced considerable asset price appreciation on average over the past decade. This was a period of greater willingness among the population to bid up the price of housing. This is likely to be the result of several unique factors:

34 Future forecasts: Construction and Property Services Skills 2016 26 a long period of low interest rates and low unemployment; the flow through of greater participation of women in the workforce and resulting shift from single to dual income households; and the strong demand for housing as an investment vehicle (such as through negative gearing and the capital gains tax exemption) for the baby boomer generation which were on high wages and paying high levels/rates of taxation. Australia is facing considerable change in the composition of the population and workforce, which have implications for the level of demand and composition of demand for housing. There will be nearly half a million additional Australians in the resident population aged 65 or more by 2015 16. By 2025 26, there will be an additional 1.8 million Australians aged over 65 and a further 1.6 million over 60. This means a significant sector of the population will largely be dependent on their savings. This cohort is likely to want to downsize their housing to provide funds for retirement. In addition, those dependent on superannuation incomes no longer face the same incentives for negative gearing as their superannuation income attracts a tax rate of no more than 15 per cent. In other countries, significant changes in population demographics due to ageing have placed significant downward pressure on housing prices. Where prices have been sustained, this is most likely to be on a regional basis as a result of inter-state migration or movement between regions primarily of the result of mining. Perth and regional areas in Western Australia and Queensland are good examples. However, at a national level, the type of growth in housing prices experienced in Australia over the past decade is unlikely to be sustained. This is likely to cause an improvement in the affordability of the existing housing stock relative to wage growth while also reducing the level of demand and stimulus for investment in housing. Construction prices The price growth for labour and materials has been constrained since 2010. This corresponds to falling demand growth in the residential and non-residential construction sectors. Prior to the financial crisis, in the 2000s, the average annual growth in housing construction prices was 4.4 per cent while the average annual growth in non-residential output prices was 6.2 per cent. Since the global financial crisis, the house construction (price) index has increased at just 1.8 per cent each year while the non-residential output (price) index increased by just 1.9 per cent each year (chart 4.8). This may be due to the inability of firms to pass on higher input and labour costs to customers and to adapt to sluggish market conditions such as through restructuring business operations to share fixed costs. This had resulted in downward pressure on construction margins. Over the medium term, prices of construction outputs will need to increase to enable firms to remain viable.

Future forecasts: Construction and Property Services Skills 2016 26 35 4.8 Index of prices for housing construction and non-residential output 250 200 Index of prices Index of earnings 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Data source: ABS 6415.0 (2013) house prices; and 6302.0 (2012) earnings index. Increasing importance of non-residential construction The value of dwellings as a share of total value of all construction has fallen over the past decade. Chart 4.9 shows the value of product, accounting for the annual rate of depreciation, across dwellings and non-dwelling construction. During the 2000s, the value of non-residential construction increased at just less than double the rate of residential building construction. More recently, since the onset of the global financial crisis, the value of non-dwelling construction continued to grow at around 11.2 per cent each year, while the value of dwellings grew at just 1.7 per cent. 4.9 Increase in the value of non-dwelling (non-residential) construction 160 Dwellings Non-dwelling construction Value of construction ($bn) 120 80 40-1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Data source: ABS 5204.0.

36 Future forecasts: Construction and Property Services Skills 2016 26 While the demand for residential housing appears to be on a reasonably predictable pathway, it is less certain whether the value of non-residential construction work will continue to increase in an exponential way. One relatively stable and small component of non-dwelling construction is non-residential building construction. This is made up of private and public sector investment in building work not for dwellings. In the 2000s, private sector investment increased by an average of 9 per cent per annum before becoming negative over the global financial crisis. This reflected positive growth in Western Australia and the Northern Territory, counteracted by negative or flat growth in most other states. In contrast, public sector investment deviated from a pathway of 3 per cent average annual growth and expanded significantly over the downturn due to expansionary fiscal policies including public construction programs. This stabilised total investment in nonresidential building and has stayed roughly the same over the global financial period. Together, public and private sector investment has averaged $34 billion over the past five years, made up of two thirds by private sector investment and one-third public sector investment. The remainder of non-dwelling construction is made up by infrastructure and civil and heavy engineering. The determinants of this component will include the timing of the investment in the National Broadband Network (NBN), the extent of ongoing public investment in infrastructure and the timing of the end of high investment in the mining sector. National Broadband Network construction and other public works The construction of the NBN across Australia is expected to take 10 years from 2011. According to the NBN Corporate Plan 2012 2015 (shown in table 4.10): total expenditure for the construction period (2011 2021) is expected to be $64.2 billion in nominal terms; between 2012 and 2016, approximately $27.9 billion (in capital expenditure and operating expenditure) will be spent. Investment is expected to peak in 2016, but stay above $6.5 billion each year until 2022 in nominal terms; and the government is expected to provide the majority of this investment, contributing $25 billion by 2016 and $30.4 billion by 2021. 4.10 Investment in the NBN in nominal terms Capital expenditure Operating expenditure Total investment $billion $billion $billion 2011 0.46 0.34 0.80 2012 0.89 0.52 1.41 2013 3.19 1.09 4.28 2014 3.95 1.78 5.72 2015 5.02 2.90 7.92 (Continued next page)

Future forecasts: Construction and Property Services Skills 2016 26 37 4.10 Investment in the NBN in nominal terms (continued) Capital expenditure Operating expenditure Total investment $billion $billion $billion 2016 4.92 3.63 8.55 2017 4.70 3.39 8.10 2018 3.99 3.35 7.34 2019 3.76 3.20 6.96 2020 3.61 3.04 6.65 2021 3.36 3.15 6.51 Total over construction period 37.84 26.39 64.23 Potential annual maintenance cost (2022-2025) 1.5 2.5 4.0 Note: This investment is reliant on the ALP s policy position and could change if the Coalition wins the election expected in September 2013. Source: NBN Co Corporate Plan 2012-2015, CIE. It is difficult to assess the future level of public investment in infrastructure, more generally. The CIE is aware of approximately $14 billion of non-building infrastructure projects in the pipeline that is due for completion by 2016, excluding the NBN. In addition, there is at least $5.2 billion in flood reconstruction works largely allocated to non-building construction works. However, this is small in comparison to the potential investment in mining over the next four years. Construction/investment in the mining sector Chart 4.11 shows the level of mining sector investment over the past 20 years. 4.11 Mining investment buildings and structures and total in current terms 80 70 60 Buildings and structures Equipment, plant and machinery Expenditure ($bn) 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Note: Data does not include expenditure in the last quarter of 2012. Data source: ABS Mining expenditure increased sharply from $10 billion in 2004 to $40 billion in 2010 and $70 billion in the first three quarters of 2012. From 2004 to 2012, the investment in the mining sector construction (buildings and structures) sharply increased above mining

38 Future forecasts: Construction and Property Services Skills 2016 26 sector investment in equipment, plant and machinery. Investment in buildings and structures grew from approximately half of mining expenditure to more than 80 per cent of mining expenditure by 2012. Most of this expenditure was undertaken in Western Australia, while Queensland experienced a significant increase in investment in the past few years. While it is widely anticipated that the high levels of investment in the mining sector will end as firms move from the construction phase to the operational phase of mining, potential projects announced for the next five years exceeds current investment levels. Chart 4.12 shows planned expenditure from 2013 to 2017. 4.12 Estimates of planned expenditure in mining in nominal terms 200 180 Coal Oil Gas/LNG Metal ore Other mining Proposed investment ($bn) 160 140 120 100 80 60 40 20 0 2013 2014 2015 2016 2017 Data source: CIE, original data from the Bureau of Resource and Energy Economics. Key points to note from this chart are: in 2013, proposed investment in new projects in the mining sector amounts $50 billion with close to 90 per cent of this committed; from 2014 to 2017, annual investment may exceed $80 billion per year and previous investment levels in the current mining sector expansion: proposed expenditure starting in 2017 amounts to more than $180 billion; the composition of proposed projects changes over the forecast period: LNG and coal seam gas developments increase from 14 per cent of planned investment in 2013 to 80 per cent in 2017; and substantive investment is planned for expansions or new developments in coal mining and metal ore, with investment in each of the two categories peaking in 2015. The extent to which these announced investments will proceed is unknown. However, table 4.13 indicates the percentage of planned expenditure, which has satisfied project feasibility studies, and for which funding has already been committed. As we would expect, the portion of announced investment that is committed is high for 2013 (89 per cent committed) and generally reduces as the investment date is further out.

Future forecasts: Construction and Property Services Skills 2016 26 39 4.13 Committed investment in nominal terms Units 2013 2014 2015 2016 2017/20 17+ Total Value of committed projects $b 43.9 43.1 63.5 72.1 33.2 255.9 Total value of announced projects $b 49.1 89.0 159.0 121.5 176.2 594.8 Percentage committed % 89 48 40 59 19 43 Data Source: BREE, Resources and energy major projects, October 2012. More than 80 per cent of planned expenditure is for projects in Western Australia (46 per cent) and Queensland (35 per cent) as shown in chart 4.14. In addition, 6.4 per cent of total expenditure is planned for projects in the Northern Territory, mostly in 2017, while approximately 4.9 per cent of investment is planned for New South Wales. 4.14 Planned mining expenditure by state QLD WA NSW NT Other 2017 2016 2015 2014 2013-20 40 60 80 100 120 140 160 180 200 Proposed expenditure ($bn) Note: Other incorporates states, territories or regions where the planned expenditure is less than 2.5 per cent of total planned expenditure: the National Offshore territory, South Australia, the Joint Petroleum Development Area, Victoria, and Tasmania. Data Source: BREE, Resources and energy major projects, October 2012.. Property services The markets for components of property services are strongly linked to construction, through construction investment and the stock of residential and non-residential building and other capital assets in the economy, and between components of the property services sectors. Chart 4.15 shows that value of sales for property operators and real estate agent services accounted for around $70 billion in 2010-11 and has grown at an average annual rate of 3.7 per cent since 2007-08 in nominal terms. Property operators are a significant part of the overall property services picture. Their role is to maintain the operation of the stock of buildings used by industries throughout the economy. They have strong sales linkages to the construction sector, wholesale and retail trade, accommodation and food service and the finance industry.

40 Future forecasts: Construction and Property Services Skills 2016 26 4.15 Value of production of property operators and real estate agent services a $ billion 80 70 60 50 40 30 20 10 Real estate agent services Non-residential property operator services 0 2007-08 2008-09 2009-10 2010-11 a Sales and service income in nominal terms. Data source: ABS Catalogue 8155.0 published 27 June 2012, and CIE calculations. Activity levels in the real estate agents sector largely depend on the state of the housing and commercial property markets in relation to the turnover of the existing stock rather than as a function of new sales. Licensed agents are reasonably mobile and are sensitive to current levels of profitability in the market. With improved performance, particularly in residential, people will be attracted back to the sector. More than half of those employed are working proprietors. Building cleaning, pest control and gardening services also support the maintenance of operation of the current stock of buildings across the economy. Chart 4.16 shows that the value of production of this sub sector has grown steadily at a rate of 7.7 per cent each year in nominal terms over recent years. Building cleaning accounts for around 64 per cent of the total, and accesses casual labour. As many of the operators are fragmented across a large number of small to 4.16 Value of production for building cleaning pest control and gardening services a Gardening services Pest control services Building and other industrial cleaning services nec 12.0 10.0 8.0 $ billion 6.0 4.0 2.0 0.0 2007-08 2008-09 2009-10 2010-11 a Sales and service income in nominal terms. Data source: ABS Catalogue 8155.0 published 27 June 2012, and CIE calculations.

Future forecasts: Construction and Property Services Skills 2016 26 41 medium sized businesses, and are not allied with the industry association, ABS estimates are the only data source. Between 22 and 25 per cent of the total sales of each of these sub-sectors are accounted for by sales to the property operators services industry.5 Chart 4.17 below shows that the nominal value of architectural and surveying services. In 2010 11, the combined estimated value of production for these sub-sectors was over $9 billion. These sub-sectors are closely linked to new investment in the construction and mining industries. Architects specialise across sub-sectors of the residential, commercial and public building construction. BIS Shrapnel (2013) illustrate this specialisation by linking the demand for different specialists within surveyors and geospatial professionals to industry segments: cadastral surveyors to private dwelling commencements; construction surveyors to private multi-residential construction and non-dwelling buildings; engineering surveyors to utilities and transport engineering construction; and mining surveyors: mining and heavy industry construction. 4.17 Value of production for architectural and surveying services a Surveying and mapping services Architectural services $ billion 10 9 8 7 6 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 a Sales and service income in nominal terms. Data source: ABS Catalogue 8155.0 published 27 June 2012, and CIE calculations. There is some uncertainty around the value of the security service industry, but it is clear that it is growing strongly. The private security industry in Australia encompasses: security officers: licensed premises and unlicensed premises; debt collectors, armoured guards, locksmiths; and investigators and advisors. 5 5215055001 Australian National Accounts: Input-Output Tables (Product Details, Electronic Publication, 2007 08

42 Future forecasts: Construction and Property Services Skills 2016 26 One estimate is the value of the Investigative and security services industry from the 2007-08 input-output tables at $4.3 billion.6 Using trends from the ABS industry Public order, safety and regulatory services (private), from ABS catalogue 8155.0, this could be worth up to $5 billion in 2010-11 terms. This industry can be separated into those that contribute to the operation and maintenance of buildings and those that provide other security services at public events and venues. The relevant security services to the CPS sectors are used widely across industries and final consumers but with key linkages to property operators. The value of this component of security services is expected to continue to move in line with the stock of buildings. Security services that depend on public events and venues are likely to be the area of future growth where increasing demand is a function on the presence of security at these occasions. 6 5215055001 Australian National Accounts: Input-Output Tables (Product Details), Electronic Publication, 2007-08

Future forecasts: Construction and Property Services Skills 2016 26 43 5 Key supply side factors short and long term perspectives Factors that shape the labour force will continue to be challenging for the CPS sectors especially the ageing of workers and increased competition for workers in the age cohort 15 to 24 years. Other contributing factors to skill shortages include strong mining investment and structural adjustment in other sectors of the economy. Productivity in the CPS sector is critical as it addresses skill shortages, affordability and profitability. A key issue for construction, and specifically the residential sector, is the contribution of on-going productivity improvements and developments that may result in significant structural change in the industry. This chapter discusses some of the key contributing factors including underlying labour force growth, and how structural change and productivity has the potential to change skill requirements. Demographics of the labour force The resident population is expected to increase at an average rate of 1.7 per cent between 2011 2012 and 2015 16, and at a similar rate from 2015 16 to 2025 26. The supply of labour is expected to keep pace with the growth in the resident population, despite the ageing of the population (see chart 5.1). 5.1 Resident population and labour force projections 30 25 People (millions) 20 15 10 5 Resident population Labour force 0 2011-12 2013-14 2015-16 2017-18 2019-20 2021-22 2023-24 2025-26 Data source: CIE Labour force forecasts based on ABS and Productivity Commission.

44 Future forecasts: Construction and Property Services Skills 2016 26 Structural change in the workforce The resident population over 60 years of age will increase from 20 per cent to 23.7 per cent over the period. This is associated with a larger portion of the labour force approaching retirement in this period as well as an increase in the proportion of the labour force that is 60 and over (see chart 5.2). Of the 2.6 million people over the age of 45 years and working full time at present, more than two fifths intend to transition to part-time work before they retire (ABS 2011). 5.2 Trends in the age cohorts of labour supply 0.20 Percentage of the labour force 0.16 0.12 0.08 0.04 0.00 Labour force over 60 years (%) Labour force between 15 and 24 years (%) Data source: CIE Labour force forecasts based on ABS and Productivity Commission. Correspondingly, there is an increase in the workforce participation rate among many cohorts, in particular, in the over 60 cohorts and among females. This will not have any significant impact in the period to 2015 16, but may have a subtle impact on the labour force by 2025 26. In addition, the percentage of the labour force aged between 15 and 24 years will fall from 18.8 to 17.5 per cent over the period such that there is increasing competition for the recruitment of new workers. That is, while the overall resident population is forecast to increase by 4.8 million over the forecast period, the labour force cohort between 15 and 24 years is forecast to increase by just 266 000 while the portion of the labour force aged 60 and over increases by half a million. Again, this is unlikely to have a significant impact in the short term. However, it may subtly affect the supply of young workers relative to the labour force by 2025 26. Long term macroeconomic conditions Implications of the end of the extensive mining investment The construction sector has an ageing population. One aspect that has contributed to this has been the rise of the mining sector. For instance, between 2006 and 2011, there has

Future forecasts: Construction and Property Services Skills 2016 26 45 been an increase in the proportion of young people (ages 15-24) employed in this industry. Over the same period, the construction industry grew by 10 per cent (table 5.3). The high levels of investment that have been experienced in the mining sector are expected to level out as the sector moves into the income generation phase after the next five years. This may provide some return of workers from the mining industry into the construction industry although it may reduce the number of workers in heavy engineering construction. In addition, the reduction in workforce requirements is expected to dampen wage inflation for other competing sectors including for skilled workers in the construction sector. The implication is that higher rates of youth unemployment may have been avoided. 5.3 Changed youth employment, by industry Industry of employment 2006 2011 Difference no % no % % Mining 10 438 0.39 16 282 0.57 0.18 Arts and Recreation Services 29 657 1.10 36 861 1.29 0.19 Health Care and Social Assistance 91 117 3.37 110 573 3.86 0.49 Electricity, Gas, Water and Waste Services 7 939 0.29 9 552 0.33 0.04 Construction 119 186 4.41 138 581 4.83 0.43 Education and Training 54 622 2.02 63 332 2.21 0.19 Accommodation and Food Services 239 184 8.84 267 520 9.33 0.49 Other Services 65 689 2.43 69 306 2.42-0.01 Public Administration and Safety 53 517 1.98 55 359 1.93-0.05 Transport, Postal and Warehousing 33 384 1.23 34 388 1.20-0.03 Inadequately described 17 641 0.65 17 777 0.62-0.03 Administrative and Support Services 42 543 1.57 40 456 1.41-0.16 Information Media and Telecommunications 27 195 1.01 25 745 0.90-0.11 Professional, Scientific and Technical Services 75 887 2.81 71 817 2.51-0.30 Retail Trade 353 492 13.07 333 772 11.6 4-1.43 Rental, Hiring and Real Estate Services 26 054 0.96 22 546 0.79-0.18 Financial and Insurance Services 40 861 1.51 35 044 1.22-0.29 Wholesale Trade 48 719 1.80 41 256 1.44-0.36 Manufacturing 124 490 4.60 105 266 3.67-0.93 Agriculture, Forestry and Fishing 25 468 0.94 21 054 0.73-0.21 Not stated 31 059 1.15 23 948 0.84-0.31 Not applicable 1 186 127 43.86 1 326 035 46.26 2.40 Total 2 704 269-2 866 470 - - Note: Youth is defined here as aged 15-24. Data source: ABS 2006 and 2011 Census. Structural change caused by a high Australian dollar As well as a key determinant of the demand for labour in the construction sector, economic conditions will impact the availability of skilled and unskilled labour. If the Australian dollar remains high, there are potential implications for the Australian manufacturing sector employment, which may release more workers into the construction industry. This may point to the need for retraining in the event that continued restructuring of the Australian economy takes place.

46 Future forecasts: Construction and Property Services Skills 2016 26 Employment by the construction industry and region According to the 2011 Census there was an increase in employment in the construction industry. In an absolute sense, there was around 709 000 employed in the industry in 2006 and this increased to around 828 000 in 2011 (table 5.4). However, over this time, there was also population growth. As such, an alternative measure of employment growth is the proportion of the population that is employed in the construction industry. 5.4 Construction industry workers, by state 2006 2011 Difference no % of population no % of population % New South Wales 212 728 3.25 230 057 3.33 0.08 Victoria 171 464 3.48 210 972 3.94 0.46 Queensland 164 938 4.22 183 778 4.24 0.02 South Australia 46 085 3.04 55 599 3.48 0.44 Western Australia 85 125 4.35 111 846 4.99 0.65 Tasmania 13 677 2.87 16 539 3.34 0.47 Northern Territory 6 097 3.16 8 056 3.80 0.64 Australian Capital Territory 9 613 2.97 11 987 3.36 0.39 Other 117 5.05 77 2.54-2.50 Total 709 844 3.58 828 911 3.85 0.28 Data source: ABS 2006 and 2011 Censuses. There were considerable differences in employment growth between states from 2006 to 2011. For instance, the Northern Territory, Tasmania and Western Australia experienced the largest growth, while Queensland and New South Wales experienced the lowest. Victoria and the ACT were in the middle. Analysing the Construction sector in more detail allows a demarcation between workers in the residential and non-residential construction industries. It is clear that there has been an increase in the proportion of employment in non-residential construction Australia-wide (table 5.5). This is most evident in Queensland, but holds for all of the states: New South Wales, Victoria, South Australia, Western Australia, and Tasmania. The exceptions are the two territories. 5.5 Construction industry workers residential or non-residential construction 2006 2011 Residential Non-residential Residential Non-residential % % % % New South Wales 82 18 80 20 Victoria 81 19 79 21 Queensland 80 20 72 28 South Australia 82 18 81 19 Western Australia 82 18 78 22 Tasmania 82 18 81 19 Northern Territory 77 23 85 15 Australian Capital Territory 71 29 76 24 Other territories 61 39 81 19 Total 81 19 78 22 Source: ABS 2006 and 2011 Censuses.

Future forecasts: Construction and Property Services Skills 2016 26 47 Impact of economic growth on skills requirements The construction sector is highly responsive to changing economic conditions and the structure of the Australian economy. Recent forecasts contained in the AWPA discussion paper, Australia s skills and workforce development needs, for a range of scenarios are summarised in appendix A. The report suggests that construction sector employment will experience positive annual growth out to 2025 if: growth in the global economy recovers by 2014 15; and the Australian terms of trade remains reasonably high including from sustained growth in demand for Australian commodities. However, construction sector employment is forecast to decline if the global demand for Australian commodities falls, resulting in significant structural change in the Australian economy, and/or where global economic conditions remain highly volatile. Forecasts contained in the discussion paper, suggest that from 2011 to 2025 the projected annual demand for qualifications will increase between: 2.9 per cent and 4.4 per cent for Certificate 3 and above; and 3.1 per cent and 4.5 per cent for Certificate 3. The lower estimate is based on below-trend, conservative assumptions for migration (128 000 each year), productivity growth (0.6 per cent each year), and output growth (1.35 per cent). Therefore, on the basis of these estimates we might expect workforce skills requirements to increase by 3 per cent each year to 2025 26. Productivity in the construction sector Ongoing productivity improvements, including rationalisation of industry fixed costs, are required to improve affordability and margins. Chart 5.6 shows multi-factor productivity in the construction industry, compared to the market sector over time. Industry productivity estimates are published for the construction industry in total (at the 1-digit 5.6 Multi-factor productivity in construction sector 1975 2012 160 Index (1975 = 100) 150 140 130 120 110 100 90 Construction Market sector 80 1975 1980 1985 1990 1995 2000 2005 2010 Data source: ABS 5260.0.55.002 Experimental estimates of multifactor productivity, Australia: Detailed Productivity Estimates (2011); Productivity Commission (2009) Productivity estimates and trends, February 2009.

48 Future forecasts: Construction and Property Services Skills 2016 26 ANZSIC level), which includes engineering construction as well as residential and commercial construction. Multifactor productivity estimates for the construction industry are summarised in table 5.7 noting that constructing accurate productivity estimates is inherently difficult and so should be used with caution. During the 1990s, multi-factor productivity (MFP) in the construction industry stayed relatively constant. The performance of the construction industry during this period was in contrast to the market sector, where MFP grew relatively strongly. 5.7 Average annual growth in multi-factor productivity Construction industry Market sector % % 1981 82 1989 90-1.0 0.9 1989 90 1995 96 0.0 1.2 1995 96 2002 03 2.8 1.5 2002 03 2010 11 0.4-0.4 Source: ABS 5260.0.55.002 Experimental estimates of multifactor productivity, Australia: Detailed Productivity Estimates (2011); Productivity Commission (2009) Productivity estimates and trends, February 2009. In the period between 1995 96 and 2002 03, MFP in the construction industry grew at an average annual rate of 2.8 per cent, despite a sharp decline in MFP following the introduction of the GST. Total growth in MFP during this period was around 21.5 per cent. Productivity growth in the construction industry outpaced the broader economy during this period and there were likely a number of contributing factors such as the introduction of the performance-based building code in 1996 and potentially, the industrial reforms for the commercial construction sector in 2002. In the 2000s, the construction sector outperformed the rest of the economy in terms of productivity growth. In the market sector, from 2002 03 to 2010 11, multifactor productivity fell by around 0.4 per cent each year but recovered to 2002 03 levels by the end of the period. On the other hand, productivity in the construction sector grew over the same period by approximately 0.4 per cent. Furthermore, the ABS estimates productivity growth in the construction sector recently was around 4 per cent. If this is incorporated, productivity growth in the construction sector over the past decade is, on average, 0.8 per cent. CPS specific estimates Productivity estimates are not routinely estimated for the sub-components of construction and property services. However, several sources indicate significant productivity growth in commercial construction, a subcomponent of the construction industry, due to industrial reforms implemented in 2002 and further reinforced in 2005 06. A report by Independent Economics (2012) concludes that annual productivity growth in the commercial construction sector may have been close to 1.5 per cent between 2004 and 2012.

Future forecasts: Construction and Property Services Skills 2016 26 49 Structural adjustment is unlikely to happen quickly in the construction sector. This is due to the structure of the firms in the industry, many of which are working proprietorships. We expect that productivity growth in the residential construction sector has been limited, which could be explained by a wide range of factors. For example, the prevalence of small businesses, which may reduce the scope for innovation, and the conservative nature of the industry and its customers. It is also possible that gains from productivity were offset by increased costs from changes to building standards. The property services sector is also dominated by small businesses and working proprietors especially those based on professions. The cleaning industry is an example where there is considerable reliance on part time workers. We would expect that long term productivity improvements would be similar to those in residential construction. Product manufacturing and design capabilities Chapter 3 demonstrated that housing affordability was a key driver behind current market softness. One way to address this constraint is for the industry to innovate to provide low cost alternatives for housing. With uncertainty expected to persist for potential market entrants over the next four years, there is a strong imperative for innovation in residential construction. An increase in product manufacturing and design capabilities, such as 3D printing, beyond existing 3D CAD capabilities, and prefabrication (offsite manufacturing), has the potential to deliver benefits to households and builders. Embracing such opportunities, however, may require a shift in the skills and training mix of industry as well as attitudes of consumers and builders. Some of the major benefits of offsite-manufactured products include: lower on-site construction time a house with pre-fabricated walls and roofing can be completed within 1.5 to 3 months and reach the lockup stage in around 10 days (Miller, 2011). This provides significant cash flow benefits to builders and earlier income generation for clients; lower skilled labour requirements (trades workers) for example, prefabricated walls and roofing can alleviate the requirement for bricklayers; lower workplace health and safety (WH&S) risks onsite due to reduced time and personnel on site and lower exposure to hazards; and more efficient design and engineering that could result in: cost reductions relative to comparative products for example, the MiiHome Building System can provide wall and roofing cost savings of approximately 25 per cent compared with rendered brick veneer, which results in an overall reduction in the cost of a house (excluding the purchase price of the land) by around 10 per cent (see Miller, 2011). greater control of quality and costs; and reduced wastage on site, greater insulation and other properties associated with sustainability.

50 Future forecasts: Construction and Property Services Skills 2016 26 At the same time, it is important to recognise the limitations that are placed on consumer choice. For instance, it may be that the internal feel of the house is different because of the materials used. That is, off-site homes may not be a strong substitute for those built on-site but rather a different and distinct segment of the market. While prefabricated buildings and components are becoming commonplace in the commercial sector, such as tilt-up concrete slabs, the adoption of prefabricated housing is minimal in Australia (Daly, 2009). However, prefabricated housing components in the form of prefabricated housing frames and trusses and cladding systems, kitchens and bathrooms are becoming more widely utilised. In addition, modularised building is offered for homes, schools and shelters. Currently the demand for offsite manufacturing of houses is believed to be less than 5 per cent of the total new housing market. One reason for this is that manufacturing lines for residential construction are required to provide greater versatility in products to meet consumer tastes, greater cost efficiency than traditional building methods and lightweight products for cost effective transportation (Daly, 2009). In theory, it is possible to envisage that prefabricated housing and housing components may be extended further due to the benefits identified above. However, there are a range of impediments to the adoption of offsite manufacturing, including the mix of skills and structure of training in the Australian construction industry. Industrial knowledge of offsite manufacturing in the Australian construction industry is limited. Prefabricated housing erection is undertaken by general tradespeople with generic building and construction qualifications, who have learned their skills outside of the Australian Qualifications Framework (Daly, 2009). As well as a general lack of support for prefabrication among the residential side of the construction industry, there is resistance from the building and construction advisory councils to specialisation for discreet prefabricated housing skills sets (Daly, 2009). The structure of the industry limits the extent of ongoing training. Almost all apprentices graduating from group schemes move into private employment or establish their own business such that the construction industry has a strong sub-contractor basis (Daly, 2009). Investment in further training is seen as a cost impost and typically invested in for subordinate staff (rather than managers) as they are more likely to have a closer involvement in terms of complying with regulation, and knowledge of construction methodology and/or materials (Daly, 2009). While some skills requirements can be reduced from offsite manufacture, such as through replacing some tradespeople for labourers, integrated offsite manufactured products need to be designed and implemented in a way that is appropriate to the climate, site, client and regulators. In the United Kingdom, project managers are used to research material and structural lifespan and integrity in order to satisfy building regulations and provide a conduit between professionals, tradespersons and clients (Daly, 2012). The additional complexity associated with the integration of new processes and products is likely to be more difficult for small to medium sized enterprises to adopt.

Future forecasts: Construction and Property Services Skills 2016 26 51 This would be possible to overcome if there were strong demand from consumers. However, the conservative attitudes in the construction industry towards innovation and prefabricated housing reflects the low level of demand from consumers, perhaps because the perceived benefits to consumers do not outweigh their reservations around the process and attributes of prefabricated housing. Prefabrication may therefore have a gradual impact but is unlikely to be a panacea for the expected gap between housing supply and underlying demand. Improvements in information technology There is little doubt that improvements in communications and information technology has had a significant impact across not only all businesses, in construction and property services, but across all industries in the economy. Indeed, part of the productivity gains observed in the construction industries can be attributed back to the improved portability of and access to communication and information and through from the adoption of e-commerce. This would be especially the case when managers or workers are on-site. It is likely that improvements in portable communications and computing will continue to be important in the future, but unlikely to have a greater contribution to productivity than for other industries especially in the service sector. However, there are some cases where recent developments indicate this view may be no longer valid. Building and construction techniques, and the potential for greater efficiency, is becoming more apparent from integrating Building Information Modelling (BIM) technology. Integrating lean construction technology such as 5 dimensional BIM is being incorporated into the design and construction phase to further reduce construction costs from the design stage, through the construction stage, to subsequent refits, through to demolition. BIM design and data also potentially creates efficiencies for property services throughout the ongoing operation and servicing life cycle. In the case of surveying and geospatial services, the significant improvements in technology that have improved access to, and capability to processing, spatial information could potentially have a profound impact on that industry and so the skills profile required. While we know that these developments have significant potential for construction, or are already critical to industries such as the surveying and geospatial services, it is very difficult to quantify how productivity will be improved (that is, labour saving versus output augmenting productivity improvement) or how large these improvements will be compared to the ongoing or underlying productivity change.

52 Future forecasts: Construction and Property Services Skills 2016 26 6 Macroeconomic drivers and modelling approach Key macro drivers accounted of the analysis This section outlines the macro scenario that has been developed for each of the economic drivers of the state economies and the construction and property services sectors. Gross State Product growth Table 6.1 lists the assumed annual growth rate of gross state product (GSP), which is based on the relevant state and territory treasuries forecasts as reported in table C.7 in appendix C, adjusted to be consistent with the changes in the latest World Economic Outlook from IMF (2013). The latest GSP forecasts are only available for 2015 16 for some states. For some states and territories, the available official forecasts are for an even shorter timeframe. 6.1 Annual growth rate of Gross State Product 2013-14 2014-15 2015-16 2016-17 to 2025-26 % % % % New South Wales 2.79 2.54 2.63 2.74 Victoria 2.54 2.54 2.63 2.74 Queensland 3.57 3.69 3.83 4.01 South Australia 2.53 2.55 2.63 2.74 West Australia 5.11 3.83 4.06 4.27 Tasmania 2.29 2.06 2.15 2.24 Northern Territory 3.97 3.57 3.73 3.91 Australian Capital Territory 2.04 2.32 2.39 2.49 Source: State and Territory treasury forecasts and CIE assumptions. We assume there will be steady or small increase in the growth rates in 2014 15 and 2015 16. For 2016 17 and beyond, we assume the growth will continue albeit with slightly lower rates. Productivity improvement Table 6.2 lists the annual growth rate of gross output based industrial multi-factor productivity (MFP) for different periods from the ABS estimates. In general the productivity has been negatively affected by the global financial crisis (GFC) which tended to be mainly demand driven. Because the demand side shocks are explicitly modelled, we adopt the 10 year average growth rate before GFC as the underlying ongoing force for economic growth. In other words, we assume that the fundamentals of the supply side drivers are not changed.

Future forecasts: Construction and Property Services Skills 2016 26 53 6.2 Annual growth of MFP by industry 10 years before GFC after GFC last 10 years last 20 years % % % % Agriculture, forestry and fishing 0.86 2.68 0.85 1.58 Mining -1.20-4.47-3.01-1.57 Manufacturing 0.02-0.19-0.16 0.01 Electricity, gas, water and waste services -1.72-1.93-2.07-1.18 Construction 0.38 0.04 0.70 0.41 Wholesale trade 0.16-0.39-0.04 0.45 Retail trade 0.37 0.81 0.55 0.61 Accommodation and food services 0.47-0.74-0.01 0.26 Transport, postal and warehousing 0.42-0.65 0.13 0.33 Information, media and telecommunications -0.15 0.11 0.26 0.10 Financial and insurance services 2.00-0.13 1.51 1.64 Rental, hiring and real estate services -2.29-0.12-1.66-1.59 Professional, scientific and technical services 0.22 1.51 0.18 0.16 Administrative and support services 0.74-2.23 0.14-0.15 Arts and recreation services -0.10 0.33-0.24-0.14 Other services -0.45 0.32-0.71-0.29 Data source: CIE calculations based on ABS 5260.0.55.002 Estimates of Industry Multifactor Productivity, Table 15: Gross output based MFP indexes. It should be noted that the MFP growth in the construction sector has been low 0.38 per cent per annum, and that in the rental, hiring and real estate services even negative at -2.29 per cent per annum, it appears the worst performing sector in terms of MFP growth. These assumptions may different from those adopted by other projections, such as DEEWR s. External demand Australian economy is highly integrated into the world economy, and thus affected by the external demand for its goods and services. We use a general equilibrium model of the global economy, Dynamic GTAP, to estimate the future growth of Australian exports to the global market. The global modelling draws information of global economic growth projections by the International Monetary Fund (table C.7 in appendix C), world population growth and likely trade liberalisation. Table 6.3 reports the modelling results of Australian exports growth. Mining and agricultural exports will continue strong growth in the short term, while manufacturing exports will fall. Services exports will see mixed patterns in growth, but because they account for small share of total Australian exports, their impact on overall demand is limited. For example, although utilities (electricity, gas and water) exports growth rate will be big negatives, they account for less than 1 per cent of total Australian exports.

54 Future forecasts: Construction and Property Services Skills 2016 26 6.3 Annual growth of Australian exports 2012 15 2016 20 2021 25 % % % Agriculture, forestry and fishing 5.94 1.11-0.15 Mining 6.12 3.46 2.32 Manufacturing -1.02-3.82-2.81 Electricity, gas and water -9.35-10.91-6.28 Construction 2.27-3.01-2.99 Wholesale & Retail trade 0.48-4.18-4.27 Accommodation, cafes and restaurants 1.98-2.51-3.37 Transport & Communication 2.64 0.45 0.58 Finance and insurance -0.41-4.96-5.06 Property and business services -0.33-4.72-5.00 Other services 2.64-2.80-3.98 Source: Dynamic GTAP simulations Population and immigration As detailed in appendix C, we adopt the Series A of population projections produced by ABS, which is the optimistic estimate of future Australian population. Key assumptions are that there is a net overseas migration level of 220 000 persons for the foreseeable future and high female fertility. This is consistent with recently released information concerning fertility rates and net immigration levels. For example, for 2012-13, the Department of Immigration and Citizenship estimates a net migration level of 232 000 persons which is around 40 000 more than the current policy of 180 000. Out to 2016, the Department forecasts net overseas migration is forecast to be 261.9 thousand. Fiscal policy The scenario around Australian economic growth used in these projections implicitly includes judgments about the likely course of fiscal policy, and in particular, net budgetary positions across all Australian jurisdictions. Recent evidence has emerged that a prolonged period of budget deficits is likely for the Australian Government and for some states and territories. How these impact oin growth and the CPS sectors, in particular, is difficult to predict because it depends on how, where and over what period, the reduction of budget deficit is achieved. Equally important is how these decisions impact on the confidence of industry and consumers. The economic growth projections above assume that fiscal policy will remain around current settings. However, the shift to a structural deficit over the medium to long term has the capacity to slow economic growth across Australian regions, but the size of this reduction depends on a range of factors including the response of respective state and territory governments. The bottom line is that a succession of structural budget deficits: would require a further downward revision of growth prospects; and may flow through to reductions in expenditure on public investments thus putting further pressure on the CPS sectors.

Future forecasts: Construction and Property Services Skills 2016 26 55 CPS specific assumptions In consultation with relevant stakeholders, we adopt the following assumptions (tables 6.4 and 6.5): investment growth in resources sectors and infrastructure will continue at present levels, at least through to 2019 20; and residential building will see mixed pictures across regions with resources rich states continuing relatively high growth while others stagnant or even declining. 6.4 Annual growth rate of residential building starts 2012 13 2013 14 2014 15 2015 16 2016 17 to 2025 26 % % % % % New South Wales 18.7 1.5 0.9 1.5 2.5 Victoria -7.5-13.1 1.2 1.8 3.9 Queensland -3.1 13.4 13.7 2.7 2.8 South Australia -9.7 13.2 10.3 10.0 1.2 West Australia 27.8 2.3 2.2 2.7 1.0 Tasmania -7.1 3.4 3.7 4.2 3.3 Northern Territory 14.2 11.0-3.1 0.6 0.6 Australian Capital Territory -27.6-4.4 0.0 0.6 5.0 Australia 2.6-0.3 4.4 2.6 2.7 Source: CIE assumptions in consultation with HIA. 6.5 Annual growth in investment in selected sectors 2012 13 2013 14 2014 15 2015 16 2016 17 to 2025 26 % % % % % Mining 11.7 7.2 7.2 5.4 5.4 Utilities 7.8 5.5 5.5 4.1 4.1 Roads and freeways 5.7 2.5 2.5 1.9 1.9 Rail projects 11.2 11.0 11.0 8.3 8.3 Other transport 7.0 8.5 8.5 6.4 6.4 Communications 11.9 14.2 14.2 10.7 7.1 Refinery 32.4 16.5 16.5 15.1 5.0 Chemicals 5.3 8.7 8.7 8.7 5.3 Other heavy industries 10.2 1.8 1.8 1.8 1.8 Source: CIE assumptions in consultation with AIG. Economywide approach Chapters 2 through 5 of this report analysis have assembled a wide range of information and assumptions, at a macro and industry level, that need to be brought together in a systematic and consistent framework to project employment and skills requirements for the CPS sectors. This approach involves a number of components:

56 Future forecasts: Construction and Property Services Skills 2016 26 supply side drivers: GSP growth and productivity growth; demand side drivers: external demand for Australian goods and services, population growth, shocks specific to the CPS sectors; and the nature and structure of the labour market, such as full time versus part time, sectoral composition and geographical distribution of the labour force. The whole process is composed of sequential simulations and calculations involving different types of models: a general equilibrium model of the global economy, Dynamic GTAP, to model the external demand for Australian goods and services based on the world economic outlook from the International Monetary Fund (IMF); a general equilibrium model of the Australian economy, CIE-Regions, to simulate all the supply and demand side shocks including those from the global modelling; and an employment module to transform the state and industrial employment results from the CIE-Regions modelling results to detailed employment projections based on the Census and ABS statistics. Chart 6.6 illustrates the overall approach of projecting employment. 6.6 Modelling approach SUPPLY SIDE DEMAND SIDE GSP by state Productivity Global economic forecast Population CPS specific shocks residential Dynamic GTAP infrastructure mining heavy industry External demand CIE-Regions State and sectoral employment Census and ABS statistics Detail employment state industry (ANZSIC 4-digit) occupation (ANZSCO 4-digit nature (full, part) Source: CIE.

Future forecasts: Construction and Property Services Skills 2016 26 57 7 Strategic priorities and key issues Maximising the contribution of the CPS to the economy will require ongoing reform across the economy and more targeted actions addressing constraints faced by individual industries in the CPS sector to maintain and improve productivity. At an industry level, these actions include reform of inefficient taxes and regulation. Appropriate industry and government policy is also vital to address shortfalls in the CPS skills base. This involves addressing likely labour force trends through maintaining access to skills for priority industry and, in the longer term, consideration of a range of policy actions that attract to, and retain skills within, the CPS sector. The results outlined in the previous chapter indicate that there is likely to be an ongoing skills shortage in the CPS sectors. The DEEWR and AWPA reports have a more optimistic scenario for growth, and if this were to occur then this skills shortage would be exacerbated. Possible courses of action that can be taken by industry and governments to alleviate the skills shortage and its effects can be broadly divided into: those which are relevant to all industries; and those that are directly relevant to the CPS sectors. General reform agenda At the highest level, there are a range of objectives and activities that industry and governments should be pursuing that would have benefit to the wider economy and indeed the CPS sectors. These include: sound fiscal and monetary management including managing the level, and response, to any structural deficit that may emerge; reducing the cost of compliance to regulations and other operating costs including energy efficiency requirements; enhancing productivity through reforms, particularly in relation to the labour market; and reform to increase taxation efficiency through moving away from inefficient or costly taxes and simplifying tax compliance especially for small businesses. Taking an economywide view, these areas of reform should be pursued to maximise economic performance throughout the economy independent of outcomes in the CPS sectors and the formation of a suitable skills base. The key message from chapter 3 is that there appears to be a great deal of potential for demand growth, especially for housing, given projected increases in population and

58 Future forecasts: Construction and Property Services Skills 2016 26 incomes in the long term. However, since this demand has not been realised, especially since the GFC, due to low consumer confidence it is difficult to see a sustained increase in demand in the short to medium term. Supply side factors, in particular the availability of land and labour shortages in trades workers, will constrain the capacity for an offsetting increase in supply to meet underlying demand, once consumer confidence returns. Beyond sensible reform measures above, there are a number of possible options available to government to stimulate demand for the CPS sectors, such as: further reduce interest rates; provide increased support to residential building and address housing affordability by increasing the first home owner grant; or maintain or increase public expenditure in infrastructure spending. Not only may these initiatives be unpalatable in the current budgetary and economic environment, they are also unlikely to address the structural problems that underlie housing affordability. As noted, recent reductions in interest rates have improved housing affordability but these changes are in the context of a range of other developments. Since the success of the first home owners grant, which was doubled after the GFC, the scheme recently has not translated into the increase in demand that was expected. This, in turn, resulted in some states phasing out some of the assistance offered, such as that for first home buyers of established housing. As a result, there was a negative flow-on effect to residential construction as sellers of established homes to first home buyers, would have otherwise traded up to new homes. The NHSC (2013, p. 88) notes recent progress made on housing affordability. State governments actions to better focus first home owner programs and stamp duty concessions on new supply, and their wider expression and application of affordable housing targets, are also having an effect. Overall, there appears to be a lack of an integrated approach across jurisdictions with schemes limiting the grants to first homebuyers, while others are available more widely. However, while these actions are being taken, new dwellings remain less attractive than existing dwellings in many cases for first homebuyers. As identified, the government is already heavily committed to a substantial infrastructure program out beyond 2020, based around the roll-out of the NBN and investment in roads, which has resulted in a strong outlook for non-residential construction. This outlook has in part contributed to the skills shortages we observe in the current market and shape the projections presented in chapter 3. The investment in the NBN is also expected to have flow-on impacts for regional housing markets as the availability of these services are expected to make living and working, particularly in the more affordable segment, located in regional areas more attractive. Increased budgetary pressures and changes in the political environment have increased the likelihood that planned investment expenditure may be subject to cuts or re-prioritisation across areas. It is the assessment of this report that the CPS sectors should not rely on any significant changes in government expenditure patterns and instead focus industry and government decision-making on underlying constraints faced directly by the industry.

Future forecasts: Construction and Property Services Skills 2016 26 59 In terms of specific actions that can be undertaken, three primary areas were identified during the course of this study: the removal of or reduction in inefficient taxes and other regulations in the housing sector including the reform of inefficient and costly infrastructure charges and levies; maintaining and improving productivity through ongoing structural adjustment and through the adoption of improved on-site practices; and maintaining and improving the skills base especially for construction and certain parts of property services. Removal of government constraints on housing As housing affordability has become a critical issue, underlying structural problems with regard to government taxes, compliance costs and infrastructure charges should be a priority. A number of the taxes imposed on the housing sector, and on new housing in particular, are inefficient. The Henry Report (2009) and CIE (2011) prepared for HIA, were both critical of many of the taxes levied on housing. Among the vast array of taxes paid by the housing sector, about half of them are identified by the Henry Tax Review as being highly inefficient. In particular: stamp duties; the existing land taxes; the effects of zoning on raw land prices; excessive requirements in the building code; the effects of planning delays and uncertainties in planning on risk premiums and finance charges of developers; and inefficient and excessive charges within infrastructure charges. Box 7.1 notes that further work is required in reforming the release of land, through a transparent and consistent planning approach, and in reducing the impact of inefficient and costly infrastructure charges and levies. Indications of payoff from reform All indicators are that the burden of tax falling on new housing is considerably higher than the average for all other sectors. New housing in particular is inequitably taxed, accounting for around 1.2 per cent of value added in the economy yet contributing 2.8 per cent of government taxation revenues. The average tax burden on the new housing sector is estimated at around 31 per cent of the value of output compared with an economywide average of 24.4 per cent.

60 Future forecasts: Construction and Property Services Skills 2016 26 7.1 Key findings of COAG Housing Supply and Affordability Report While all States and Territories have improved their strategic planning systems, no jurisdiction was wholly consistent with the nationally agreed criteria. City strategic plans need to be based on a better understanding of whether and how the private sector can implement the desired housing outcomes, and of the impact of government policies on the market. A comprehensive and coherent response to housing affordability was lacking across most planning systems. It is important that all levels of government continue to collaborate, as no single level holds all the policy responsibilities or expertise on city strategic planning. All levels of governments should commit to ongoing engagement with communities, business and all stakeholders in setting, implementing and reviewing city strategic plans. Governments need to consider the cumulative impact of the planning, regulatory and taxation arrangements that apply to housing, jobs and infrastructure in capital cities. National Housing Supply Council, Housing Supply and Affordability Issues 2012 13. When hidden and ambiguous taxes are added in, the tax on new housing is an estimated 44 per cent ($268 000) of the purchase price of a new house in Sydney, 38 per cent ($184 000) in Melbourne and 36 per cent ($191 000) in Brisbane (see table 7.2). As there is no reason to expect that there have been substantial changes in the housing market since this analysis was conducted, as shown by various sources, for instance, NHSC, Housing Supply and Affordability Issues 2012 13, these figures are still relevant in 2013. These taxes include direct and indirect taxes, which are solely used to raise revenue such as payroll tax, stamp duty and income taxes. The indirect component is the tax on intermediate products used in building construction. In addition to the readily identifiable (direct and indirect) taxes there is a range of hidden/ambiguous taxes that not only add to housing costs but cause a wasteful use of resources and impose deadweight losses on the economy. Hidden taxes arise from policies that increase the cost or reduce the value of developing and building in a particular place such as irrational zoning restrictions and development controls, excessive standards for building new dwellings, including energy efficiency and in some cases water efficiency. Furthermore, excessive planning delays and uncertainties impose a significant hidden cost. 7.2 Taxes on housing New homes New apartments Sydney Melbourne Brisbane Sydney Melbourne Brisbane $ $ $ $ $ $ Direct 75 422 63 312 55 170 73 694 55 607 52 238 Hidden/ambiguous 106 276 45 398 56 346 51 331 28 545 46 718 Indirect 86 180 75 071 79 265 84 598 73 058 72 504 Total 267 879 183 781 190 781 209 623 157 210 171 460 Data source: CIE (2011).

Future forecasts: Construction and Property Services Skills 2016 26 61 Ambiguous taxes relate to specific activities, and may be levied above the cost of the services provided. The most significant ambiguous taxes for new housing are infrastructure charges levied by state and local governments. The removal of some inefficient taxes could reduce the cost of housing prices by around 10 per cent. Shown in table 7.3, the quantum of these inefficient taxes on new dwellings is estimated to range between 9 per cent and 22 per cent of the cost of a dwelling. For Sydney, the $141 500 worth of inefficient taxes represents more than half of the $267 879 in taxes levied on the median house. Removing just half of the inefficient taxes would reduce the cost of a new dwelling by around 10 per cent, potentially reducing the cost of the home from $640 000 to $575 000. 7.3 Potential scale of inefficient or excessive tax on a dwelling a Sydney Melbourne Brisbane A$ per dwelling A$ per dwelling A$ per dwelling Stamp duty 24 228 22 156 10 073 Land tax 1 457 1 117 909 Excessive land price 40 381 19 789 9 493 Planning delays and uncertainties a 38 094 22 609 23 297 Excessive infrastructure charges 24 801-20 557 National Broadband Network 3 000 3 000 3 000 Building code excesses 9 583 10 926 11 609 Total greenfield 141 545 79 597 78 938 Cost of house to home buyer 639 533 511 202 534 726 % price comprised by inefficient taxes 22 16 15 Stamp duty 23 718 16 248 10 194 Land tax 2 971 463 1 931 Excessive land price 11 087 7 174 9 391 Planning delays and uncertainties a 37 426 21 371 23 630 Excessive infrastructure charges 2 818 13 696 National Broadband Network N/A N/A N/A Total infill 78 020 45 257 58 843 Cost of infill to home buyer 618 968 497 084 522 313 % price comprised by inefficient taxes 13 9 11 a Estimated through removing excessive delays and uncertainties. Therefore, estimates also reflect resulting reduction in other taxes such as the GST. Data source: CIE (2011). Taxation reform to remove stamp duties, as well as excessive planning delays and uncertainties and red tape could be optimistically achieved by 2015 16, however would need to be considered within a package of overall taxation reform and the interrelationship between states and the commonwealth. The actual reduction of these taxes and charges would likely pose difficult decisions for governments, particularly in those cases where taxes would need to be raised by other means.

62 Future forecasts: Construction and Property Services Skills 2016 26 Increasing productivity The most valuable reform that industry could make is with regards to productivity. This would not only improve the bottom line of the firms in the industry, but would also be likely to ease affordability. In addition, increasing productivity has the potential to change the skills requirement equation. However, productivity improvements appear to be difficult to obtain in this industry. Productivity in the residential building sector, unlike the non-residential building sector, is relatively constrained by the structure of the industry. The large number of single owner-operators and small businesses means that it could be difficult for productivity improvements to be discovered, and when they are, it could be difficult for innovations to be widely disbursed across the market. Productivity improvement may come from reform to taxation and planning arrangements that ultimately reduce the cost of housing as well as from incremental shifts in building processes and practices. Nonetheless, on average, ongoing productivity growth out to 2025 26 is likely to be slow and steady. As identified earlier in this report, an example of what could be achieved in the housing sector is the continuation of the gradual shift towards prefabricated housing or transportable housing. We previously identified the potential for prefabrication methods to reduce the cost of a new dwelling by around 10 per cent as well as potentially offering better quality attributes in terms of management of resources and waste. Due to consumer and building industry attitudes towards prefabrication, as well as the lack of well-established supply chains, it would be prudent to assume a slow adoption pathway of less than one per cent increase in market share each year, and a maximum 15 per cent share of the market for new houses. It is thought that the current market share of prefabricated housing is less than 5 per cent. Based on these assumptions, a further increase in prefabricated housing by 10 per cent (to 15 per cent) has the potential to lower the cost of a new standalone house by another 1 per cent. Taking into account the expected mix of dwellings (houses as a share of all new dwellings), this may equate to a decrease in the average cost of a new dwelling by between 0.5 to 0.75 per cent by 2025 26. Therefore, this does not constitute a significant deviation from the productivity trend in the residential building sector over the past decade of between zero and less than half a per cent. However, if Australia were to follow trends observed in Europe to the widespread adoption of prefabrication, this could change significantly. The non-residential building sector has shown greater scope for productivity improvement over the past decade. This is likely to be the result of industrial relations reforms including improvements in workplace practices and changes in building processes such as from the adoption of prefabricated building components. We have not be able to establish any structural changes in this sectors that would improve productivity performance beyond that identified for the past decade.

Future forecasts: Construction and Property Services Skills 2016 26 63 It is thought that productivity improvement in the non-residential building sector averaged approximately 0.8 per cent over the period. We would expect ongoing improvement of up to one per cent, on average, each year out to 2025 26. In the property services sector, productivity is expected to move in-line with changes in the services sector. Similar to the residential dwelling sector, the property services sector is predominantly made up of non-employing businesses and to a lesser extent, small businesses employing less than 20 people. This structure reduces the capacity for productivity improvement. The property services sector is likely to benefit from developments in information technology at the same rate as the rest of the economy. An exception here is surveying and spatial information where improved access to, and processing of, spatial information could potentially have a profound effect. Overall, it is critical that workplaces and vocational training remains sufficiently flexible and responsive to structural changes in CPS sectors that result from productivity enhancing developments that are underway now or likely to take place. Maintain and grow the CPS skill base Another challenge for CPS sectors is to maintain and grow the workforce especially given the specialised skill requirements. This is especially evident in the construction industry due to the physical nature of much of the work. The ingredients to the supply side equation for skills are: underlying labour force growth especially of the target age range (from 15 to 24 years); programs and policies around skills formation and training; and sponsorship of skills in shortage under temporary 457 Visas. Labour force changes and skills formation Chapter 5 has already identified that a challenge for all industries out to 2025-26 is the ageing of the workforce especially for the cohort between 15 and 24 years of age, which is growing at a slower rate than the overall labour force. This structural change is compounded by the fact that many workers from the 15-24 year old cohort have been attracted to other industries, notably mining, due to relative wages. Also noted in chapter 5, the slowdown in mining investment is likely to release workers to other industries. However, competition for this cohort will remain highly competitive. Over the longer term, one of the major challenges facing Australia with respect to the labour force is that of the ageing population. This is likely to have a greater impact on the construction and property services sectors than that which will be experienced by other sectors of the economy. The construction and property services sector tends to draw on younger workers. Further, the effective working life, especially in some of the construction trades, will be shorter than other occupations due to the physically demanding nature of the work. As

Per cent 64 Future forecasts: Construction and Property Services Skills 2016 26 shown in chart 7.4, the construction industry has a younger age distribution than the wider labour force. Moreover, this chart shows bricklayers and stonemasons tend to be even younger than the average across the construction industry. Therefore, as the population ages it may be difficult for the industry to attract sufficient young workers, and there will be specific CPS occupations, such as bricklaying, that will be affected to an even greater extent. This effect will be seen as the current generation of bricklayers approaches the end of their effective working life and the expected difficulty that the sector may have to replace them. 7.4 Age distribution of bricklayers relative to construction and the labour force 20 Bricklayers and Stonemasons Construction industry Labour force 15 10 5 0 15-19 25-29 35-39 45-49 55-59 65-69 75-79 Data source: 2011 Census via ABS Tablebuilder. Age group Although there is not an absolute concordance between data sets, the comparison with the 2006 Census shows that this generation is quickly leaving this occupation as they approach retirement age. As another example, consider the surveying occupation (chart 7.5). Similar to bricklayers, this occupation is currently dependent on the 20 39 years cohort but there is also a large proportion of surveyors in older age brackets. In the 2011 Census, almost 10 per cent of surveyors were in the 55 59 age bracket and would be expected to retire soon. Another 10 per cent were in the 50 54 age bracket and will soon follow. In numerical terms, of the approximately 12 000 surveyors identified in the 2011 Census, around 2 400 (or 20 per cent) are aged between 50 and 59. 457 Visa applications Over the past five years, access to skilled workers from overseas through the 457 visa program has been an important source of labour for a number sectors of the economy where skill shortages have been prevalent. Chart 7.6 shows the number of 457 visa approvals across a number of dimensions relevant to the construction sector. The chart shows that in 2011 12, when applications surpassed the previous four years:

Future forecasts: Construction and Property Services Skills 2016 26 65 7.5 Age distribution of surveyors 20 15 Surveyors (Census 2006) Surveyors (Census 2011) Construction industry Labour force Per cent 10 5 0 15-19 25-29 35-39 45-49 55-59 65-69 75-79 Note: Data for surveyors is taken from Census data for occupation 2322. This occupation was defined as Cartographers and surveyors in 2006, but defined as Surveyors and spatial scientists in 2011. Data source: 2011 Census via ABS Tablebuilder. Age group 7.6 457 visa applications granted by category for construction 18 Construction industry Residential construction Technicians and trade workers persons (thousands) 12 6 0 2007-08 2008-09 2009-10 2010-11 2011-12 Data source: Department of Immigration and Citizenship, Subclass 457 State/Territory Summary Report and HIA. 9 000 applications for the construction industry were granted. Many of these workers were highly skilled, such as specialist construction managers, and received packages over $100 000; technicians and trade workers, as a broad occupational group that include construction trade workers, had in excess of 16 000 visa applications granted. However, this broad category would be shared by other industries outside of construction (particularly mining), and would explain the high number of successful applications in 2011 12. A more useful indicator of the contribution of 457 visas for the construction industry is for skills that are directly relevant to the residential construction sector. This group

66 Future forecasts: Construction and Property Services Skills 2016 26 represented only 43 per cent of successful applications of the total construction industry. It more accurately reflects the contribution of the program to the skills balance for the construction sector in Australia. Based on this time series, there are currently between 7 000 and 8 000 residential sector trades workers working through the 457 visas in Australia. One of the drivers for this outcome is that small businesses involved in residential construction are generally not in the position to satisfy the eligibility criteria, or afford the associated compliance costs required to access 457 visa workers. The total number of applications granted for property services is small compared to construction and other sectors such as mining (see chart 7.7). It is important to note that at this broad level of classification these data may include occupations that are not included in the terms of reference for this study. Therefore, they will overestimate the contribution of 457 visa applications for the property services sector. According to the data, the number of applications granted for 457 visas for rental, hiring and professional services has fallen significantly since 2009 10. 7.7 457 visa applications granted by category for property services a persons (thousands) 8 6 4 2 Rental, Hiring and Real Estate Services Administrative and Support Services Professional, Scientific and Technical 0 2007-08 2008-09 2009-10 2010-11 2011-12 a Estimates include sponsorship by industries components that are not under the terms of reference. Data source: Department of Immigration and Citizenship, Subclass 457 State/Territory Summary Report. The 457 visa program is designed to respond to specific shortages and varies year-to-year with market conditions, as seen in the charts above. An example, the occupation of surveying illustrates the importance of 457 visas to labour shortages. Surveyors accessed through the 457 visa program by the mining and construction industries have had an important impact on the skill balance equation because of the ageing of resident licensed surveyors and the low number of qualified surveyors coming through tertiary institutions. The low number of tertiary qualified surveyors reflects the low demand from domestic students. In addition, the industry has sought unlicensed surveying technicians through 457 visas to work primarily in mining operations and in construction. In addition, some of the 457 visa applicants represent a permanent increase in the labour force as they go on to obtain Australian residency.

Future forecasts: Construction and Property Services Skills 2016 26 67 Government will most likely have to maintain the 457 temporary visa program as a stopgap measure for priority industries until skill shortages are addressed more directly. Vocational education and training Ultimately, a greater focus on workforce development will be required to reduce the reliance on the 457 program stream and to meet the demands for skills of the projected uptick. Given the changing structure of the labour force, sustaining or growing the number of workers for the CPS sectors, and in particular construction, will become more challenging over the next 10 years. The pathways to generating qualified workers with specific skills suitable for the CPS sectors from the labour force are many and very complex. Due to the diversity of skills throughout CPS sectors, there are a range of pathways involved from on-the-job training with qualification through to vocational education and attainment of university qualifications. For construction, the single most important pathway is through apprenticeships for construction trades workers. As an example, chart 7.8 shows that official numbers of construction trades apprentices in-training have fallen to just under 50 000 while completions of qualified trades workers have remained steady at around 10 000 persons each year. The numbers of apprentices in-training, and the number of commencements, will depend on decisions by business owners to continue to employ apprentices and trainees. These employment decisions: are often based on a financial appraisal of the costs of an apprentice including their lower productivity and high supervision costs, against perceived benefits; and 7.8 Construction trades apprentices a persons (thousands) 80 Commencements Completions In-training 60 40 20 0 2007-08 2008-09 2009-10 2010-11 2011-12 a Financial year basis, numbers in training as of 30 June. Data source: NCVER and CIE calculations.

68 Future forecasts: Construction and Property Services Skills 2016 26 vary widely throughout the financial cycle. Employers are highly sensitive to economic conditions affecting the financial feasibility of employing apprentices. With excess capacity and lower margins prevalent, particularly in residential construction, the incentive to employ or keep on apprentices is lower than at other times. For example, following the GFC, the value of work commenced (in constant chain volume measure) in Australia wide fell by 19 per cent in 2008 09, compared to the previous year, while apprentice commencements fell by 9.7 per cent over the same period. Decisions by young people to participate in apprenticeships and traineeships in the building and construction industry are also critical to the overall equation. Importantly, previous research indicates most apprentices complete their apprenticeship because the wage that they can earn when they are fully qualified is higher than what they could otherwise attain without an apprenticeship. Chapter 3 identified that relative wages, due to the significant economic activity in the mining sector, were a significant driver of employment away from non-mining industries. There are also a range of other non-wage factors that affect the attractiveness of occupations such as the degree to which it is physically demanding (and the expected working life), the location (remote, regional or metropolitan areas), and the length of training involved. Data remains a key constraint to better understanding the linkage between vocational training and addressing skill shortages. The key parameters to the success of any skills training or education program are not only commencement rates but also completion rates. For construction trades workers, NCVER reports cumulative attrition rates that are as high as 49.6 per cent over a four-year period that in turn determines the completion rate of apprenticeships. However, there are a number of uncertainties with this data and significant time lags involved between apprentices leaving training, or moving to another employer, and when this is reported by the respective training institution. For some of the other skills and professions in the property service sector, this data is simply not available. One exception is a recently produced report by BIS Shrapnel (2013) on skill shortages in the surveying and geospatial professions. A significant part of this report is devoted to estimating how many were in the workforce for this profession and how many were coming through respective vocational pathways. Options to address skill shortages Workforce development by industry, and in conjunction with government, will continue to be important Compared to the other initiatives identified in this report, the specific actions required to address skill shortages are complex. The first step is to acknowledge that there are already a wide range of Vocational Education and Training (VET) programs in place that are funded by governments, at federal and state levels, and by industry. Therefore a key

Future forecasts: Construction and Property Services Skills 2016 26 69 question is what more could be done that would build effectively on existing programs while recognising market realities. A key market reality is prevailing wages offered in each of the sectors of the economy especially the level of relativities between mining and construction. Through our consultation with industries and in the preparation of this report, some courses of action have emerged, but the optimal mix is largely specific to individual occupational groups. These strategies could include: improve the attractiveness, effectiveness and relevance of vocational training by reducing study length period and possible revision of course structure to make them more relevant to the contemporary needs of employers; This could encompass both construction trades workers and professionals employed under the property services umbrella. A faster and more direct pathway into the skills and professions should increase the attractiveness of these occupations to young people and contribute to the availability of skills. ongoing assessment of licensing and other requirements for certain skill categories; This action is related to that above for training in that it reduces the costs and time required in transition through the workforce. With the changing focus of the industry away from final consumers, the imperative to protect consumers through licensing has been diminished. Also, technology is likely to change these same requirements. This points to the opportunity to reassess the extent of licensing required or make it more outcome focused. One example, would be the declining relevance of the licensing of surveyors and related professions where technological improvements are likely to have significant impacts on the nature of the profession. extend effective working lives, particularly in physically demanding occupations, through the use of improved work practices (labour saving technology) or through retraining with new skills to keep them in the industry; and identify and understand factors that lead to low completion rates during apprenticeships and traineeships especially in the construction and related trades. This is already complicated by a complex regulatory environment and the existence of a large number of diverse players who contribute to VET system especially that targeted at apprentices and trainees.

Future forecasts: Construction and Property Services Skills 2016 26 71 Appendices

72 Future forecasts: Construction and Property Services Skills 2016 26 A Review of other employment projections This appendix summarises the employment projections by the Department of Education, Employment, and Workplace Relations (DEEWR) and as reported in Australian Workforce and Productivity Agency (AWPA). DEEWR employment projections DEEWR produced employment projections by industry, occupation and region for the five-year period 2011 12 to 2016 17. The projections are based on the Monash economywide model developed by the Centre of Policy Studies at Monash University and Access Economics projections of state and national macroeconomic indicators. These projections: factor in recent employment trends and known industry developments at the time of compilation; and are dependent on Treasury forecasts of employment growth, as published in the Mid- Year Economic and Fiscal Outlook (MYEFO). The DEEWR projections present a consensus approach to forecasting especially at the macroeconomic level. A strength of this approach is that it ensures consistency of the projections across all industries in the economy in line with national and regional aggregates. However, this may be at the expense of the incorporation of detailed trends and developments at an industry and regional level that are more difficult to incorporate into such a general equilibrium framework. National results At an economywide level, the report projects employment growth of 830 000 jobs over the five years to 2016 17 or at an average annual rate of 1.4 per cent each year over all industries and occupations. The starting point for these projections was the period from February 2007 to February 2012, during which employment was increased at a rate of 1.7 per cent each year. Table A.1 reproduces this historical estimate from most recent ABS labour force data showing that the number of persons employed by 1.73 per cent each year over that period. Underlying this growth were a number of key factors including strong growth in the civilian population at 1.9 per cent each year, as a result of migration, leading to an increase in the labour force of almost 2 per cent each year over the period.

Future forecasts: Construction and Property Services Skills 2016 26 73 A.1 Average annual growth rates of key labour force variables a Males Females Persons Civilian population % 1.96 1.88 1.92 Participation rate % -0.13 0.25 0.05 Labour Force % 1.83 2.14 1.97 Unemployed persons % 8.08 5.69 6.92 Employment persons % 1.55 1.96 1.73 Full time % 1.16 1.37 1.23 Part time % 3.70 2.68 2.98 a February 2007 to 2012. b Excluding persons in the defence forces and diplomatic corps and well as persons under 15 years of age. Source: ABS, Labour Force, Australia, Catalogue 6202.0. There was also a substantial increase in the number of unemployed with the average participation rate across males and females largely unchanged. The increase in the number of employed came from both full and part time work, where the contribution of part time work was particularly significant, increasing by nearly 3 per cent each year over the period. Data presented in appendix C, shows that population and workforce growth is most likely to slow marginally out to 2015 16, at a rate of 1.5 per cent each year. With the capacity to access unemployed, the headline estimate of 1.4 per cent by DEEWR is plausible on the basis of the aggregate historical data and forecasts. Construction and property services In terms of specific results for CPS sectors, Construction is expected to experience an increase of 131 200 or 2.4 per cent each year (table A.2). The highest growth comes from Heavy and Civil Engineering Construction (3.1 per cent) and from Construction Services (2.5 per cent). This is equivalent to a 12.6 per cent increase over the period. Employment in industries that covered property services were found to increase at a similar rate of 2.1 per cent each year or 11 per cent over the period. A significant proportion of this growth comes from the occupation Architectural, Engineering and Technical Services, which includes skills that fall outside of the terms of reference for this study, which grows at an annual average rate of 3.6 per cent. Table A.2 implies that 1.6 million people were employed in CPS sectors as of November 2011, with just over 1 million employed in Construction.

74 Future forecasts: Construction and Property Services Skills 2016 26 A.2 DEEWR Projections of employment by industry a ANZSIC Industry Employment level November 2011 Average annual employment growth a 000s % 30 Building construction 244 1.8 301 Residential building construction 87 2.1 302 Non-residential building construction 41 1.3 31 Heavy and Civil Engineering Construction 69 3.1 32 Construction services 693 2.5 321 Land Development and Site Preparation Services 64 2.4 322 Building structure services 97 1.3 323 Building installation services 236 3.0 324 Building completion services 192 2.9 329 Other construction services 98 1.8 Construction 1 045 2.4 671 Property operators 40 1.1 672 Real estate services 100 1.0 692 Architectural, Engineering and Technical Services b 240 3.6 731 Building Cleaning, Pest Control and Gardening Services 186 0.9 Property services b 566 2.1 Total construction and property services 1 611 2.3 a Over the five years to 2016 17. b Includes some occupations not in the terms of reference. Source: DEEWR (2012). Projections by state Table A.3 lists the regional outcomes at a broad industry level in terms of changes in persons employed out to 2016 17. Projections by CPS skill The terms of reference identifies 36 skill categories of interest at the 6-digit ANZSCO occupational level. These occupations are, in practice, a subset of all the occupations used by CPS sectors. The DEEWR report identified categories for the period out to 2016 17 as shown in table A.4, which shows that the average annual growth for specific construction skills should increase by 2.2 per cent each year or 11.5 per cent over the period. This is consistent with the employment estimate for the construction industry above. This is driven by an increase across a range of skills from technical professionals through to construction trades workers such as bricklayers and plumbers.

Future forecasts: Construction and Property Services Skills 2016 26 75 A.3 DEEWR Projections of employment by state a Regions NSW VIC QLD SA WA TAS NT ACT All states 000s 000s 000s 000s 000s 000s 000s 000s 000s Agriculture, forestry and fishing 0.9 3.6 0.3-1.3 2.2 0.1-0.2 0.0 5.5 Mining 17.8 5.7 28.9 5.6 42.4 1.1 2.2 0.1 103.7 Manufacturing -33.2-33.3-7.0-7.7-3.3-1.1 0.3-0.4-85.6 Electricity, gas, water and waste services 2.8 4.3 4.4 1.7 4.0 0.6 0.1-0.1 17.9 Construction 27.8 31.5 36.9 7.1 22.6 2.1 1.7 1.3 131.2 Wholesale trade 5.8 4.6 3.1 1.3 1.8 0.2 0.1 0.1 17.0 Retail trade 8.1 14.2 15.9 5.1 5.0 1.0 0.6 0.4 50.4 Accommodation and food services 10.4 7.0 6.6 2.3 3.1 0.5 0.4 0.5 30.9 Transport, postal and warehousing 6.7 8.7 16.5 2.2 7.4 0.7-0.1-0.1 42.0 Information, and telecommunications -0.9 3.7 1.8 0.2-0.5-0.1 0.4-0.1 4.6 Financial and insurance services 5.4 4.7 4.1 0.6 3.0-0.1 0.3 0.6 18.5 Rental, hiring and real estate service a 2.1 1.5 1.8 0.4 0.8 0.1 0.1 0.1 6.7 Professional, scientific and technical a 30.1 27.5 25.1 6.4 13.3 1.4 0.8 3.5 108.2 Administrative and support services a 1.6 5.0 6.9 1.3 2.9 0.4 0.7-1.1 17.7 Public administration and safety 9.1 5.9 6.5 2.3 3.4 0.5 0.8 2.7 31.2 Education and training 12.9 18.6 15.1 4.0 8.2 1.0 0.5 1.0 61.3 Health care and social assistance 71.5 61.1 52.4 19.9 28.0 4.0 2.5 2.4 241.8 Arts and recreation services 1.8 3.8-0.4 0.9 1.1 0.2 0.1 0.2 7.8 Other services 5.2 4.6 3.5 1.4 2.8 0.1 0.8-0.1 18.4 All industries 186.1 182.7 222.3 53.7 148.2 12.7 12.2 11.4 829.3 a Includes industries and occupations not in the terms of reference. Source: DEEWR (2012). Total employment in property services related occupations is projected to increase by 1.1 per cent each year or 5.5 per cent out to 2016 17. In terms of the contribution to this aggregate result, cleaners dominate the result as they represent almost 50 per cent of employment from property services. AWPA employment projections AWPA undertook economic modelling which draws out the skills implications using a scenario-based, rather than consensus, approach. The modelling examines both the demand for post-school qualifications (demand by industry) and the supply of new postschool qualifications (completions by domestic students and those provided through net migration). The modelling is conducted at both the national level and for each State/Territory with the focus of results in this report at the national level. Four scenarios were considered. The long boom scenario is largely based on the steady growth view of the Australian economy, consistent with budget projections from Federal Treasury. The stimulus coming to the Australian economy from China s economic boom is diluted over time, though that occurs at a slow rate the terms of trade declines

76 Future forecasts: Construction and Property Services Skills 2016 26 A.4 AWPA Employment by CPSISC occupation a 4 digit ANZSCO Occupation description Employment level November 2011 Average annual employment growth a 000s % 1331 Construction managers 80.5 2.4 2322 Surveyors and spatial scientists 13.7 2.0 2339 Other engineering professionals 7.1 1.0 3122 Civil engineering draftspersons and technicians 8.7 1.2 3311 Bricklayers and stonemasons 31.4 2.0 3312 Carpenters and joiners 129.4 2.1 3322 Painting trades workers 42.9 2.5 3332 Plasterers 38.9 2.0 3333 Roof tilers 11.8 2.0 3334 Wall and floor tilers 16.3 1.8 3341 Plumbers 81.1 2.9 3996 Signwriters 6.1 0.8 3999 Other miscellaneous technicians and trades workers 15.1 1.7 4422 Security officers and guards 55.2 1.2 6111 Auctioneers, and stock and station agents 3.4-1.2 6121 Real estate sales agents 74.0 1.0 6219 Other sales assistants and salespersons 11.8 1.3 7121 Crane, hoist and lift operators 13.1 1.3 7129 Other stationary plant operators 15.0 1.9 8112 Commercial cleaners 161.6 1.0 8113 Domestic cleaners 32.1 1.5 8116 Other cleaners 9.4-3.0 8212 Concreters 43.4 2.2 8215 Paving and surfacing labourers 8.8 1.2 8217 Structural steel construction workers 23.9 2.3 8419 Other farm, forestry and garden workers 13.2 1.5 8999 Other miscellaneous labourers 68.9 1.5 a Over the five years to 2016 17. Construction 587.4 2.2 Property services 429.6 1.1 Total construction and property services 1 017 1.7 Source: Deloitte Access Economics (2012). moderately over time but remains at levels over the next 15 years which are still high in historic terms.

Future forecasts: Construction and Property Services Skills 2016 26 77 Imbalances in the European economies and elsewhere do not have a major effect over Australia s growth rate. Australia s economic and employment growth continues in a steady fashion over the forecast horizon to 2025. A key feature of this scenario is a significant lift in age based labour force participation rates, beyond the historical levels which are projected by Federal Treasury to occur. This trend would be assisted by a higher rate of qualification attainment over time. This scenario also sees high levels of net overseas migration sustained over time. The smart recovery scenario is one where the current difficulties facing the Australian and global economies live on for several more years. Australia follows a low growth path to 2015, but after that date the global economy improves and Australia is able to move back towards its potential growth path. Indeed, the period of economic stagnation forms a trigger for greater take-up of technology and improvement in productivity. A key feature of this scenario is a significant lift in Australia s rate of labour productivity growth after 2015 as a key driver of growth. In the terms of trade shock scenario, the global economy continues to grow at a healthy rate over time. However, compared with the long boom, the benefits to Australia of this growth are reduced because there is a more substantial reduction in Australia s terms of trade. Australia s mining sector still enjoys a significant expansion in this scenario, but the returns on that expansion to the national economy are far less than if the terms of trade had remained high. The ring of fire scenario combines a lower global growth path over time with significant volatility. Business and consumer confidence in future economic performance is lowest in this scenario, where economic growth on average is more modest and a notable economic cycle occurs. Increased protectionism reduces trade between countries and stunts productivity growth. This scenario sees a notably lower path for the level of net overseas migration to Australia over time. Table A.5 summarises the AWPA results at a broad industry level. Total employment growth across the economy out to 2025 26 could vary between 0.7 and 2.0 per cent as an annual average increase. The optimistic long boom scenario yields a total estimate that is higher than the DEEWR projections, whereas the pessimistic ring of fire scenario yields a total estimate that is around one-third that of the optimistic scenario. Giving equal probabilities to each of the scenarios, then average annual employment growth would be 1.5 per cent out to 2025. If the ring of fire scenario is excluded as being unlikely, then the expected average employment growth rate could increase to around 1.7 per cent each year. This is in line with the recent experience of the Australian economy as reported in table A.1. In terms of CPS sectors, the AWPA projects are significantly lower than for the DEEWR results. Taking a simple average across the four scenarios, the annual average

78 Future forecasts: Construction and Property Services Skills 2016 26 employment growth in construction is projected to be 0.4 per cent out to 2025 or 0.76 per cent excluding the pessimistic scenario. This contrasts to the property services sector, which appears to be at a similar level to the DEEWR projections. This differential may be a function of the higher assumed productivity improvements for construction used in the AWPA projections (compared to DEEWR) and the higher productivity between the construction and property services sector. A.5 AWPA Projected industry employment growth by industry a 1 digit ANZSIC level Long boom Smart recovery Terms of trade Ring of fire % % % % Agriculture 0.4-0.4-0.4-1.6 Mining 3.5 2.9 2.2 0.1 Manufacturing -1.5-1.3-1.0 0.6 Electricity, gas and water 0.4-0.3 0.2-0.9 Construction 1.6 0.9-0.2-0.6 Wholesale trade 1.8 1.0 1.0 0.0 Retail trade 1.4 1.0 0.9 0.4 Accommodation and food services 1.5 1.2 1.6 0.5 Transport, postal and warehouse 2.1 1.8 1.5 0.8 Information, media and telecommunications 1.9 1.4 1.6 1.1 Financial and insurance services 2.7 2.5 2.2 1.4 Rental, hiring and real estate services 2.2 1.5 1.0 0.7 Professional, scientific and technical services 3.8 2.5 3.0 1.7 Administrative and support services 2.1 1.2 1.5 0.5 Public administration and safety 1.4 1.3 1.5 0.6 Education and training 3.2 3.1 3.3 2.1 Health, care and social assistance 3.5 2.9 3.4 1.7 Arts and recreational services 2.2 2.1 2.3 1.4 Other services 1.1 0.9 1.0-0.2 All industries 2.0 1.5 1.6 0.7 a Annual average growth over the period 2011 2025. Source: Deloitte Access Economics (2012). Projections by CPS skill Table A.6 lists projected employment growth by relevant ANZSIC classifications to the construction and property services industries. Projections by state Table A.7 summarises the implied average annual increases in total employment for each state and territory for the period 2011 to 2025.

Future forecasts: Construction and Property Services Skills 2016 26 79 A.6 AWPA Projected industry employment growth by scenario a ANZSIC Long boom Smart recovery Terms of trade Ring of fire 000s 000s 000s 000s Residential building construction 3.6-12.6-35.5-43.5 Non-residential building 4.9-2.4-12.8-16.4 Heavy and civil engineering 12.1 4.2-7.1-11.0 Land development and site 41.3 32.4 19.9 15.5 Building structure and services 37.0 24.9 7.6 1.6 Building installation services 112.6 78.8 30.8 14.1 Building completion services 1.5-18.2-46.3-56.1 Other construction services 45.1 31.1 11.2 4.4 Construction 258.2 138.1-32.1-91.3- Property operators 35.0 28.2 23.9 20.7 Real estate services 48.2 32.9 23.3 16.6 Architectural, Engineering and Technical Services 120.3 63.0 82.9 33.0 Building Cleaning, Pest Control and Gardening services 53.4 26.8 34.1 5.3 Property services 256.9 150.9 164.2 75.6 a Over the period 2011 2025. Source: Deloitte Access Economics (2012). A.7 AWPA Projected state employment growth by scenario a State Long boom Smart recovery Terms of trade Ring of fire % % % % New South Wales 3.30 2.36 2.70 1.00 Victoria 1.90 1.40 1.50 0.70 Queensland 2.50 2.10 2.10 1.30 South Australia 1.50 1.10 1.20 0.30 Western Australia 2.30 1.80 1.70 0.80 Tasmania 0.80 0.50 0.60-0.20 Northern Territory 2.60 2.20 2.30 1.60 Australian Capital Territory 1.50 1.20 1.30 0.60 Australia 2.00 1.50 1.60 0.70 a Annual average rate over the period 2011 2025. Source: Deloitte Access Economics (2012). Projections by CPS skill Table A.8 summarises the average annual increases in total employment for 4-digit ANZSCO occupations as identified by the terms of reference for the period 2011 to 2025.

80 Future forecasts: Construction and Property Services Skills 2016 26 A.8 AWPA Projected industry employment growth by scenario a 4 digit ANZSCO level Long boom Smart recovery Terms of trade Ring of fire % % % % Construction managers 1.7 1.8 1.7 1.9 Surveyors and Spatial Scientists 1.0 1.3 1.2 1.4 Other engineering professionals 1.0 1.2 1.2 1.4 Civil Engineering Draftspersons and Technicians 1.7 1.9 1.9 2.1 Bricklayers and Stonemasons 1.2 1.3 1.4 1.4 Carpenters and Joiners 1.2 1.3 1.4 1.4 Painting trades workers 1.5 1.7 1.8 2.0 Plasterers 1.2 1.3 1.4 1.5 Roof tilers 1.2 1.3 1.4 1.5 Wall and Floor Tilers 1.2 1.3 1.4 1.5 Plumbers 1.2 1.3 1.3 1.3 Signwriters 1.4 1.4 1.5 1.7 Other Miscellaneous Technicians and Trades Workers 1.4 1.5 1.5 1.7 Security Officers and Guards 1.2 1.4 1.3 1.6 Auctioneers, and Stock and Station Agents 1.8 1.9 1.9 2.0 Real estate sales agents 1.5 1.6 1.6 1.8 Other Sales Assistants and Salespersons 1.2 1.3 1.2 1.3 Crane, Hoist and Lift Operators 1.7 1.9 1.8 2.0 Other stationary plant operators 1.7 1.9 1.8 2.0 Commercial cleaners 1.9 2.2 2.1 2.4 Domestic cleaners 1.9 2.2 2.1 2.4 Other cleaners 1.9 2.2 2.1 2.4 Concreters 1.2 1.3 1.4 1.5 Paving and Surfacing Labourers 1.2 1.3 1.4 1.5 Structural steel construction workers 1.2 1.3 1.4 1.5 Other Farm, Forestry and Garden Workers 1.3 1.5 1.5 1.7 Other miscellaneous labourers 1.3 1.5 1.5 1.7 Construction 1.3 1.4 1.5 1.6 Property services 1.6 1.8 1.8 2.0 a Annual average rate over the period 2011-2025. Source: Deloitte Access Economics (2012). Table A.9 summarises the changes in total employment, in terms of number of persons employed, for 4-digit ANZSCO occupations as identified by the terms of reference for the period 2011 to 2025.

Future forecasts: Construction and Property Services Skills 2016 26 81 A.9 AWPA Projected industry employment growth by scenario a 4 digit ANZSCO level Long boom Smart recovery Terms of trade Ring of fire 000s 000s 000s 000s Construction managers 32.1 23.0 14.4 8.8 Surveyors and spatial scientists 4.2 1.7 2.2-1.0 Other engineering professionals 3.1 2.3 2.5 1.6 Civil engineering draftspersons and technicians 2.6 0.8 1.0-0.7 Bricklayers and stonemasons 4.8 1.8-2.4-3.5 Carpenters and joiners 2.5-6.1-16.1-19.8 Painting trades workers 2.4-2.0-7.7-10.2 Plasterers -2.7-6.0-10.1-12.0 Roof tilers 0.4-0.4-1.4-1.8 Wall and floor tilers 0.2-1.5-3.8-4.8 Plumbers 31.1 22.0 10.6 4.9 Signwriters 2.1 1.5 1.8 2.0 Other miscellaneous technicians and trades workers 7.1 5.9 6.1 4.4 Security officers and guards 16.4 14.5 15.8 7.9 Auctioneers, and stock and station agents -0.4-0.7-0.8-1.1 Real estate sales agents 34.7 25.6 20.7 15.0 Other sales assistants and salespersons 10.9 9.6 9.4 8.0 Crane, hoist and lift operators 6.8 5.8 4.9 4.0 Other stationary plant operators 3.8 2.5 1.8 0.2 Commercial cleaners 44.1 28.2 32.8 9.4 Domestic cleaners 5.1 1.7 2.6-2.0 Other cleaners -0.1-1.6-1.3-3.8 Concreters 13.7 9.9 5.6 3.2 Paving and surfacing labourers 1.7 1.0 0.4-0.4 Structural steel construction workers 8.4 6 3.8 2.1 Other farm, forestry and garden workers 2.0 0.8 0.9-0.5 Other miscellaneous labourers 27.6 23.7 23.2 17.7 Construction 124.3 68.2 13.6-23.0 Property services 140.3 101.8 103.3 50.6 a Over the period 2011 2025. Source: Deloitte Access Economics (2012).

82 Future forecasts: Construction and Property Services Skills 2016 26 B Details on the construction and property services sectors This appendix summarises supporting data used in chapter 2 and the following analysis conducted in this report. Structure of businesses operating in CPS sectors Tables B.1 and B.2 list the number of businesses, by 4-digit ANZSIC for the core components of the construction and property sectors, by turnover and by employment size for 2010 11. The CPS sectors are dominated by small businesses, many of which do not have employees. Of businesses with employees, over 90 per cent of businesses have less than 20 employees. Value of sales and value added In addition to other publications, ABS Catalogue 8155.0 Australian Industry, reports detailed industry economic data in nominal terms at a 2-digit ANZSIC level. While this dataset has a different methodology to other data sources, such as National Accounts, Labour Force Australia and the Census, it complements them providing valuable information. Table B.3 and B.4 set out the estimated value of sales and industry valued added of the CPS sectors between 2007 08 and 2010 11.

Future forecasts: Construction and Property Services Skills 2016 26 83 B.1 Number of CPS businesses by turnover size 2010 11 4 digit ANZSIC All businesses With less than $200 000 turnover no no % 3011 House construction 42 676 23 174 54.3 3019 Other residential building construction 12 224 7 550 61.8 3020 Non-residential building construction 13 313 7 276 54.7 3101 Road and bridge construction 2 296 964 42.0 3109 Other heavy and civil engineering construction 9 053 4 955 54.7 3211 Land development and subdivision 10 947 6 732 61.5 3212 Site preparation services 17 662 10 164 57.5 3221 Concreting services 12 611 6 568 52.1 3222 Bricklaying services 11 727 8 905 75.9 3223 Roofing services 5 508 3 142 57.0 3224 Structural steel erection services 4 714 3 195 67.8 3231 Plumbing services 25 547 14 877 58.2 3232 Electrical services 34 801 21 265 61.1 3233 Air conditioning and heating services 6 305 2 990 47.4 3234 Fire and security alarm installation services 3 068 1 666 54.3 3239 Other building installation services 5 392 3 389 62.9 3241 Plastering and ceiling services 16 410 11 956 72.9 3242 Carpentry services 45 158 34 045 75.4 3243 Tiling and carpeting services 14 526 11 857 81.6 3244 Painting and decorating services 19 509 14 339 73.5 3245 Glazing services 3 063 1 711 55.9 3291 Landscape construction services 15 084 9 749 64.6 3292 Hire of construction machinery with operator 2 219 1 205 54.3 3299 Other construction services nec 18 182 13 073 71.9 6711 Residential property operators 58 695 43 388 73.9 6712 Non-residential property operators 106 607 80 289 75.3 6720 Real estate services 36 563 21 561 59.0 6921 Architectural services 14 006 9 804 70.0 6922 Surveying and mapping services 3 655 1 903 52.1 7311 Building and other industrial cleaning services 27 352 22 295 81.5 7312 Building pest control services 2 857 2 042 71.5 7313 Gardening services 12 045 10 006 83.1 Total 613 775 416 035 67.8 Source: ABS Catalogue no 8165.0.

84 Future forecasts: Construction and Property Services Skills 2016 26 B.2 Number of CPS businesses by employment size 2010 11 4 digit ANZSIC Non employing Less than 20 persons All businesses no no no 3011 House construction 25 262 16 796 42 676 3019 Other residential building construction 9 193 2 875 12 224 3020 Non-residential building construction 8 287 4 442 13 313 3101 Road and bridge construction 996 1 012 2 296 3109 Other heavy and civil engineering construction 4 848 3 725 9 053 3211 Land development and subdivision 9 547 1 294 10 947 3212 Site preparation services 10 102 6 868 17 662 3221 Concreting services 7 085 5 173 12 611 3222 Bricklaying services 8 080 3 540 11 727 3223 Roofing services 2 784 2 603 5 508 3224 Structural steel erection services 2 524 1 939 4 714 3231 Plumbing services 13 461 11 574 25 547 3232 Electrical services 17 025 16 823 34 801 3233 Air conditioning and heating services 2 822 3 142 6 305 3234 Fire and security alarm installation services 1 456 1 465 3 068 3239 Other building installation services 2 989 2 199 5 392 3241 Plastering and ceiling services 11 754 4 521 16 410 3242 Carpentry services 31 451 13 257 45 158 3243 Tiling and carpeting services 10 230 4 231 14 526 3244 Painting and decorating services 13 487 5 829 19 509 3245 Glazing services 1 589 1 358 3 063 3291 Landscape construction services 9 051 5 692 15 084 3292 Hire of construction machinery with operator 1 256 842 2 219 3299 Other construction services nec 12 338 5 421 18 182 6711 Residential property operators 54 624 3 838 58 695 6712 Non-residential property operators 99 738 6 459 106 607 6720 Real estate services 22 589 12 477 36 563 6921 Architectural services 7 319 6 356 14 006 6924 Other specialised design services 9 776 4 647 14 619 7311 Building and other industrial cleaning services 17 792 8 553 27 352 7312 Building pest control services 1 540 1 244 2 857 7313 Gardening services 8 426 3 461 12 045 Total 431 175 170 908 613 775 Source: ABS Catalogue no 8165.0.

Future forecasts: Construction and Property Services Skills 2016 26 85 In 2010-11, total sales and service income (equivalent to gross value of production) for CPS sectors was worth $394.4 billion in nominal terms. This includes a contribution from industries that would be considered to be outside of the core CPS sectors. Listed in table B.3, these additional industries are identified as those that are important in terms of employment of CPS occupations. The overall approach that was followed involved establishing the proportion of total employment in these additional industries accounted for by CPS occupations from the 2011 Census data. This proportion was then used to attribute part of that industry s sales, value-added and labour cost back to CPS sectors. Using this approach, for example, for 2010 11, it is estimated that these additional industries contributed 1.7 per cent to the overall sales and service income of CPS sectors. B.3 Sales and service income by CPS sector a 3/4 digit ANZSIC 2007-08 2008-09 2009-10 2010-11 $m $m $m $m 270 Gas supply b 84 90 97 110 280 Water supply, sewerage and drainage services b 1 127 1 078 1 213 1 490 29 Waste collection, treatment and disposal services b 321 323 325 345 301 Residential construction 54 544 57 660 61 262 65 000 302 Non-residential construction 43 875 44 798 47 596 43 709 310 Heavy and civil engineering construction 42 325 43 921 47 078 54 029 320 Construction services 113 076 113 775 120 336 134 728 6711 Residential property operators 160 166 168 180 6712 Non-residential property operators 47 678 49 472 50 083 53 578 6720 Real Estate Services 14 249 14 785 14 968 16 013 6921 Architectural Services 6 619 7 107 7 145 7 593 6922 Surveying and Mapping Services 1 379 1 481 1 489 1 582 7311 Building and Other Industrial Cleaning Services 5 793 6 303 6 904 7 141 7312 Building Pest Control Services 1 509 1 642 1 798 1 860 7313 Gardening Services 1 771 1 927 2 111 2 183 770 Public order, safety and regulatory services (private) b 748 759 791 895 940 Repair and maintenance b 343 371 359 391 Construction 253 820 260 154 276 272 297 466 Property services 79 158 82 882 84 667 90 131 All CPS sectors 338 188 348 669 366 830 394 395 a In nominal terms. b Industry has partial coverage by occupations identified by the terms of reference of this study. Source: ABS Catalogue no 8155.0 and CIE calculations.

86 Future forecasts: Construction and Property Services Skills 2016 26 B.4 Value added by CPS sector a 3/4 digit ANZSIC 2007-08 2008-09 2009-10 2010-11 $m $m $m $m 270 Gas supply b 84 90 97 110 280 Water supply, sewerage and drainage services b 1 127 1 078 1 213 1 490 29 Waste collection, treatment and disposal services b 321 323 325 345 301 Residential construction 8 775 10 134 10 774 12 858 302 Non-residential construction 7 058 7873 8 371 8 631 310 Heavy and civil engineering construction 12 694 14 627 16 085 13 616 320 Construction services 46 727 46 265 48 730 53 411 6711 Residential property operators 90 95 101 106 6712 Non-residential property operators 26 897 28 404 30 038 31 618 6720 Real Estate Services 8 039 8 489 8 977 9 450 6921 Architectural Services 3 644 3 728 3 784 4 139 6922 Surveying and Mapping Services 759 777 789 863 7311 Building and Other Industrial Cleaning Services 3 181 3 275 4 064 4 246 7312 Building Pest Control Services 829 853 1 059 1 106 7313 Gardening Services 972 1 001 1 242 1 298 770 Public order, safety and regulatory services (private) b 748 759 791 895 940 Repair and maintenance b 343 371 359 391 Construction 75 254 78 899 83 960 88 516 Property services 44 412 46 622 50 053 52 826 All CPS sectors 122 289 128 141 136 798 144 573 a In nominal terms. b Industry has partial coverage by occupations identified by the terms of reference of this study. Source: ABS Catalogue no 8155.0 and CIE calculations. Total labour costs and employment Table B.5 and B.6 shows the estimates of wages and salaries and corresponding estimates of employment, across 3 and 4-digit ANZSICs relevant to the construction and property service sectors.

Future forecasts: Construction and Property Services Skills 2016 26 87 B.5 Wages and salaries by CPS sector a 3/4 digit ANZSIC 2007-08 2008-09 2009-10 2010-11 $m $m $m $m 270 Gas supply b 16 19 19 22 280 Water supply, sewerage and drainage services b 337 381 368 430 29 Waste collection, treatment and disposal services b 162 172 184 201 301 Residential construction 5 355 5 783 5 869 6 271 302 Non-residential construction 4 308 4 493 4 559 4 710 310 Heavy and civil engineering construction 9 618 10 188 11 443 11 925 320 Construction services 25 710 26 631 27 717 32 074 6711 Residential property operators 23 24 23 24 6712 Non-residential property operators 6 895 7 025 6 846 7 016 6720 Real Estate Services 2 061 2 100 2 046 2 097 6921 Architectural Services 2 649 2 675 2 698 2 863 6922 Surveying and Mapping Services 552 557 562 597 7311 Building and Other Industrial Cleaning Services 2 119 2 103 2 288 2 386 7312 Building Pest Control Services 552 548 596 622 7313 Gardening Services 648 643 699 729 770 Public order, safety and regulatory services (private) b 616 609 614 694 940 Repair and maintenance b 207 213 218 247 Construction 44 991 47 095 49 588 54 980 Property services 15 499 15 674 15 760 16 333 All CPS sectors 61 828 64 163 66 752 72 907 a In nominal terms. b Industry has partial coverage by occupations identified by the terms of reference of this study. Source: BS Catalogue no 8155.0 and CIE calculations. Table B.6 demonstrates the importance of working proprietors to CPS sectors, especially for residential construction and construction services sector. In property services, working proprietors are also important for the property operators and real estate services industry.

88 Future forecasts: Construction and Property Services Skills 2016 26 B.6 Employment of the CPS sectors by industry and status 2007 08 2008 09 2009 10 2010 11 000s 000s 000s 000s 27 Gas Supply a Total employed 4.5 4.7 4.9 5.0 28 Water supply, sewerage and drainage services a Total employed 0.3 0.3 0.3 0.3 29 Waste collection, treatment and disposal services a Total employed 2.7 2.9 2.6 2.8 301 Residential construction Employees 147.3 152.8 159.4 164.8 Working proprietor 37.7 34.2 29.6 33.2 Total employed 185.0 187.0 189.0 198.0 302 Non-residential construction Employees 99.8 103.0 122.6 113.5 Working proprietor 5.2 5.0 4.4 3.5 Total employed 105.0 108.0 127.0 117.0 32 Construction services Employees 462.8 492.0 491.7 577.3 Working proprietor 230.2 197.0 190.3 184.8 Total employed 693.0 689.0 682.0 762.0 67 Property operators and real estate services Employees 155.2 174.3 170.6 193.2 Working proprietor 121.5 106.4 110.9 113.7 Total employed 276.7 280.6 281.6 306.9 Architectural and surveying/ mapping services Employees 48.3 46.1 46.2 45.7 Working proprietor 6.1 5.8 7.1 7.2 Total employed 54.4 51.8 53.3 52.9 73 Building cleaning, pest control and other support services Employees 117.6 119.8 115.0 128.1 Working proprietor 146.9 152.5 146.9 153.3 Total employed 264.5 272.3 261.9 281.4 77 Public order, safety and regulatory services (private) a Total employed 16.4 13.9 13.9 16.6 94 Repair and maintenance a Total employed 5.8 5.7 5.5 6.1 All CPS sectors 1608.4 1616.3 1622.0 1749.1 a Industry has partial coverage by occupations identified by the terms of reference of this study. Source: ABS Catalogue 8155.0 and CIE calculations.

Future forecasts: Construction and Property Services Skills 2016 26 89 C Demographic and economic assumptions This appendix brings together the range of inputs including forecasts of: population; household; labour force; and income growth. Population and workforce Population and more specially ageing of the population and the impact on workforce growth and composition have been the subject of a number of reports over recent years including: the Productivity Commissions Economic Implications of an Ageing Australia in 2005; the so-called Intergenerational Report by the Australian Treasury in 2010; the State of Supply Report by the National Housing Supply Council in 2011; reports addressing workforce and skills requirements by specific sectors, or the economy as a whole, over the past three years. Many of these reports used the Series B demographic projections by the ABS, released in 2008, as a starting point as this reflected the most likely scenario. That series used the following key assumptions: a total fertility rate of 1.8 babies per woman; net overseas migration of 180 000 persons; and average life expectancy of males and females of 85 and 88. The reports identified above either updated the series using latest base population numbers from most recent ABS statistics or modified some key assumptions. For example, the NHSC (2011) looked at the sensitivity of the base projections to changes in net migration whereas Australian Treasury (2010) increased fertility rates. The net overseas migration estimate has been revised upwards recently by the Department of Immigration and Citizenship. For 2012-13 net migration was estimated to be 232 000 persons, which is around 40 000 more than the current policy of 180 000. Out to 2016, the Department forecasts net overseas migration is forecast to be 261.9 thousand. For this exercise, we have compiled demographic projections by state and territory. To do this, we have updated the composition of the base Australian population by state to 2011 12 to a total of 22.68 million. To project forward, we have then used the Series A

90 Future forecasts: Construction and Property Services Skills 2016 26 demographic projections by the ABS, as this reflected recent observed changes in net migration. That series used the following key assumptions: a total fertility rate of 2.0 babies per woman; net overseas migration of 220 000 persons; and average life expectancy of males and females of 93.9 and 96.1. Table C.1 shows the familiar result of an ageing Australian population by 2025 26 reaching a total of 27.45 million. This is 4.3 per cent higher than the mid-point estimate between 2020 and 2030 provided by the Australian Treasury (2010). By 2025 26, persons from the over 60 years cohort will account for 23.7 per cent of the population (compared to 19.6 per cent in 2011-12). C.1 Population projections Total 15-24 years 24-59 years Over 60 years 15-24 years 24-59 years Over 60 years million million million million % % % 2011 12 22.68 3.08 10.88 4.45 13.6 48.0 19.6 2012 13 23.05 3.11 11.03 4.59 13.5 47.8 19.9 2013 14 23.44 3.13 11.18 4.73 13.4 47.7 20.2 2014 15 23.84 3.15 11.34 4.88 13.2 47.6 20.5 2015 16 24.25 3.17 11.49 5.04 13.1 47.4 20.8 2016 17 24.66 3.19 11.65 5.20 12.9 47.2 21.1 2017 18 25.09 3.21 11.80 5.36 12.8 47.0 21.4 2018 19 25.52 3.23 11.95 5.53 12.6 46.8 21.7 2019 20 25.95 3.24 12.10 5.70 12.5 46.6 22.0 2020 21 26.39 3.27 12.25 5.88 12.4 46.4 22.3 2021 22 26.83 3.30 12.39 6.05 12.3 46.2 22.6 2022 23 27.28 3.34 12.52 6.26 12.2 45.9 22.9 2023 24 27.73 3.37 12.66 6.44 12.2 45.7 23.2 2024 25 28.18 3.41 12.82 6.61 12.1 45.5 23.5 2025 26 28.63 3.45 12.97 6.78 12.1 45.3 23.7 Source: CIE projections based on ABS Population projections: Australia Series B, Catalogue 3222.0 and ABS Australian Demographic Statistics, Catalogue 3101.0. Table C.2 summarises growth rates over the two timeframes considered in this report. The total Australian population will increase by 6 per cent, or 1.5 per cent per annum by 2015-16, which the over 60 years cohort growing at more than twice that rate. The total Australian population growth will increase by 21 per cent by 2025 26, or 1.4 per cent per annum with the over 60 year cohort growing at twice that rate.

Future forecasts: Construction and Property Services Skills 2016 26 91 C.2 Summary of population growth rates 2011 12 to 2015 16 All cohorts 15 24 24 59 Over 60 years % % % % - cumulative growth 6.9 2.9 5.6 13.3 - annual average growth 1.7 0.7 1.4 3.2 2011 12 to 2025 26 - cumulative growth 26.2 12.0 19.2 52.4 - annual average growth 1.7 0.8 1.3 3.1 Source: CIE projections based on ABS Population projections: Australia Series B, Catalogue 3222.0 and ABS Australian Demographic Statistics, Catalogue 3101.0. See table C.3 below on the composition of the Australian labour force as at June 2011 12. This information was used as the basis for the CIE labour force projections. C.3 Labour force as at June 2012 Males Females Persons Estimated resident population 000s 22 683.6 Non-civilians a 000s 4 085.6 Civilian population 000s 9 173.0 9 425.0 18 598.0 Participation rate % 71.6 58.8 65.1 Labour force 000s 6 564.1 5 542.9 12 107.0 Unemployed persons 000s 314.4 295.8 610.2 Employment persons 000s 6 249.8 5 247.0 11 496.8 Full time 000s 5 196.1 2 816.5 8 012.7 Part time 000s 1 053.6 2 430.5 3 484.1 a Including persons in the defence forces and diplomatic corps and well as persons under 15 years of age. Source: ABS, Labour Force, Australia, Catalogue 6202.0. The next step for this analysis, was to develop estimates of the labour force by applying a time profile of participation rates by age cohort. The starting point for this data was the assumptions used by the Productivity Commission (2005). These participation rates were then updated using ABS Labour Force survey data for 2011 12, refer to table C.3 (71.6 per cent for males and 58.8 per cent for females). End point participation rates for 2025 26 were aligned to those used in Australian Treasury (2010) reflecting an expected decline in participation rates for both males and females by 2025 26. Table C.4 summarises the CIE projections which show a slowing and ageing of the labour force by 2025.Note that these estimates refer to the civilian population over 15 years of age.

92 Future forecasts: Construction and Property Services Skills 2016 26 C.4 Workforce projections Total 15-24 years 24-59 years Over 60 years 15-24 years 24-59 years Over 60 years million million million million % % % 2011 12 11.96 2.25 8.87 0.84 18.8 74.2 7.0 2012 13 12.18 2.28 9.01 0.89 18.7 74.0 7.3 2013 14 12.40 2.30 9.16 0.93 18.6 73.9 7.5 2014 15 12.62 2.33 9.32 0.98 18.5 73.8 7.7 2015 16 12.85 2.35 9.48 1.02 18.3 73.8 7.9 2016 17 13.08 2.38 9.65 1.06 18.2 73.7 8.1 2017 18 13.32 2.40 9.82 1.10 18.0 73.7 8.3 2018 19 13.56 2.43 9.99 1.14 17.9 73.7 8.4 2019 20 13.79 2.45 10.16 1.18 17.8 73.6 8.6 2020 21 14.00 2.48 10.30 1.23 17.7 73.6 8.8 2021 22 14.22 2.50 10.44 1.27 17.6 73.5 8.9 2022 23 14.44 2.54 10.59 1.30 17.6 73.4 9.0 2023 24 14.65 2.57 10.74 1.34 17.5 73.3 9.1 2024 25 14.87 2.60 10.90 1.37 17.5 73.3 9.2 2025 26 15.09 2.64 11.05 1.40 17.5 73.2 9.3 Source: CIE projections based on CIE projections based on ABS Population projections: Australia Series B, Catalogue 3222.0. Table C.5 shows that while average annual growth rates of the labour force is in line with population (1.7 per cent), the majority of this growth comes from the over 60 age cohort even after consideration of participation rates. By 2025 26, the labour force could increase by 20.5 per cent compared to 2011 12 levels. However, the growth in the 15 24 age cohort, from which apprentices and trainees are drawn, are likely to grow at just over half that rate (11.8 per cent). C.5 Summary of labour growth rates All cohorts 15-24 24-59 Over 60 years % % % % 2011 12 to 2015 16 - cumulative growth 7.4 4.5 6.9 21.4 - annual average growth 1.8 1.1 1.7 4.9 2011 12 to 2025 26 - cumulative growth 26.1 17.2 24.5 66.3 - annual average growth 1.7 1.1 1.6 3.7 Source: CIE projections based on CIE projections based on ABS Population projections: Australia Series B, Catalogue 3222.0.

Future forecasts: Construction and Property Services Skills 2016 26 93 Household formation The average number of people in an Australian household has steadily declined over the past century from 4.5 people in 1911 to 2.6 in 2006. The ABS predicts that the average household size will continue to decrease to between 2.4 people and 2.5 people per household by 2031.7 However, the 2011 Census indicated that the average size of Australian households had not reduced further between 2006 and 2011. This appears to be the result of two offsetting factors, which are almost cancelling out at the national level8 (ID, 2012). The trend towards declining household size continued in Tasmania, parts of South Australia, regional areas and some outer suburbs of the main capital cities. This can be attributed to the ageing of the population and lower (and in some cases, declining) population growth. In other places, the average household size actually increased. Building industries in Queensland and NSW have struggled in the global financial crisis, such that in these states, there was less building activity, and there continued to be strong influx of overseas migrants into NSW. In such areas where supply is constrained, the household sizes tend to be larger as more people have to fit into existing dwellings. Table C.6 shows the change in household size over the past five and 15 years by state. C.6 Changes to average household size, past five, 10, 15 years Household size Change in size State 2011 2006 2001 1996 Past five years Past 15 years persons persons persons persons persons persons NSW 2.61 2.59 2.64 2.69 0.02-0.07 Victoria 2.58 2.57 2.62 2.68 0.01-0.10 Queensland 2.59 2.57 2.58 2.65 0.02-0.06 South Australia 2.41 2.41 2.44 2.50 0.00-0.09 Western Australia 2.58 2.53 2.58 2.65 0.04-0.07 Tasmania 2.39 2.43 2.45 2.56 0.03-0.17 Northern Territory 2.88 2.78 2.83 2.95 0.10-0.06 Australian Capital Territory 2.57 2.57 2.61 2.70 0.0-0.13 Other territories 2.86 2.84 3.14 3.08 0.02-0.22 Average 2.58 2.56 2.60 2.66 0.02-0.08 Source: CIE, ABS Catalogue No. 2068.0, 2011 Census of Population and Housing Population growth and the reduction in average dwelling size underpin the forecast increase in the number of households to 2031. Currently, there are 9.14 million households in Australia. The ABS (2012) forecasts the number of households will grow 7 http://www.abs.gov.au/ausstats/abs@.nsf/lookup/by%20subject/1301.0~2012~ Main%20Features~Households%20and%20families~56 8 http://blog.id.com.au/2012/australian-housing-trends/2011-census-our-expandinghouseholds/

94 Future forecasts: Construction and Property Services Skills 2016 26 to 11.6 million in 2031. The small projected decline in households partly reflects an increase in the projected one-person households to 3.2 million (28 per cent of all households) by 2031. This represents the fastest projected increase of all household types over the period 2006 to 2031. The ageing of the population, as well as the longer life expectancy of women over men and the delay of marriage, are some of the factors that underpin the projected growth in one person households (ABS, 2012). The number of Australians aged over 75 years was projected to grow from 1.3 million, representing 6 per cent of the total population, to more than double to 2.9 million or 10 per cent of Australia s population by 2031 (ABS, 2012). Those living as couples were expected to account for between 42 per cent and 52 per cent while those living alone were projected to increase to between 29 per cent and 31 per cent of older Australians (ABS, 2012). In addition, couples without children are expected to increase at a faster rate than families with children. These demographic changes and shifts in household composition are likely to impact the level and composition of housing demand. The ageing of the population is expected to result in an increased demand for semi-detached housing and flats relative to separate housing. According to modelling of housing demand9 by the ANU, the relative demand for flats and semi-detached housing in 2024 is expected to be higher than for separate houses across Australia, particularly in Western Australia and South Australia (McDonald and Temple, undated).10 Economic growth The prospects for the CPS sectors depend on prevailing economic conditions, particularly household incomes and interest rates that drive consumer confidence, particularly in housing markets. There are a large number of macroeconomic projections prepared by the Treasury Departments of each state/territory typically made two years ahead, and then assuming trend growth for subsequent periods. Table C.7 reports the state/territory gross state used in this analysis. A key component for these forecasts, and how we use them for projecting demand for CPS skills, are the prospects for mining sector. Recently, a comprehensive study was completed by AWPA (2012) on the review of the skills needs of the resource sector and the flow-on to other industries and regions. 9 Projections provide the housing demand for occupied dwellings resulting from changing demographic and social trends (population size, births, deaths, international migration, internal migration, age structure and family and household formation and dissolution). The projections are not constrained by supply-side factors such as the availability of land, number of vacant dwellings or affordability. 10 Exceptions include Sydney, where the demand for separate housing remains stronger and Brisbane where the relative demand does not vary between dwelling type.

Future forecasts: Construction and Property Services Skills 2016 26 95 C.7 Gross State Product forecasts Element 2011-12 2012-13 2013-14 2014-15 2015-16 % % % % % Western Australia 6.70 6.00 5.00 4.25 4.25 Victoria 2.30 2.00 2.50 2.75 2.75 NSW 2.40 2.00 2.75 2.75 2.75 Queensland 4.00 3.75 3.50 4.00 - South Australia 2.10 1.75 2.50 2.75 2.75 Tasmania 1.75 2.25 2.25 2.25 2.00 Northern Territory 2.40 3.90 3.90 3.90 - ACT 2.50 2.00 2.00 2.50 - Australia 3.30 3.00 3.25 3.32 3.20 Source: West Australia Treasury, Government Mid-Year Financial Projections Statement, 2012-13, p.5; Victoria Treasury, 2012-13 Victorian Budget Update, p.10; NSW Treasury, Half-Yearly Review, 2012-13, p.26; QLD Treasury, Mid Year Fiscal and Economic Review, State Budget 2012-13, p.2; SA Treasury, Mid Year Budget Review, 2012-13, p.26; Tasmania Department of Treasury and Finance, 2012-13 Revised Estimates Report, p.5; Northern Territory Department of Treasury and Finance, 2012-13 Mid-Year fiscal Outlook Report, p.5; ACT Department of Treasury and Finance, 2012-13 Budget Paper No. 3, p.6. Recent strong economic growth in Western Australia and Queensland has been the result of both strong capital expenditure and operational phases in mining have underwritten strong growth in GSP, exports, total investment and employment. Moving forward, forecasts should reflect a slowing in capital expenditure in mining (with some prospective projects being shelved) and a re-focus on extraction and export. AWPA (2012) puts forward a most likely (medium) scenario for the period 2012 2018 with an average investment of $43.4 billion per year, resulting in the creation of approximately 36 400 full time equivalent short term jobs per year out of total employment of around 220 000. This should have a significant impact on the level and composition of GSP and employment at a state level, but also an indirect effect on demand for dwelling and non-dwelling construction. Indirectly, there should also be an easing of the labour market in those states. Recent floods, particularly in Queensland, will hamper mining exports while mines are repaired. In 2011, this was expected to only impact one quarter s economic growth in Queensland, but actually took most of the year to fully work through. Reconstruction spending did not fully counter the negative economic effect from the mining set-back. In terms of CPS sectors, demand growth can be expected in the short term (2013) due to repair efforts in the mining sector, but broader confidence in Queensland may inhibit demand in other areas of the state. Unfortunately, there are no consistent forecasts across all industries including mining.11 These interactions will be taken account of through our general equilibrium model that reflects that CPS sectors are linked, directly and indirectly, to the mining sector and the rest of the economy. 11 Noting forecasts for the construction sector by the Master Builders Association (MBA).

96 Future forecasts: Construction and Property Services Skills 2016 26 Demand for Australian exports, and confidence in the domestic economy, also depends on world economic prospects that have been assembled using IMF World Economic Outlook forecasts (October 2012 database) as reported in table C.8. C.8 IMF WEO Economic Growth Forecasts of GDP Country/region 2012 2013 2014 2015 2016 % % % % % Australia 3.31 3.00 3.25 3.32 3.20 New Zealand 2.23 3.07 2.67 2.59 2.27 China 7.83 8.23 8.51 8.54 8.54 India 4.86 5.97 6.39 6.74 6.89 Indonesia 6.04 6.34 6.54 6.64 6.74 Vietnam 5.11 5.88 6.42 6.76 7.20 Thailand 5.57 5.99 4.50 4.60 4.80 Korea 2.69 3.63 3.95 3.95 3.95 South East Asia 4.74 3.96 4.29 4.74 4.77 Japan 2.22 1.23 1.08 1.15 1.07 Rest of Asia 5.13 3.49 4.53 4.95 5.01 USA 2.17 2.12 2.94 3.36 3.41 Latin America 4.21 2.93 3.9 4.08 4.03 EU25 1.56-0.25 0.43 1.45 1.81 Middle East 6.05 3.60 3.53 3.88 4.23 Rest of World 2.92 2.92 3.26 3.43 3.58 Source: IMF World Economic Outlook Database, October 2012.

Future forecasts: Construction and Property Services Skills 2016 26 97 D Detailed projections by CPS industry and occupation Tables D.1 to D.8 present detailed employment results, by CPS occupations for Australian states and territories. D.1 Projected change in CPS related occupations New South Wales a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers 3 510 3 469 3 402 3 369 5 590 2322 Surveyors and spatial scientists 255 286 318 347 873 2339 Other engineering professionals 105 132 158 186 571 3122 Civil engineering draftspersons and technicians 232 244 261 272 585 3311 Bricklayers and stonemasons 694 713 735 753 1 490 3312 Carpenters and joiners 3 426 3 467 3 495 3 534 6 511 3322 Painting trades workers 902 949 1 008 1 046 2 196 3332 Plasterers 656 665 677 684 1 272 3333 Roof tilers 226 230 234 237 447 3334 Wall and floor tilers 369 382 400 411 826 3341 Plumbers 1 515 1 595 1 699 1 764 3 729 3996 Signwriters -4 12 31 48 223 3999 Other miscellaneous technicians and trades workers 100 137 175 210 665 4422 Security officers and guards 121 204 302 383 1 385 6111 Auctioneers, and stock and station agents 7 20 32 43 160 6121 Real estate sales agents -109 40 248 404 2 001 6219 Other sales assistants and salespersons 2 35 72 101 448 7121 Crane, hoist and lift operators 101 140 174 208 676 7129 Other stationary plant operators 127 262 381 517 2 132 8112 Commercial cleaners 139 510 954 1 333 5 522 8113 Domestic cleaners -9 29 82 121 530 8116 Other cleaners 16 37 67 89 344 8212 Concreters 598 632 677 706 1 520 8215 Paving and surfacing labourers 38 61 98 116 380 8217 Structural steel construction workers 344 373 406 431 985 8419 Other farm, forestry and garden workers 20 68 118 165 685 8999 Other miscellaneous labourers 230 425 628 820 3 084 Total 13 611 15 117 16 833 18 298 44 828 a Change from 2011-12 employment levels. Source: CIE projections.

98 Future forecasts: Construction and Property Services Skills 2016 26 D.2 Projected change in CPS related occupations Victoria a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers -1 255-3 242-3 205-3 169-125 2322 Surveyors and spatial scientists -70-191 -169-153 221 2339 Other engineering professionals -14-47 -16 12 413 3122 Civil engineering draftspersons and technicians -64-174 -152-136 219 3311 Bricklayers and stonemasons -301-769 -727-694 372 3312 Carpenters and joiners -1 426-3 675-3 541-3 429 982 3322 Painting trades workers -330-843 -765-712 714 3332 Plasterers -310-792 -750-721 322 3333 Roof tilers -59-150 -138-130 103 3334 Wall and floor tilers -116-296 -274-260 180 3341 Plumbers -631-1 624-1 436-1 307 1 793 3996 Signwriters 20 43 62 82 293 3999 Other miscellaneous technicians and trades workers 10 13 47 77 460 4422 Security officers and guards 60 101 165 212 790 6111 Auctioneers, and stock and station agents 10 23 35 46 153 6121 Real estate sales agents 143 262 400 510 1 754 6219 Other sales assistants and salespersons 30 65 98 127 456 7121 Crane, hoist and lift operators -5-13 19 47 424 7129 Other stationary plant operators 29 68 132 202 1 050 8112 Commercial cleaners 323 646 950 1 216 4 158 8113 Domestic cleaners 45 86 125 155 484 8116 Other cleaners 22 41 63 79 273 8212 Concreters -272-702 -637 594 580 8215 Paving and surfacing labourers 31 58 102 130 473 8217 Structural steel construction workers -65-181 -126-88 594 8419 Other farm, forestry and garden workers 20 45 68 92 347 8999 Other miscellaneous labourers 101 188 324 442 1 848 Total -4 073-11 059-9 346-7 963 19 332 a Change from 2011-12 employment levels. Source: CIE projections.

Future forecasts: Construction and Property Services Skills 2016 26 99 D.3 Projected change in CPS related occupations Queensland a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers -437 905 2 481 2 646 4 561 2322 Surveyors and spatial scientists 22 159 316 377 1 133 2339 Other engineering professionals 10 52 101 120 352 3122 Civil engineering draftspersons and technicians 7 183 395 446 1 073 3311 Bricklayers and stonemasons -48 178 446 488 982 3312 Carpenters and joiners -440 1192 3 120 3 365 6 208 3322 Painting trades workers -41 498 1 146 1 282 2 902 3332 Plasterers -92 291 747 810 1 548 3333 Roof tilers -10 63 150 166 354 3334 Wall and floor tilers -26 184 435 483 1 051 3341 Plumbers -32 641 1 449 1630 3 812 3996 Signwriters 22 27 37 50 207 3999 Other miscellaneous technicians and trades workers 26 80 142 174 534 4422 Security officers and guards 65 144 227 286 933 6111 Auctioneers, and stock and station agents 7 11 16 22 80 6121 Real estate sales agents 346 224 249 350 1 907 6219 Other sales assistants and salespersons 52 53 71 95 411 7121 Crane, hoist and lift operators 41 141 255 317 1 082 7129 Other stationary plant operators 113 284 453 618 2 643 8112 Commercial cleaners 432 536 745 1 006 4130 8113 Domestic cleaners 79 40 36 54 351 8116 Other cleaners 39 44 61 81 331 8212 Concreters -22 351 799 895 2 048 8215 Paving and surfacing labourers 77 128 197 242 808 8217 Structural steel construction workers 30 250 512 597 1 651 8419 Other farm, forestry and garden workers 42 43 56 78 355 8999 Other miscellaneous labourers 195 416 672 865 3 091 Total 458 7 115 15 310 17 541 44 537 a Change from 2011-12 employment levels. Source: CIE projections.

100 Future forecasts: Construction and Property Services Skills 2016 26 D.4 Projected change in CPS related occupations South Australia a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers -352 5 325 637 592 2322 Surveyors and spatial scientists -24 8 38 66 120 2339 Other engineering professionals -3 15 33 49 136 3122 Civil engineering draftspersons and technicians -32 8 46 81 115 3311 Bricklayers and stonemasons -116 3 113 219 242 3312 Carpenters and joiners -370 10 354 690 713 3322 Painting trades workers -122 17 152 278 410 3332 Plasterers -119 5 121 231 262 3333 Roof tilers -23 0 22 42 46 3334 Wall and floor tilers -87 2 84 163 177 3341 Plumbers -176 38 247 438 707 3996 Signwriters 5 7 10 13 63 3999 Other miscellaneous technicians and trades workers 6 27 48 68 238 4422 Security officers and guards 19 37 57 71 226 6111 Auctioneers, and stock and station agents 4 7 11 14 52 6121 Real estate sales agents 41 33 61 81 498 6219 Other sales assistants and salespersons 9 15 25 33 161 7121 Crane, hoist and lift operators -3 17 37 55 177 7129 Other stationary plant operators 14 51 85 122 524 8112 Commercial cleaners 136 164 248 317 1 577 8113 Domestic cleaners 19 16 26 31 185 8116 Other cleaners 7 8 13 16 83 8212 Concreters -82 15 109 196 298 8215 Paving and surfacing labourers 5 13 24 31 93 8217 Structural steel construction workers -40 12 62 109 199 8419 Other farm, forestry and garden workers 11 17 27 36 169 8999 Other miscellaneous labourers 14 60 111 157 547 Total -1 256 611 2 486 4 245 8 611 a Change from 2011-12 employment levels. Source: CIE projections.

Future forecasts: Construction and Property Services Skills 2016 26 101 D.5 Projected change in CPS related occupations Western Australia a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers 1 205 1 308 1 437 1 558 1 948 2322 Surveyors and spatial scientists 224 312 389 468 1 282 2339 Other engineering professionals 51 70 88 106 272 3122 Civil engineering draftspersons and technicians 205 249 295 335 655 3311 Bricklayers and stonemasons 658 726 807 874 1 125 3312 Carpenters and joiners 1 176 1 308 1 461 1 589 2 148 3322 Painting trades workers 466 547 634 703 1 165 3332 Plasterers 531 591 663 721 971 3333 Roof tilers 72 81 91 99 134 3334 Wall and floor tilers 238 271 309 338 496 3341 Plumbers 777 931 1 092 1 223 2 187 3996 Signwriters 7 12 17 21 74 3999 Other miscellaneous technicians and trades workers 51 79 107 132 377 4422 Security officers and guards 60 106 154 196 630 6111 Auctioneers, and stock and station agents 5 9 13 17 52 6121 Real estate sales agents 61 87 110 114 452 6219 Other sales assistants and salespersons 29 45 56 61 159 7121 Crane, hoist and lift operators 127 210 279 347 1 117 7129 Other stationary plant operators 141 329 466 632 2 625 8112 Commercial cleaners 172 306 435 542 1 937 8113 Domestic cleaners 14 23 33 37 144 8116 Other cleaners 19 36 51 64 232 8212 Concreters 291 343 400 444 757 8215 Paving and surfacing labourers 26 45 65 79 238 8217 Structural steel construction workers 346 482 612 721 1 837 8419 Other farm, forestry and garden workers 13 25 36 45 166 8999 Other miscellaneous labourers 242 388 515 633 1 920 Total 7 209 8 919 10 615 12 096 25 097 a Change from 2011-12 employment levels. Source: CIE projections.

102 Future forecasts: Construction and Property Services Skills 2016 26 D.6 Projected change in CPS related occupations Tasmania a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers -143-104 -48 10 461 2322 Surveyors and spatial scientists -3 2 8 14 70 2339 Other engineering professionals 0 1 2 3 12 3122 Civil engineering draftspersons and technicians -2 2 7 11 54 3311 Bricklayers and stonemasons -1 7 17 27 110 3312 Carpenters and joiners -66-16 49 107 619 3322 Painting trades workers 5 23 47 69 268 3332 Plasterers 0 13 30 46 188 3333 Roof tilers 0 2 4 6 25 3334 Wall and floor tilers -1 2 6 10 42 3341 Plumbers 8 33 65 96 371 3996 Signwriters 3 3 4 5 16 3999 Other miscellaneous technicians and trades workers 6 14 22 30 114 4422 Security officers and guards 6 12 19 24 88 6111 Auctioneers, and stock and station agents 1 2 2 3 10 6121 Real estate sales agents 29 34 44 50 132 6219 Other sales assistants and salespersons 5 6 8 9 26 7121 Crane, hoist and lift operators 1 4 8 11 44 7129 Other stationary plant operators 7 20 29 41 200 8112 Commercial cleaners 57 91 131 165 563 8113 Domestic cleaners 9 11 15 18 54 8116 Other cleaners 6 7 9 11 30 8212 Concreters 2 10 20 29 112 8215 Paving and surfacing labourers 9 17 27 34 116 8217 Structural steel construction workers 3 7 12 16 61 8419 Other farm, forestry and garden workers 5 9 13 17 64 8999 Other miscellaneous labourers 9 19 30 40 148 Total -44 232 581 902 3 996 a Change from 2011-12 employment levels. Source: CIE projections.

Future forecasts: Construction and Property Services Skills 2016 26 103 D.7 Projected change in CPS related occupations Northern Territory a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers 114 202 158 148 49 2322 Surveyors and spatial scientists 9 17 16 17 33 2339 Other engineering professionals 2 4 4 4 6 3122 Civil engineering draftspersons and technicians 7 13 11 11 13 3311 Bricklayers and stonemasons 15 26 21 20 10 3312 Carpenters and joiners 99 174 142 137 86 3322 Painting trades workers 33 56 51 52 62 3332 Plasterers 17 30 26 25 21 3333 Roof tilers 8 15 12 12 7 3334 Wall and floor tilers 15 26 23 23 23 3341 Plumbers 49 84 82 87 142 3996 Signwriters 1 1 2 2 6 3999 Other miscellaneous technicians and trades workers 5 8 10 12 37 4422 Security officers and guards 9 19 25 31 108 6111 Auctioneers, and stock and station agents 1 1 1 2 6 6121 Real estate sales agents 15 17 28 35 104 6219 Other sales assistants and salespersons 2 1 1 1-3 7121 Crane, hoist and lift operators 5 8 9 10 23 7129 Other stationary plant operators 7 17 23 31 140 8112 Commercial cleaners 27 41 61 78 259 8113 Domestic cleaners 4 6 7 8 18 8116 Other cleaners 2 3 4 5 12 8212 Concreters 28 47 42 43 49 8215 Paving and surfacing labourers 3 6 8 10 30 8217 Structural steel construction workers 10 18 17 18 25 8419 Other farm, forestry and garden workers 2 3 6 7 20 8999 Other miscellaneous labourers 15 28 30 35 89 Total 506 870 821 864 1 374 a Change from 2011-12 employment levels. Source: CIE projections.

104 Future forecasts: Construction and Property Services Skills 2016 26 D.8 Projected change in CPS related occupations Australian Capital Territory a ANZSCO Occupation 2011-12 2012-13 2013-14 2015-16 2025-26 persons persons persons persons persons 1331 Construction managers -241-282 -290-297 -88 2322 Surveyors and spatial scientists -19-21 -21-21 7 2339 Other engineering professionals -4-4 -2-1 23 3122 Civil engineering draftspersons and technicians -24-28 -28-29 -7 3311 Bricklayers and stonemasons -56-66 -67-68 -6 3312 Carpenters and joiners -233-273 -278-281 -43 3322 Painting trades workers -54-64 -63-61 24 3332 Plasterers -46-55 -55-56 -3 3333 Roof tilers -12-14 -14-14 1 3334 Wall and floor tilers -34-41 -41-41 0 3341 Plumbers -100-119 -118-117 18 3996 Signwriters 2 2 3 4 8 3999 Other miscellaneous technicians and trades workers -2-2 -2-2 7 4422 Security officers and guards -1 6 13 17 97 6111 Auctioneers, and stock and station agents 0 0 0 0 1 6121 Real estate sales agents 39 48 62 76 172 6219 Other sales assistants and salespersons 4 5 7 8 20 7121 Crane, hoist and lift operators -1-1 -1-1 4 7129 Other stationary plant operators -3-3 -3-2 13 8112 Commercial cleaners 47 62 82 101 257 8113 Domestic cleaners 10 13 17 21 50 8116 Other cleaners 2 3 4 5 13 8212 Concreters -23-27 -27-27 7 8215 Paving and surfacing labourers -1-2 -2-2 2 8217 Structural steel construction workers -23-27 -27-27 -2 8419 Other farm, forestry and garden workers 4 6 8 10 32 8999 Other miscellaneous labourers -7-5 0 5 73 Total -776-889 -841-797 679 a Change from 2011-12 employment levels. Source: CIE projections.

Future forecasts: Construction and Property Services Skills 2016 26 105 References ABS (Australian Bureau of Statistics) 2011, Retirement and Retirement Intentions, Australia, July 2010 to June 2011, Catalogue no. 6238.0, Canberra. 2012, Australian Year Book 2012, Catalogue no. 1301.0, Canberra. Australian Treasury 2010, Australia to 2050: future challenges, January. Australian Workforce and Productivity Agency, 2012 Resources Sector Skill Needs, Report 2012, Accessed at www.awpa.gov.au January 2013. BIS Shrapnel 2013, Determining the Future Demand, Supply and Skills Gap for Surveying and Geospatial Professionals, Prepared for Consulting Surveyors National, January. CRC Construction Innovation, 2007, Off-site manufacture in Australia: Current state and future directions, CIE (Centre for International Economics) 2011, Taxation generated from the Housing Sector, Prepared for the Housing Industry Association Ltd, May. 2012, Construction and the wider economy: A general equilibrium analysis, Prepared for the Housing Industry Association Ltd, November. Daly 2009, Prefabricated Housing in Australia. Skill Deficiencies and Workplace Practice, International Specialised Skills Institute Inc, Department of Education, Employment and Workplace Relations, April. Deloitte Access Economics 2012, Economic modelling of skills demand and supply, Prepared for Australian Workforce and Productivity Agency, November. Department of Education, Employment and Workplace Relations 2012, Industry Employment Projections: 2012 Report, http://www.deewr.gov.au/lmip/default.aspx?lmip/publications /IndustryEmploymentProjections, Date accessed 11 February 2013/ Eslake, S and Walsh M 2011, Australia s Productivity Challenge, Grattan Institute, Melbourne. Fox, R., and Finlay, R. 2012, Dwelling Prices and Household Income, Bulletin, Reserve Bank of Australia, December. KPMG econtech 2010, Economic Analysis of Building and Construction Industry Productivity: 2010, Report prepared for the Master Builders Australia, July. IMF (International Monetary Fund) 2013, World Economic Outlook, International Monetary Fund, Washington D.C., April. Independent Economics 2012, Economic Analysis of Building and Construction Industry Productivity, February. McDonald, P., and Temple, J. 2 Undated, Projections of Housing Demand in Australia 2009-2039, Australian Demographic and Social Research Institute, The Australian National University, Prepared for the National Housing Supply Council. Miller 2011, MiiHome Building System: Analysis of Energy Efficient And Construction Impacts, January. NHSC (National Housing Supply Council) 2011, State of Supply Report, Department of Sustainability, Environment, Water, Population and Communities.

106 Future forecasts: Construction and Property Services Skills 2016 26 2013 Housing Supply and Affordability Issues 2012-13. Productivity Commission 2005, Economic Implications of an Ageing Australia, Research Report, March. Reserve Bank of Australia 2013, Statement on Monetary Policy, February. RP Data-Rismark 2013, RP Data-Rismark Daily Home Value Index Monthly Movements, Available at: http://www.rpdata.com/research/monthly_indices.html. Last accessed 14 February 2013.

108 Future forecasts: Construction and Property Services Skills 2016 26 THE CENTRE FOR INTERNATIONAL ECONOMICS