Why Is Australia Facing A Building Materials Shortage?

Australia currently faces a critical international shortage of building materials. Construction timber, which includes framing, laminated veneer lumber, and beams has been cited as the product most affected and has been in extremely short supply since the end of 2020.

The shortage is being driven by two key factors.

1.  Increased investment in home construction and renovations

During the COVID-19 pandemic, there was a surge in demand for building materials as Australians invested their free time (and spare cash) in home construction and renovation projects.

This behaviour was driven, in part, by the government’s HomeBuilder scheme, which offered grants of up to $25,000 for people building a new home – so long as the construction begins within six months. The Housing Industry Association (HIA) estimates that 130,000 new homes will be built across the country this year and the scheme will likely cost the government $2 billion.

While applications for the scheme closed at the beginning of April, those already approved for the grant may struggle to access the timber they need – if they do, it will almost certainly be at a higher price. For those hoping to launch their home construction projects within the allotted time, ordering in advance will be essential as materials could take months to arrive.

Increased demand and skyrocketing timber prices have led to calls for the government to review the HomeBuilder program and extend the deadline to help suppliers manage the increased demand.

Shadow Housing Minister Jason Clare believes the deadline for starting construction work should be extended to 12 months. “If [the government] make this tweak,” he says, “it’ll help the people that are applying for the scheme to comply with the rules, and it will mean more work for tradies next year as well as this year.”

2. The loss of local timber in the 2020 Black Summer bushfires

Australia’s Black Summer bushfires eliminated a large supply of Australia’s hardwood and softwood supplies, which resulted in many suppliers and construction workers looking to source their materials from overseas.

It’s estimated that the 2019-20 wildfire season impacted 22 million acres of Australia’s land mass, including up to 247,000 acres (10%) of the country’s softwood plantations.

Before the pandemic, imports of timber accounted for around 25% of Australia’s total supply but, in the current climate, sourcing from overseas has proved challenging and imports have dropped significantly. Prices in the U.S., for example, are currently up by almost 200%. In addition, constraints on global freight and shipping containers due to COVID-19 are also holding up imports.

The Australian Financial Review reports that a pipeline of $300 billion new infrastructure projects was announced in the latest state and federal budgets. Without a coordinated effort by the government to source the required skills, bidders, and materials,  there could be significant project delays and cost blowouts.

Speaking to ABC, Victor Violante, deputy chief executive of the Australian Forest Products Association said “A number of processing mills are working at capacity and will continue to do so until things settle down.”

He continued to say that while this is arguably a good problem to have, these circumstances have also served to highlight the need for Australia to become self-sufficient with regard to sourcing critical building materials.