Towards the end of 2018, we had many robust discussions, particularly about the current economic position and the future of jobs in the construction industry. Many of our clients went into early hibernation for the holiday season and our pipeline projects (of which there are many) were pushed into 2019 for a variety of predictable reasons. A perfect storm surrounded the Banking Royal Commission and traditional lenders are choosing to either play it safe or issue PR statements about how they intend to operate pending the findings and outcomes of the Royal Commission. At the same time, if projects are not already in P&E Court, then they are headed in that direction (where did all this confrontation come from?), or, amongst other things, they are waiting for a Board approval, protracted Development Approvals, construction funding or tenancy commitments.
This situation is not unique to our industry sector and many of our colleagues are reporting a similar flatlining of the commercial and funding pulse. The political instability in Canberra is not conducive to a positive business outlook and Josh Frydenberg’s New Year announcement of a pre-election budget in the first quarter of 2019 only adds speculation to the timing of the next federal election which is due in May.
There is no compelling reason for the government to go to the election earlier. The 2018 Victorian state election result may be delusionally dismissed by the Federal (now minority) government as being about state issues; but the reality is that May’s federal election result will be a Labour landslide, irrespective of how many times John Howard is wheeled out on the 7:30 Report to talk about the opposite result, “back in my day”, when the Liberals won at a time when every state and territory government was Labour.
Is anyone else tired of this roller-coaster ride? The constant pressure on all businesses of finding work (or customers), winning work, getting work done and then getting paid is increasingly hard to address.
We need our clients to have confidence and stability to continue to make positive commercial decisions that affect an industry employing over a third of the nation’s workers. The best economic outlook is for the Federal Government to create an environment for the major lenders to get back to the business of funding construction projects, making money readily available and boosting the economy. The banks are in the business of lending money and their shareholders are expecting return on their investment. What more positive outcome could there be for Scott Morrison, the coalition government and small business before a federal election? Many banking investors were understandably embarrassed by revelations during the Banking Royal Commission, but these same major banks are now presented with an opportunity for redemption. We need consistent not cyclical financial and economic stimulus for the confidence to further support the construction industry otherwise the banks risk irrelevance as other funding models continue to emerge to fill the gap, with developers looking for more flexibility and certainty.
We are looking forward to hearing the Banking Royal Commission Report outcomes and no doubt some further robust discussions.