Effects of Global Financial Crisis on the Construction Industry in Australia - Economics Assignment Help

Assignment Task :

Influences

A correct measurement of the impacts of external shocks on the construction industry will allow the construction industry policy makers and the developers to make the correct allowances for the future occurrences and this will allow them to advance the construction industry in a manner which is sustainable. The construction industry is a vital sector for the economy of Australia. It provides a great number of employment and business opportunities. The effect of the global financial crisis is very harsh on the construction industry, because the output of the construction is a response to the demand for the buildings. The relationship between the economic and construction cycles was found in Singapore, which showed the short term business cycle had a direct influence on the demand for construction (Hua 1998). The influence of the economic cycle not only effects the general economy but the construction industry itself. The global financial crisis which occurred in 2007-2009 influenced the construction industry greatly as investors lost confidence, and it resulted in a liquidity shortfall in the global banking systems. During this period Australia experienced a 2% increase in the unemployment rate, which triggered a major influence in the construction industry, with house prices decreasing by 6% and construction approvals shrunk by a quarter. 

The effects of the global financial crisis also influenced a deep analysis about the effects of the crisis on growth in the industry to help facilitate resource planning. This has helped ensure all the valuable public resources are allocated for the construction sectors which will help with retaining labour and skills after the crisis. 
 

The impacts and influences which the global financial crisis had on the construction industry are:

• Lagged impacts: The 2008 global financial crisis Impacts were delayed because of the boom in the resources industry all across the country which created a demand for a large number of projects and expenditure. 

• Fierce competition, tight margins and shrinking markets: The global financial crisis created very tough market conditions as projects began disappearing. This was because the market could no longer support projects which were privately funded and some of them stopped halfway or even suspended. This then increased the level of competition as in the industry after the financial crisis as the amount of tenderers for a job almost doubled and sometimes tripled. As a result, the margin for projects had to be reduced, which is compounded with the increase in trade costs because of the short suplply of resources which were available. 

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