SUPPLY CHAIN ISSUES

Supply shortages plague building and construction

Megan Peacock Director Policy & Media

Supply chain shortages continue to be an issue across the industry as we move into a postpandemic recovery. MBV knows that the cause of supply shortages is a result of combined domestic and international factors:

• The success of the Homebuilder

Scheme - which provided muchneeded stimulus to support our economy throughout COVID-19 • Other countries around the world, such as the US, also increased domestic spending on construction to stimulate their economies

• Environmental factors, such as bushfires and cyclones impacting domestic timber production • Shipping delays due to ongoing strikes and shipping and logistical challenges • China’s covid-zero policy is causing continued shutdowns across the country, affecting major ports – Shenzhen, one of the largest international ports in the world, was recently shut down earlier in March 2022

• Increased demand for building materials due to flooding in QLD and

NSW • Things such as internal lighting, arks, skirts, plasterboard and doors are all going to be in high demand • Conflict in Ukraine and international economic sanctions on trade with

Russia

These events have converged and led to real pressures on the building sector within Victoria and Australia more broadly. In addition to this, consumers who would usually spend money overseas have turned their attention to renovating or buying a new home because they could not travel during the pandemic. MBV has continued to advocate government on the industry’s supply

issues, trying to find some relief for the industry. At the request of MBV, the Victorian Government asked Commissioner for Better Regulation and Red Tape Commissioner, Anna Cronin, to investigate the issue of building and construction material shortages. The Commissioner delivered a report on the state of supply shortages in Victoria to the government by November 2021. The government has released their Supply Chain Review, where it supported nine out of 10 key recommendations. Among the nine recommendations endorsed by the Victorian Government were commitments to support: • The sourcing of any surplus timber held in storage or any mature softwood timber due for harvest

• The development of further softwood plantation projects • Increased use of steel house framing • Further research and development of new building materials • Better communication materials to improve consumer awareness of the complexities and time and price impacts of the supply chain shortages MBV was disappointed that the Victorian Government did not support the inclusion of a cost escalation clause into new contracts, which effectively allows builders to vary a contract price to reflect these unprecedented increased costs of labour and materials, rather than being locked into a fixed price agreement when increased costs are beyond their control.

MBV continues to advocate to the government on this issue in the hope of bringing some relief to the industry.

Some of the media coverage of the supply chain issues plaguing the building and construction industry.