NSW’s construction shutdown needs to end on time. Here’s why

Josh Frydenberg and his beleaguered PM Scott Morrison might find themselves regretting that the much-demonised CFMEU, a favourite government bogyman used to scare the electorate, doesn’t have more sway with the Berejiklian government. So might a lot of major construction companies.

At no stage in Victoria last year did Daniel Andrews ever shut down that state’s construction sector — a sensible decision given the lack of transmission of the virus on building sites, but also one that reflected the power of the construction sector union in that state.

But Gladys Berejiklian announced a different approach on Saturday, shutting down all Sydney construction — from mega-projects like Westconnex right down to bathroom renos — in a move that took the sector, and the other industries that rely on it, by surprise.

Whether her decision is based on the science of the higher transmissibility of the delta variant or, as some have suggested, the optics of finally demanding a strict lockdown while allowing government projects to continue working isn’t clear.

But by having resisted locking down, and then not locking down hard enough to look after the Liberals’ business constituency, Berejiklian has ended up having to go much harder and with far more damage than a Victorian-style lockdown would have inflicted. And with one of Australia’s biggest employers as a casualty. Gold-standard stuff. One can only imagine the fury that would have been directed at Andrews by the Morrison government and the media if he’d done the same.

Shutting down a sector that employs 250,000 people for a fortnight might send a few marginal operators to the wall but the work will still be there in two weeks’ time and the sector should be able to resume as normal then.

An extension beyond that, however, will increase the risk that major economic damage is inflicted — not merely in terms of jobs lost but on the financing of property developments.

Fortunately, the sector has been booming since the government introduced Homebuilder and people began taking advantage of historically low interest rates to move into the housing market, so this is the least worst moment for a shutdown. It might even temper the massive pressure on building supplies that has been delaying projects across the country.

A failure to get on top of Sydney’s outbreak will leave Berejiklian and her ministers with a difficult dilemma of whether to allow construction to resume or take the risk of causing serious economy-wide damage, with construction firms and developers failing, and flow-on effects into the financial system.

Berejiklian and her cabinet won’t lack for advice from business — self-interested, as always.

Wesfarmers, which has a direct stake in the construction shutdown via its ownership of Bunnings, has backed the government’s decision but says it’s strictly a short-term approach — flagging what they’ll say if the shutdown gets extended. Kerry Stokes’ Seven West Media and Seven Group Holdings also has an interest, given Stokes is in the process of taking over Boral, the country’s biggest building materials supplier. Stokes’ Seven Group Holdings already controls Westrac, the distributor of Caterpillar machinery in WA (for the booming iron ore industry) and in NSW, plus Coates equipment hire and the AllightSykes lighting equipment hiring company (great for 24-hour infrastructure projects).

For that matter, both Nine and News Corp are also self-interested because they control the two biggest real estate listing websites, REA and Domain — News Corp controls 61% of REA, the biggest; Domain, the runner-up, is 58% controlled by Nine. All real estate dealings are virtual now in greater Sydney and Victoria. Both companies now own mortgage originators, too.

And the longer the lockdown drags on, the less we’ll hear from the “rate rise looms” crowd who had started tipping that the Reserve Bank would be forced to lift rates as early as the end of next year due to the booming economy. The Sydney lockdown will materially detract from the September quarter GDP numbers — we won’t know how much until December — but there’ll be a bounce back in the December quarter, unless, of course, there are more lockdowns because we’re not getting vaccinated fast enough.

Who’s game to say the current shutdowns in Sydney and Melbourne will be the last?

This article was first published by Crikey.