There is a strong construction industry present in Australia, and its growth, which has been led by building houses and residential infrastructure in the eastern part of the country, has kept the economy from sinking after the mining industry in the west fizzled out.
Demand for building supplies in Sydney increases with the house industry thriving within the city, as well as Melbourne. The tragedy is, the same cannot be said for the western parts of Australia, where construction faced speed bumps in their progress in the form of large corporate collapses within recent years. This caused smaller businesses and contractors to not receive payment even for accomplished work.
A senate inquiry in 2015 shows insolvencies in construction has cost the industry a debt amounting to $3 billion annually. All over Australia, there have been around 1,700 construction companies that have shut down, congregated mostly in Victoria and New South Wales. However, what truly caught people’s attention was the failure of RCR Tomlinson. It was a firm that had stood for 120 years and is a prime example of a company that has grown too big to fail. After which, a large number of suppliers and subcontractors encountered their own problems that further suggests complications in the overall industrial organisation, followed by the fall of York Civil.
The ASIC faults underbidding, poor management, and lack of cash flow to the downfall of the construction industry in the west. The need for building supplies in Sydney and the rest of the east coast is what keeps the industry afloat in what has been an established toxic culture. The effect, however, includes the decreasing property prices that fall into the hands of east buyers and developers.
The initial competition that led to the downfall of the western construction industry is feared to spread over to the east as the subsequent tumble of prices lead to tighter competition for projects, just as Bryan Hughes of Pitcher Partner Perth suggests.
Timothy Hibbert of BIS Oxford Economics agrees by saying construction companies situated in Melbourne and Sydney, which has been seen to succeed the most, is expected to be one of the biggest to fall.