With the construction industry starting to slow significantly, and the unlikelihood of any improvement in the parlous state of wages growth across the economy, Australia’s economic performance is going to heavily depend on NSW voters returning the Berejiklian government and the maintenance of that state’s strong jobs growth and construction record.
Yesterday’s construction data from the Australian Bureau of Statistics confirmed that the nation’s third-largest employing sector slowed noticeably in the final quarter of 2018, with building work down 1.2% in trend terms and engineering down 4%. Residential building was down 1.7%. Those declines are off a high base, so some of the gloom and doom in the commentariat today is misplaced — we’re still building a lot of housing and commercial buildings. But they will feed into the coming December quarter GDP number, which will have its own impacts on consumer, business, and political sentiment, and will confirm economists who think the RBA will end up cutting rates this year.
Building in NSW is holding up well — it increased in trend terms and fell only slightly in seasonally adjusted terms; it was engineering construction that came off the boil there, falling back to 2017 levels. Engineering construction also fell in Victoria, but building is holding up there too. But NSW is critical: it is currently generating over 30% of all construction in Australia and has by far the lowest unemployment, at 3.9% seasonally adjusted. Nearly 40% of employment growth in the last two years has happened in NSW.
That’s not accidental. The Berejiklian government has many faults, is frequently self-indulgent and has made some terrible calls, including wasting billions on idiot sport arenas and abandoning much of its plan to properly reform the often corrupt local government system in NSW.
But it has tried to respond effectively to the massive population pressure Sydney is under, has reversed decades of under-provision of transport infrastructure with much-needed major projects, and even invested significantly more in social housing than allegedly “progressive” governments elsewhere — all while running a tight fiscal ship (admittedly easier when you’re funded by Sydney property prices). The result is the country’s most successful state economy.
That alone would justify the reelection of Gladys Berejiklian but the election of NSW Labor, or a minority Berejiklian government, poses a significant threat to the national economy. NSW Labor has made a virtue of winding back infrastructure investment, proposing to cancel multiple motorway projects, and shamelessly pandered to the NIMBYism over residential development.
Labor leader Michael Daley — who used to not mind development — promises to dump housing supply targets and halt “rampant development”, which is great news for Sydney’s older, affluent home owners and terrible news for young people and low income earners struggling to get into the Sydney housing market.
There’s some political logic to Daley’s anti-development stance — with the NSW Greens mired in open warfare between Trotskyites and identity politics obsessives and actual environmentalists, there are disaffected Greens voters to be won across the inner city. But success for Daley will mean less residential construction and less infrastructure investment at a time when the Australian economy needs a source of support in its third-largest employing industry.
Voters in other states should cross their fingers for Gladys and hope the country’s best state government gets over the line on March 23.