“The construction industry previously gained the benefits of low interest rates and stimulus policies, which led to increased demand for construction services,” A/Prof. Dechter explains. “Following the boom and entering the period of high interest rates and high building materials costs, as well as increasing labour costs, the sector became less profitable.”
According to Professor Richard Holden, School of Economics at UNSW Business School, a key challenge for these companies is that fixed-price construction contracts are the default in Australia. When labour and materials costs increase, builders must complete the contract without adjusting the price.
“That has been a fundamental driver of a lot of these bankruptcies…
