Building jobs: How residential constructions drives the economy

Introduction

This first research report by NHFIC - Building jobs: How residential construction drives the economy – looks at the important role the residential construction industry plays in generating jobs and growth across the Australian economy.

The residential building construction industry generates more activity across Australia than nearly every other industry, with each $1 million of economic output supporting nine jobs across the economy.

Key insights

• New analysis shows that the residential building construction industry has the second-largest economic multiplier of all 114 industries that make up the economy.
• The analysis shows that $1 million of residential building construction output supports around $2.9 million of industry output and consumption across the broader economy.
• Each $1 million of residential building construction industry output supports nine jobs across the economy.
• Each new home built would support three jobs (on average) across the economy, based on these newly constructed multipliers and current average dwelling costs.

Overview

Contributing around 5 per cent to annual gross domestic product (GDP) and accounting for about 134,000 jobs, the residential construction industry plays an important role in the Australian economy. Economic activity in this industry also affects output across the broader economy.

Understanding the extent to which residential construction activity (including social and affordable housing) affects output and jobs across the broader economy is important, given the impact of COVID 19 and general market uncertainty.

The National Housing Finance and Investment Corporation (NHFIC) has generated economic multipliers for residential construction. These are based on the most recent available economic data released by the Australian Bureau of Statistics (ABS) in its input–output tables at the end of May 2020.

NHFIC’s analysis confirms that, relative to other industries, residential construction activity has strong economic spillovers in terms of economic output and jobs, particularly when there is spare capacity.

Because NHFIC analysed output and employment data from 2017–18, the effect of any industry linkages over the next two to three years is likely to be similar to estimates in this paper. Input–output multipliers can overstate industry effects when the economy has limited spare capacity, but the current economic outlook means that is unlikely to occur over the next few years.

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