Construction is Australia’s Largest Importing Industry

What products are imported by Construction?

 

 

The previous post on products used in Construction was based on the ABS supply-use table, which do not include imported products. However, the ABS input-output tables that the supply-use tables are based on have data on imports of product groups by industry groups, in the same matrix of 115 product groups by 64 industry groups. 

 

This post looks at the latest release of the input-output tables for 2022-23 for the four Construction industry groups of Residential building, Non-residential building, Heavy and civil engineering, and Construction services (the trades). The four industry groups are combined to get shares of total use of products by Construction.

 

The post first looks at imports by the Construction industry groups, and compares their shares of total imports to some other industry groups. The major products imported by Construction in 2022-23 are identified and the Construction share of those imports discussed. 

 

Comparing the share of imports over time is difficult, but there are a couple of measures that can be used. The ABS calculates Primary input content per $100 of final use by industry. Primary inputs are Imports, Compensation of employees, taxes and subsidies, and Gross operating surplus. This estimate includes the initial increase plus the direct and indirect effects. Another estimate from the share of imports in Total intermediate use of products uses the value of imports as a percent of the value of products produced in Australia and used in Construction.  

 

Construction accounts for 80 to 90% of imports of timber and wood products. A 2022 research report for the industry association Forest and Wood Products Australia analysed the demand for sawn softwood timber to 2050 and meeting that demand. The report’s data on imports is discussed.

 

Product Imports by Construction

 

When the four Construction industry groups are combined, their share of total imports in 2022-23 was 17.2%. This makes Construction by far the largest importing industry in Australia.

 

 

Table 1. Imports by Construction industry groups 2022-23

 

In 2022-23 the industry group that had the largest share of total imports was Construction services, at 9.6% it had more than twice the share of the next largest industry group of Road transport’s 3.7%, and three times the share of total imports of many other product groups. 

 

 

 

Table 2. Imports by industry groups 2022-23

 

 

 

Construction has very large shares of some product imports. In particular, for Sawmill and Other wood products the shares are 80 and 90% respectively. For Ceramic products, the Construction share  is 91%. There are several other product groups where Construction is 40 to 50% of imports, such as Iron and steel, Structural and Fabricated metal products, and Electrical equipment. There is a very high import share of 73% for Domestic appliances.

 

Table 3. Major products imported by Construction 2022-23

 

 

Comparison of 2022-23 Import Shares with 2012-13

 

Comparing the share of imports over time is difficult because the input-output tables are in current dollars and not adjusted for inflation. An accurate estimate requires not just local prices each year for each product, but also global prices for traded products and their cost in Australia including customs, insurance and freight. This data is not readily available. There are, however, a couple of measures that can be used

 

Each year the ABS calculates a figure for Primary input content per $100 of final use by industry. Primary inputs are Imports, Compensation of employees, taxes and subsidies, and Gross operating surplus. Final use is the total demand for a product. This estimate includes the initial increase plus the direct and indirect effects of an increase in an industry’s output as demand increases. Because it includes these second and third round multiplier effects it is not a measure of industry output.

 

It does, however, allow a comparison between years of the role of imports in Construction for the four industry groups, and since 2012-13 there has been an increase for all groups. Table 4 shows Non-residential building has had the largest increase of 4.5% since 2012-13. As an aside, in 2022-23, the average of the four Construction industry groups in Table 4 is 18.2%, close to Construction’s 17.2% share of total imports in Table 1.

 

Table 4. Import content of final use in Construction

 

 

Another approach is to use the share of imports in Total intermediate use of products, which is the value of imports as a percent of the value of products produced in Australia and used in Construction.  This is in Table 5, which shows the same trend as table 4, with increases in the import share for the four Construction industry groups, although in this case the largest increase is in Residential building. For Total construction the increase of 2% is equivalent to a 20% increase in imports.

 

Table 5. Imports percent of Australia products used in Construction

 

 

Figure 1. Imports Used in Construction

 

 

 

The increases in imports by the Construction industry groups in Tables 4 and 5 are reflected in the increases in the Construction share of imports of most of the major product groups, in Table 6. This generally reflects the decline of Australian manufacturing, as with Electrical equipment and Domestic appliances, but the increased imports of Sawmill and Wood products is due to demand outstripping local supply. Since 2012-13 there have been some declines, in Petroleum and coal products and Structural metal products for example, but for the majority of products there were increases.

 

Table 6. Major products, percent imported by Construction

 

 

 

Sawn Softwood Imports

 

A 2022 report for Forest and Wood Products Australia, an industry association, was on the Future Market Dynamics and Potential Impacts on Australian Timber Imports.  The report focused on the demand for sawn softwood timber and the challenges in meeting that demand. There is some data on imports and forecasts out to 2050 for demand, local supply and imported timber products. Demand for sawn softwood is primarily driven by the Australian housing industry. In 2002, the proportion of locally produced sawn softwood used for framing and structural purposes in Australian houses was 66.2%, but in 2021 the proportion had fallen to 50.4%. Sawn softwood production peaked at 3.746 million m3 in 2017-18, before the 2019 bushfires affected output.

 

The report argues global sawn softwood production has increased at 1.06% per year over the last 25 years and per capita production of sawn softwood has been falling. There is international competition for timber resources, limiting availability for Australian imports. In 2020-21, local production was 3.619 million m³ while demand was 4.566 million m³, and the gap between sawn softwood demand and local production is expected to widen because local sawn softwood annual production is static at 3.6 to 3.8 million m³. ​

 

Figure 2. Timber imports 2005-2021

 

 

The existing softwood plantation estate has not expanded significantly since the early 1990s, and was 1.028 million hectares in 2020. Projected average annual demand for sawn softwood from 2046 to 2050 is 6.5 million m³, with local production limited to 3.6 to 3.8 million m³ the projected gap is 2.6 million m³ by 2050, or 40.5% of total demand. 

 

The report finds Australia's timber imports would need to triple to meet the implied gap. However, global production and imports have been declining, making it unlikely they can fully meet Australian demand in the future, because there will be a significant increase by 2050 due to population growth. Up to 468,000 more hectares of softwood plantations would be needed to meet that demand.

 

 

Figure 3. Sawn Softwood Demand, Local Production and Implied Gap 2021–2050

 

Conclusion

 

It is not widely recognised that, of all Australian industries, Construction is by far the largest importer of products. Combining the four Construction industry groups of Residential building (3.3%), Non-residential building (2.3%), Heavy and civil engineering (2.1%) and Construction services (9.6%), Total Construction imports were 17.2% of total imports by value in 2022-23. The industry group with the largest share of products imported into Australia is Construction services, at 9.6% of total imports it is more than twice the second largest Road transport, with 3.7%.

 

Construction has very large shares of some product imports. For Sawmill and Other wood products the shares are 80 and 90% respectively, for Ceramic products, the share  is 91%, and for Domestic appliances imports are 73% of the value of products used.

 

The ABS calculates the import share for Construction of Primary inputs per $100 of final use by industry group. For Residential building this was 19.7%, for Non-residential building 20.2%, for Heavy and civil engineering 14.4% and for Construction services 18.5%. Since 2012-13 the import share of final inputs has increased by 4.5% for Non-residential building and by 1 to 2% for the other groups.

 

Another estimate is the share of imports in Total intermediate use of products, which is the value of imports as a percent of the value of products produced in Australia and used in Construction.  This has the same trend since 2012-13 as Primary inputs per $100, with increases in the import share for the four Construction industry groups, although in this case the largest increase was 3% in Residential building. For Total construction the increase of 2% is equivalent to a 20% increase in imports.

 

The significant role of imported products in Australian construction is not widely recognised, and has not been included in any of the recent reports on the industry. There could be two reasons for this lack of attention. The first is simple acceptance that manufacturing in Australia is too expensive, and lower cost imports have won market share. Closely allied to that is the idea of lack of scale, because the domestic market is too small to support globally competitive factories. There are other contributing factors like energy costs, which could be among the lowest in the world if most of our natural gas was available to local industry instead of being exported by foreign multinationals, or if sufficient solar energy had been built over the last decade. 

 

A second reason could be reluctance to highlight the lack of investment in capacity by Australian business and fund managers. This is most obvious in softwood plantations, where despite growing demand, the area planted in 2020 was the same as in 2000, while imports of sawn softwood used for framing and structural purposes have increased to over 50% of demand. A report for Forest and Wood Products Australia finds Australia's imports of sawn softwood would need to triple to 2.062 million m³ a year to meet projected demand. However, global production has been declining, making it unlikely imports can meet that demand.

 

The decline in Australian manufacturing is reflected in the increase in imported products used in Construction. While there are many reasons for this decline, fundamentally it is because of the strength of the Australian dollar from the high value of mining and resource exports. This is known as ‘Dutch disease’, after the hollowing out of Dutch manufacturing and agriculture after the 1959 discovery of the North Sea oil and gas fields led to an increase in gas exports that boosted the currency and made other exports uncompetitive. This has been the experience of Australia over the last couple of decades, as the boom in iron ore, coal and gas exports has reduced the competitiveness of other exports and import-competing industries.

 

 

 

 

Insights from New Data on Australian Construction

Construction Industry Survey 2024

 

The ABS has published detailed data on the Construction industry for 2023-24. Although released as part of the Australian Industry data, this is the seventh of a series of irregular and infrequent Construction Industry Surveys done by the ABS [1]. The ABS collected employment, wages and salaries, income, expenses, operating profit, earnings before interest tax depreciation and amortisation (EBITDA), and industry value added (IVA) for private sector construction businesses. 

 

Construction is an industry division, divided into three subdivisions: 

·      Subdivision 30 Building construction, with the two groups of Residential and Non-residential building;

·      Subdivision 31 Heavy and civil engineering construction; and

·      Subdivision 32 Construction services with five groups of Land development and site preparation services, Building structure services, Building installation services, Building completion services, and Other construction services.

 

The survey divides income by: 

·      Type of client;

·      Nature of contract (contracting, subcontracting or speculative);

·      Type of asset (houses, other residential building, non-residential building, road and bridge construction, and other non-building construction); and

·      Type of work (new construction work, alterations, additions, renovations and improvements, and repairs and maintenance).

 

This post first looks at industry totals and the Construction subdivisions and groups, and details income and expenses. It then compares the amount per employee for income, wages and salaries, EBITDA and IVA across the subdivisions and groups to show their relative performance. The data on capital expenditure, work done by type of asset and type of work is presented. 

 

Australia is in the fortunate position of having one of the world’s best statistical agencies with the ABS, at a time when other countries are having issues with their data collections [2].

 

 

 Industry Totals

 

Total employment was 1,291,000 people, of which Construction services were 883,000 or 68%. Within Construction services, the largest groups were Building installation services (329,000 people) and Building completion services (223,000 people). Building construction employed 254,000 with 173,00 in Residential building, and Heavy and civil engineering construction employed 154,000. 

 

Total income includes income from non-construction services and sales of land and goods, but the survey also has income from contracting and subcontracting. Construction total income was $633.6 billion with $438.6bn from contracting and subcontracting (69%), with $77bn of contracting income from the public sector (17.5%). For the three subdivisions:

·      Building construction’s total income was $235.2bn, with $130.8bn from contracting and $21.5bn from subcontracting, contributing $152.3bn. 

·      Heavy and civil engineering construction’s total income was $122.4bn with $85bn from contracting, of which $47.2bn (55.5%) was for the public sector, and $13.2 from subcontracting, contributing $98.2bn. 

·      Construction services’ total income was $276.1bn, with $116.6bn from subcontracting and $71.4bn from contracting, contributing $188bn. 

·      Within Construction services, Building installation services was the largest group by income ($94.2bn), followed by Building completion services ($53.2bn), which together were 53% of Construction services income. 

 

 

Table 1. Construction totals 

Source: ABS 8155DO008. 

Note: W & S is Wages and salaries, Total income includes income from non-construction services and sale of land and goods, Profit is Operating profit before tax, EBITDA is Earnings before interest tax depreciation and amortisation, IVA is Industry value added. 

 

Figure 1. Contracting income by client type

 

 

Non-construction income was 31% of total income, with $113.2bn from the sale of goods and $61.2bn from services. Income from sales of land and goods was a high proportion of contracting and subcontracting income for Residential building (67%) and Land development and site preparation services (53%). Income from Non-construction services (including professional, scientific and technical services) was a high proportion of contracting and subcontracting income for Heavy and civil engineering (14%), for Land development and site preparation services (43%), and for Building installation services (18%). 

 

Figure 2. Non-construction income by source

 

 

Expenses were $570.7bn in 2023-24. The largest were purchases of goods and materials ($255.4b) and selected labour costs ($105.7b). Payments to other businesses for construction services, building and industrial cleaning services was $91.6b, and this will have included Professional services like architectural, engineering and surveying services, and rental and hire of machinery and equipment .

 

Purchases of land for property development was $12.2 bn, with Residential building accounting for $7bn and Land development and site preparation $3bn of the total. Those purchases incurred $2.1bn and $1.3bn in interest costs for the groups, which also had $762mn and $1.4bn in depreciation and amortisation expenses. 

 

Performance Per Employee

 

Comparing the amount per employee for income, wages and salaries, EBITDA and IVA highlights the differences between the industry subdivisions and groups. The Non-residential building and Heavy and civil engineering construction subdivisions had much higher average wages and salaries and income than the rest of the industry, and the highest IVA per employee. The highest operating profit per employee and EBITDA was in Land development and site preparation, which was also the group with the highest income from non-construction services, and Building installation services had the lowest operating profit per employee and EBITDA.

 

Table 2. Amount per employee

Source: ABS 8155DO008. 

Note: W & S is Wages and salaries, Total income includes income from non-construction services and sale of land and goods, Profit is Operating profit before tax, EBITDA is Earnings before interest tax depreciation and amortisation, IVA is Industry value added. 

 

The figures below show the differences between the groups for wages, profits, EBITDA and IVA per employee. The general pattern is that Construction services have lower values than Building and Engineering, often around half as much, particularly for wages and contracting income. Average wages are notably low for Residential building and Building completion services. Contracting income per employee is highest in Non-residential building, by a considerable margin over Residential building and Engineering, and the three groups of Building installation, Building completion and Other construction services have almost the same contracting income per employee.

 

Figure 3. Wages and salaries per employee

 

 

Figure 4. Income per employee

 

Note: Includes contracting and subcontracting income, excludes non-construction income from sales of land and goods.

 

For EBITDA and IVA where non-construction services income is included, Land development and site preparation had the highest EBITDA and third highest IVA per employee. Residential building had lower IVA per employee but higher EBITDA than both Non-residential building and Engineering, which were the two groups with the highest IVA per employee. Interestingly, there is only a weak relationship between EBITDA and IVA per employee across the industry groups. 

 

Figure 5. EBITDA per employee

 

Note: EBITDA is Earnings before interest tax depreciation and amortisation.

 

The four Construction services groups of Building structure services, Building installation services, Building completion services and Other construction services have IVA per employee values around half that of Engineering, and around two thirds of Building. 

 

Figure 6. IVA per employee

 

Note: IVA is Industry value added.

 

Capital Formation

 

There is a well-established relationship between the amount of capital (both physical and intellectual) available for each worker and their level of productivity. All else equal, the more capital the higher the productivity. The survey has capital expenditure (capex) and gross fixed capital formation (GFCF) for the eight industry groups, and Figure 5 shows  the relationship between IVA per employee, capex and GFCF per employee.

 

Land development and site preparation had the highest level for both capex and GFCF per employee indicators, due to including purchases of land and equipment. Similarly, Engineering has a high capex that includes purchases of machinery and equipment, and also the highest IVA per employee. Capex is low for Residential and Non-residential building  because of the low level of ownership of heavy equipment and machinery due to extensive use of hiring and leasing, however that equipment and machinery lifts the level of IVA per employee. The other four trades in Construction services have capex and GFCF tracking IVA per employee, and are the best example of the relationship between capital and productivity.

 

Figure 7. IVA, capex and GFCF per employee in 2023-24. 

 

Note: Capex is capital expenditure and GFCF  is gross fixed capital formation.

 

Work Done by Type of Asset and Type of Work

 

Building Construction and Construction Services Income

 

There is a new set of data in this year’s survey that has the income from different types of asset built, divided into houses, other residential building and non-residential building, and the type of work done, divided into new construction work, alterations, additions, renovations and improvements, and repairs and maintenance. This is given for the three Building groups of Residential and Non-residential building and Construction services. 

 

Table 3. Income from construction services by type of work

 

 

Residential projects provided the largest source of income for Construction services, with $55.6bn from House construction and $17bn from Other residential building, a total of $72.6bn, compared to Construction services’ Non-residential building income of $66.2bn and Non-building construction’s $49.3bn. For the Non-residential building group, Alterations etc. income of $18bn was 58% of income from New work of $31bn.

 

Table 4. Type of work done by Building construction and Construction services

 

 

The distribution of income across type of work and type of asset can be found from this data. This has not previously been available and it allows a comparison of the relative importance of type of building work done. New work is 72% of the total, but of particular interest is that 9% is repair and maintenance, which is generally inefficient and labour intensive compared to new work. Around three quarters of R&M is (unsurprisingly) done by trades in Construction services and, except for Non-residential building, most of the alterations and additions.

 

Engineering Construction Income

 

Heavy and civil engineering construction total income was $98.2bn, of which $85.1bn was from contracting. Income was broken down by project type and into New work and Improvements and Repairs and maintenance (R&M): 

·       Road and bridge construction ($37.5bn; New work $34.5bn, R&M $2.6bn );

·       Railways, tramways and harbour construction ($17.3bn; New work $17bn);

·       Water storage and supply, sewerage and drainage construction ($7.2bn; New work $6.1bn, R&M $1.1bn);

·       Electricity generation, transmission and distribution construction ($11.5bn; New work $11.1bn);

·       Telecommunications construction ($1.2bn; New work $$567mn, R&M $595mn);

·       Oil, gas, coal, pipelines (not water) and other heavy industry construction ($9.4bn; New work $7.2bn, R&M $2.2bn);

·       Other non-building construction ($8.2bn; New work $7.6bn);

·       Building construction ($5.1bn; New work $5.5bn, Alterations & additions plus R&M $593mn). 

 

Roads and railways are by far the largest categories of new engineering work ($37.5bn and $17.3bn respectively), and it should be noted that 2023-24 was a year with exceptionally high public expenditure on infrastructure, with major projects underway in NSW, Victoria and Queensland. The third highest category was Electricity generation, transmission and distribution construction, reflecting expenditure on the energy transition with $11.1bn of new work. Repair and maintenance was 8.3% of total Engineering income. 

 

 

Key Points

 

Total income included income from non-construction services and sales of land and goods as well as income from contracting and subcontracting. Construction total income was $633.6 billion with$438.6bn or 69% from contracting and subcontracting. Contracting income from the public sector was $77bn. Sales of land and goods was a high proportion of contracting and subcontracting income for Residential building (67%) and Land development and site preparation services (53%).

 

Construction services have lower wages, profits, earnings before interest, tax, depreciation and amortisation (EBITDA) and industry value added (IVA) per employee values than the Building and Engineering groups, particularly for wages and contracting income. Contracting income per employee is highest in Non-residential building, much more than Residential building and Engineering, and the three groups of Building installation, Building completion and Other construction services have almost the same contracting income per employee. 

 

When non-construction services income is included, Land development and site preparation had the highest EBITDA and third highest IVA per employee. Residential building had lower IVA per employee but higher EBITDA than both Non-residential building and Engineering, which were the two groups with the highest IVA per employee. There is only a weak relationship between EBITDA and IVA per employee across the industry groups. The four Construction services groups of Building structure services, Building installation services, Building completion services and Other construction services have IVA per employee values around half that of Engineering, and around two thirds of Building. 

 

The survey has capital expenditure and gross fixed capital formation (GFCF). Land development and site preparation had the highest and Engineering the second highest for capex and GFCF per employee, due to purchases of land and equipment. Capex is low for Residential and Non-residential building  because of hiring and leasing of heavy equipment and machinery. The other four trades in Construction services have capex and GFCF closely tracking IVA per employee, a good example of the relationship between physical capital and productivity.

 

Data on the distribution of income across type of work and type of asset has not previously been available. For Building construction New work is 72% of the total, alteration, additions and improvements 19%, and repair and maintenance is 9%, with around three quarters of R&M done by trades in Construction services. However, the data does not include the number of people employed in R&M. 

 

For Heavy and civil engineering, total income was $98.2bn, of which $85.1bn was from contracting. Roads and railways are by far the largest categories of new work ($37.5bn and $17.3bn respectively). 2023-24 was a year with high public expenditure on infrastructure and 55.5% of income came from the public sector. Repair and maintenance was 8.3% of total Engineering income. 

 

The 2023-24 Construction Industry Survey has provided a level of detail previously unavailable. Key insights are that 69% of total income is from contracting and subcontracting, with the rest from provision of services and sale of land and goods, and 9% of income is from repair and maintenance. Although only 18% of total contracting income is from the public sector, for Engineering it is 56%. Purchases of land by Residential building was $7bn and by Land development and site preparation $3bn, with $2.1bn and $1.3bn in interest costs respectively. In Non-residential building work, Alterations, additions, renovations and improvements income of $21.2bn was 41.2% of the income from New work of $51.3bn. For House construction by Construction services, income from New work was $30.6bn, and for Alterations etc. was $17.6bn, 57% of New work income. 

 

Non-residential building and Engineering had the highest IVA per employee, followed by Land development and site preparation and Residential building. There is a wide productivity differential across the industry groups, as measured by IVA per employee. That may be an imprecise measure, but it is indicative of the labour intensity of the trades, and the higher capital intensity of the Building and Engineering subdivisions. One way to improve overall industry productivity would be through lifting the capital intensity of Construction services by providing incentives for them to increase capex. 

 

Conclusion

 

The ABS 2023-24 Australian Industry data included a survey of the Construction industry, with previously unavailable data on income from work done and type of work, clients and other variables at the level of eight industry groups. Therefore, this data has much more detail compared to the three industry subdivisions of Building, Engineering and Construction services used in regular ABS publications, because subdivisions are made up of industry groups.  

 

The first three groups are Residential building, Non-residential building and Heavy and civil engineering, and there are five groups of Construction services: Land development and site preparation services, Building structure services, Building installation services, Building completion services, and Other construction services.

 

In terms of policy and industry development, this detailed data is important because it clearly shows the differences in the characteristics of the industry groups, their clients and sources of income. It will also allow recalculation of construction labour productivity for the different types of work done. 

 

Construction is better viewed as three sub-industries when the differences between Residential building, Non-residential building and Engineering construction are taken into account. These structural differences affect the way clients, contractors, subcontractors, designers and suppliers work and interact, and these ABS subdivisions have their own characteristics and ways of working. For example, house builders have pattern books, commercial building uses architects, and infrastructure is designed by engineers.

 

Industry policies that target Construction will be challenged by sub-industries with limited, though important, similarities, and are unlikely to be relevant across them. The specific nature of the individual subdivisions often makes recommendations and policy directed at Construction as a single industry hard to implement or ineffective, separate policies are required. 

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[1] ABS 8155DO008 Australian Industry 2023-24, ABS 8155DO001 Construction Industry Survey 2011-12. ABS 8772  Private Sector Construction Establishments 2002-03, 1996-97,1988-89,1984-85 and 1978-79. 

The 2002-03 survey used different industry categories and is not comparable with the other surveys. The ABS notes that survey data ‘were understated in the 1978/79 collection as there were significant coverage deficiencies in this survey.’

 

[2] In the US the Bureau of Labor Statistics issued a notice in June 2025 that said CPI collection reduction and suspension affected the Commodity and Services survey and the Housing survey. The ‘BLS makes reductions when current resources can no longer support the collection effort.’  

 

The UK Office of National Statistics published a wrong CPI figure in April 2025 and 

a Systemic Review of ONS Economic Statistics noted  ‘there are widely recognised problems with the Labour Force Survey’ and  ‘resource pressures on economic statistics and on the ONS as a whole have intensified in the last two years.’ In 2014 issues with UK construction data were so serious they led to Construction Output being de-designated as a National Statistic.