Why Construction Keeps Fixing The Wrong Problem

After three decades building technology solutions across financial services, construction, and real estate, I've seen the same pattern repeat: industries that focus on managing failure instead of preventing it get stuck in expensive cycles.

Right now, Australia's construction sector is doing exactly that.

While policymakers scramble to streamline insolvency processes, the real numbers tell a different story. Construction labour productivity has crawled along at just 1 percent annually over two decades, compared to 2.8 percent for the global economy and 3.6 percent for manufacturing. The Productivity Commission reports that housing construction productivity has declined by 53 percent in physical output since 1995, whilst the broader economy's productivity rose 49 percent.

We're optimising for the wrong outcome.

The Numbers Tell The Story

Construction dominates business failures across Australia. ASIC data shows construction represented 27.7 percent of all external administrations in the nine months ending March 2024 - that's 2,142 out of 7,742 company failures. Meanwhile, the Australian Bureau of Statistics shows construction contributed 7.0 percent of Australia's GDP in 2023-24, employing 1.3 million people with total income of $633.6 billion.

The policy response? Make business failure more efficient. Streamlined insolvency processes, simplified administration, faster asset liquidation.

But here's what CFOs and lenders should really be asking: what if we could prevent most of these failures instead of just processing them faster?

The $56 Billion Opportunity We're Ignoring

A massive productivity opportunity sits right in front of us. Oxford Economics Australia calculates that raising construction productivity to economy-wide averages could unlock $56 billion in additional capacity annually.

That's enough for 1,000 additional schools, 10,000 kilometres of roads, or 25,000 extra hospital beds every year.

Yet policy attention remains laser-focused on processing business failures rather than preventing them through systematic productivity improvements.

Manufacturing Shows What's Possible

The productivity gap isn't inevitable. Manufacturing proves that. Between 2000 and 2022, manufacturing achieved 90 percent productivity improvement through lean principles and automation. Construction managed just 10 percent improvement over the same period.

The difference comes down to approach. Manufacturing prioritised systematic operational excellence. Construction keeps managing the consequences of operational inefficiency.

We've seen glimpses of what's possible here in Australia. Hickory's La Trobe Tower - at 33 levels, Australia's tallest prefabricated building - was delivered 30 percent faster than conventional construction using integrated structural systems.

The prefabAUS report confirms that industrialised offsite construction can significantly reduce costs, build times, and emissions whilst improving productivity and housing delivery outcomes. The Federal Government's 1.2 million home target under the National Housing Accord aims to scale prefabrication through new technology and regulatory support.

Where Commercial Real Estate Financing Fits

The financing side reflects this same misalignment. Complex, fragmented processes create friction that compounds productivity challenges from day one.

When deals take months to structure and financing options remain opaque, construction projects start with built-in inefficiencies. Developers waste time navigating bureaucratic processes instead of focusing on delivery.

This hits CFOs particularly hard. Extended financing timelines increase holding costs, complicate cash flow management, and create uncertainty that ripples through project planning.

Infrastructure Australia's 2024 report identifies low productivity, labour shortages, and material costs as major challenges, outlining the development of a National Construction Strategy to boost efficiency.

For commercial mortgage brokers, it means longer deal cycles and frustrated clients. For lenders, it means higher due diligence costs and increased risk exposure.

A Different Framework For Success

Industry health metrics reveal the strategic misalignment clearly. We measure success by how efficiently we process business failures rather than how effectively we prevent them.

A productivity-first approach would prioritise standardisation, technology integration, and systematic process improvement. McKinsey research suggests construction firms acting across seven key areas simultaneously could boost productivity by 50 to 60 percent.

The financing component becomes critical here. Streamlined, transparent financing processes reduce project complexity and timeline uncertainty.

When developers can access global financing options through standardised, digital processes, projects start with productivity advantages rather than administrative burdens.

The Technology Exists Today

Having built technology solutions for 20 years, technology to transform construction financing already exists.

Digital marketplaces connects borrowers with global financiers. Automated due diligence can reduce approval timelines from months to weeks. Standardised processes can eliminate the bespoke complexity that kills productivity.

The question isn't technological capability. It's strategic commitment.

The Choice Ahead

Australia's construction industry has a decision to make. Continue refining failure management systems, or redirect resources toward systemic productivity improvement that minimises failure.

The productivity data shows the choice. Manufacturing's success story provides the roadmap. The technology exists to standardise and streamline operations across the construction value chain.

What's missing is the strategic commitment to optimisation that prevents problems rather than efficiently managing their consequences.

For CFOs evaluating construction investments, this represents a fundamental shift in risk assessment. Projects backed by productivity-focused processes and streamlined financing carry different risk profiles than those built on traditional inefficient systems.

For lenders, it means backing the right approach becomes a competitive advantage. Those who finance productivity-driven projects will see better outcomes than those who simply process failures faster.

The $56 billion productivity opportunity represents more than economic potential. It represents a fundamental shift from reactive failure management to proactive industry transformation.

The question isn't whether construction can achieve manufacturing-level productivity gains. The question is whether industry leaders will prioritise the right metrics to get there.

References

1. Productivity Commission (December 2024)
Housing construction productivity declined 53% in physical output and 12% in labour productivity since 1995, whilst broader economy productivity rose 49%.

2. Australian Bureau of Statistics (June 2025)
Construction contributed 7.0% of Australia's GDP in 2023-24, employing 1.3 million people with total income of $633.6 billion.

3. Australian Securities and Investments Commission (June 2024)
Construction accounted for 27.7% of company failures (2,142 out of 7,742) between July 2023 and March 2024.

4. Infrastructure Australia (December 2024)
Low productivity, labour shortages, and material costs identified as major challenges; National Construction Strategy developed to boost efficiency.

5. Department of Treasury (March 2025)
Construction sector contributed $189 billion in gross value added in 2024, employing 1.36 million people across 450,000 businesses.

6. prefabAUS (May 2024)
Industrialised offsite construction can significantly reduce costs, build times, and emissions whilst improving productivity and housing delivery.

7. Minister for Industry and Science (July 2025)
Federal Government's 1.2 million home target under National Housing Accord; scaling prefabrication through technology and regulatory support.

8. Master Builders Australia (February 2023)
Cost pressures, labour shortages, and regulatory burdens slowing housing delivery; national reforms needed to improve productivity and affordability.

9. McKinsey & Company (2017)
Construction productivity grew 1% annually over two decades vs 2.8% for global economy and 3.6% for manufacturing; 50-60% productivity boost possible.