Across Australia, and in particular the building and construction industry, the need to boost productivity is more critical than ever.
Comment from Geoff Crittenden, CEO, Weld Australia
Nationally, labour productivity growth has been slowing since the mid-2000s. According to Treasury reports, the decade to 2020 experienced the slowest productivity growth in 60 years, falling to a yearly average of 1.2 per cent. By comparison, the late 1980s to early 2000s saw a labour productivity growth rate of around 3 per cent.
While this downward trend is roughly in line with the average OECD labour productivity growth rate of 1.4 per cent, Australia has dropped from number 20 to 41 globally in terms of workplace productivity. The slowdown in productivity growth has concerning implications for our economic growth, real wages, and overall living standards, which are key to prosperity.
The construction industry ranks among the lowest in terms of productivity performance: even an increase to the national average would deliver billions of dollars to the economy. What’s more, Australia’s state and federal governments have a pipeline of infrastructure, housing, and energy projects that are not achievable with our current productivity performance. Solving the productivity problem is paramount to their success.
Productivity as a key economic driver
Labour productivity is a major contributor to economic efficiency and rising living standards. Over the past 30 years, labour productivity has accounted for around 70 per cent of the growth in Australia’s living standards, as measured by real gross national income (GNI) per person. For living standards to improve, we need sustained labour productivity growth – defined as the ratio of output to labour input.
In the construction sector, lack of productivity gains is one of the greatest challenges to project completion, resulting in only 50 per cent of project owners meeting delivery deadlines. Poor productivity is placing increased pressure on businesses that are already feeling the squeeze of rapidly escalating labour and supply chain costs, high inflation, and long wait times for equipment and materials. Improved productivity performance is crucial to delivering on the Federal Government’s pipeline of $120 billion infrastructure spend and $800 billion of investment in renewable projects by 2050.
On a broader level, Australia’s capacity to navigate economic challenges and capitalise on opportunities hinges on having dynamic, productive, and innovative businesses. Weak productivity hampers the economy: in fact, the past 30 years of slow productivity growth has equalled approximately $47 billion in lost opportunity.
The productivity challenge in Australia
A driving factor behind the productivity slowdown is a decline in business dynamism. This has slowed the rate of technological adoption and innovation and inhibited resource allocation to more productive companies. As a result, there are a growing number of zombie firms – businesses that are unprofitable but remain in the market, sometimes with government support. At the same time, increased market concentration has led to reduced competition and higher price markups.
Recent years have also seen large structural changes in the economy, with shifts towards the services sector, which typically has slower growth according to traditional productivity metrics. The ongoing impacts of COVID-19 on productivity remain uncertain, as working-from-home models could enhance productivity in some sectors while worsening pre-existing challenges for productivity growth in others.
According to the Federal Government’s projections, the current productivity growth rate of 1.2 per cent will erode relative living standards—with GNI per person forecast at $32,000 lower than an LP rate of 1.5 per cent. However, we are unlikely to see an increase in Australia’s LP rate without additional government policy drivers aimed at addressing barriers to business dynamism, driving technological transformation, and incentivising businesses to improve productivity performance.
In the construction industry, while the number of workers has increased in the past decade, output per worker has reduced. On average, people are working two hours less per year with 25.4 per cent lower output – calculated as construction work completed divided by the number of workers. For example, worker output in 2023 was $180,100, compared with $196,800 in 2018. With demand for skilled workers continuing to outpace the available supply, greater productivity is key to raising worker output.
Productivity solutions in the welding industry
In the welding industry, productivity is equally imperative to driving innovation and growth. Welding businesses that maximise efficiencies and optimise operations benefit directly from cost savings and better use of resources. Labour, equipment, and materials can be more effectively allocated to minimise waste and energy consumption. Productivity gains lead to faster project completion times – enabling companies to exceed client expectations and ensure repeat business.
Our recent member survey revealed that two-thirds of Australian welding businesses rate the productivity of their staff as good or excellent. However, more than 42 per cent of welders are spending eight hours or less on site every day, and one-quarter spend less than two hours of their shift doing actual welding. The factors most likely to impact on the productivity of welding staff are materials handling and staff shortages.
A clear pathway to productivity is through technology. When companies are focused on improving their processes, they naturally innovate – implementing the latest technologies in a bid to streamline operations. However, Australian companies generally lag their global competitors in digital adoption and unfortunately the welding sector is no exception. Uptake of advanced welding technology remains relatively slow, and this lack of tech adoption is impeding our ability to navigate the current challenges facing the industry.
Most welding businesses are still not leveraging robots or collaborative robots, known as cobots. These are robotic arms equipped with sensors so they can safely work alongside humans, unlike traditional industrial robots, which are a potential hazard to human workers. They are designed to take on mundane and repetitive tasks, freeing up workers to take on high-value tasks.
By leveraging the benefits of cobot welding, businesses can increase their productivity and reduce labour costs, while improving the quality of their welds. Given that the major barriers to productivity are materials handling and a lack of skilled staff, there is an opportunity for welding businesses to harness the capabilities of advanced welding technologies to overcome these issues.
How Weld Australia is boosting productivity
To address the productivity challenge in Australia’s welding and fabrication industry, Weld Australia is seeking grant funding for a productivity-based training scheme.
Under the program, fabrication companies would be supported to conduct their own staff training at little to no cost – with Weld Australia providing advanced learning resources, training for the instructor, and accreditation for the training facility. We would also quickly certify production welders according to ISO 9606 or AS/NZS ISO 1554–so that businesses don’t have to wait three or more years for a Certificate III or IV trained welder.
Weld Australia is also undertaking research into welder productivity, which is defined by the number of arc-on-time per welder per shift. In Australia, our member reports show that the average arc-on-time is around two hours – compared with approximately five hours per welder per day in countries like the United States and Germany, which have similar Workplace Health and Safety Standards.
Our research will investigate the reasons behind this marked difference in productivity, with the objective of identifying potential solutions such as using robots and cobots, and trades assistants for tasks such as griding, set up and cleaning.
These two projects could help raise the welding capacity of the Australian industry by enabling us to match international productivity standards. If you would like to be involved in Weld Australia’s Productivity Improvement Projects, please contact Cornelis Van Niekerk (business manager, Weld Australia) via c.vanniekerk@weldaustralia.com.au or 0409 609 031.