This publication presents final results from an Australian Bureau of Statistics (ABS) survey of employing and non-employing private sector and public trading construction services businesses. The survey was conducted in respect of the 2002-03 financial year. The estimates in this publication are derived using a combination of data directly collected by the ABS and business income tax data provided to the Australian Taxation Office (ATO).
The collection was last conducted in respect of the 1996-97 reference period.
MORE INFORMATION ON ABS SERVICE INDUSTRIES STATISTICS
Information about ABS activities in the field of service industries statistics is available from the Service Industries Statistics theme page on the ABS web site <http://www.abs.gov.au>. To access the theme page, select 'Themes' from the menu on the home page.
The ABS welcomes comments and suggestions from users regarding future surveys of Service Industries. These comments should be addressed to the Director, Service Industries Business Statistics Centre, Australian Bureau of Statistics, GPO Box 2796Y, Melbourne, Vic. 3001.
Where figures have been rounded, discrepancies may occur between the sum of component items and the total.
For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Geoff Frost on Melbourne (03) 9615 7787.
This publication presents the results of the 2002-03 Construction Industry Survey. This survey is conducted periodically by the ABS to provide a detailed measure of the performance and structure of construction businesses operating in Australia. The main focus of the survey was on understanding the composition of the income earned by these businesses, details of expenses incurred and the nature of the work undertaken. A state dimension is also presented.
The survey scope included employing and non-employing private sector and public trading businesses in Australia that generated income predominantly from general construction and construction trade services. These services included: building and non-building construction, site preparation services, building structure services, installation trade services and building completion services.
For ease of reading 'residential building' is referred to as residential, 'non-residential building and non-building' is referred to as non-residential and non-building, and 'construction trade services' as trade services in this publication.
At the end of June 2003, there were 339,982 construction businesses operating in Australia with employment of 716,200 persons. Most of these businesses (79.2%) and most of the employment (73.2%) were in trade services. See paragraphs 34-36 of the Explanatory Notes for an interpretation of these items.
During 2002-03 these businesses generated $140.9b in income. Construction businesses were predominantly small businesses with most (64.7%) earning less than $100,000 in income.
More income was generated from the construction of houses than from any other type of structure ($48.4b or 38.5% of all income from trade services, building and construction). Non-residential building ($37.4b or 29.8%) accounted for the second greatest share of this income.
A total operating profit before tax of $13.8b was recorded by construction businesses in 2002-03, resulting in an overall operating profit margin of 10.1%.
The total industry value added of the construction industry was $38.8b, contributing the equivalent of 5.1% of Australian Gross Domestic Product (GDP) for 2002-03.
SOURCES OF INCOME
The total income generated by all construction businesses during 2002-03 was $140.9b. Most of this income (89.2% or $125.7b) was generated from trade services, building and construction, followed by other sales of goods and services (8.3% or $11.7b).
Contracting and Subcontracting Income
Income from trade services, building and construction was generated through contracting and subcontracting services. Contracting income comprised $83b (66% of the total), while subcontracting income accounted for $42.7b (34%).
Residential, and non-residential and non-building businesses accounted for $64.9b of the contracting income, while $18.1b was from trade services.
Subcontracting income was more prevalent within trade services businesses accounting for $36.1b, while residential, and non-residential and non-building businesses generated a combined $6.6b.
Type of Client
The following graph shows that other organisations were the major source of all contracting income from trade services, building and construction, accounting for 45.7% of all contracting income. Householders accounted for 36.3%, Federal, state and local government accounted for 11.5% and same business (as the property owner) accounted for 6.4%.
Contracting income by type of client, Percentage contribution(a)
The following graph shows that householders were the main client for residential construction businesses accounting for 66.5% of the total contracting income for these businesses. The main client for non-residential and non-building businesses were other organisations, namely private businesses (63.8% of total contracting income for non-residential and non-building). Trade services businesses generated most of their contracting income from two sources: other organisations (50.8%) and householders (38.8%).
Contracting income by type of client, Percentage contribution(a)
Type of Asset
Houses and non-residential building accounted for most of the income generated from trade services, building and construction (38.5% or $48.4b and 29.8% or $37.4b respectively). Other non-building construction accounted for 15%, other residential building 12%, and road and bridge construction 4.7%.
New work and improvements accounted for 89.6% of the income generated from trade services, building and construction, while repairs and maintenance accounted for 10.4%.
Residential building accounted for 47.6% of contracting income, comprising 32.2% for new construction work; 12.2% for alterations, additions, renovations and improvements; and 3.3% for repairs and maintenance. Non-residential accounted for 28.6% and non-building construction 23.8%.
The majority of subcontracting income (56%) related to residential building comprising 47.9% for new construction work; 4.8% for alterations, additions, renovations and improvements; and 3.2% for repairs and maintenance. Non-residential building accounted for 32.1% and non-building construction 12%.
Total expenses incurred by construction businesses during 2002-03 was $128.3b. Major expense items included: purchases ($55.5b or 43.3%), payments to contractors/subcontractors ($22.5b or 17.5%) and labour costs ($21.5b or 16.8%).
Purchases constituted over half of all expenses (56.2%) for residential businesses while expenditure for this item was similar for non-residential and non-building businesses and for trade services (39.5% and 38.2% respectively). Labour costs comprised a higher proportion (23.3%) of total expenses for trade services than for non-residential and non-building (15.6%) and residential (7.7%). Payments to subcontractors was also more prevalent in non-residential and non-building (26.1%) than in residential and trade services (16.3% and 10.5% respectively).
Residential building construction consists of businesses mainly engaged in the construction of houses or other residential buildings, or in carrying out alterations, additions or renovations or general repairs to such buildings, or in organising or managing these activities.
There were 48,201 residential building businesses operating during 2002-03 accounting for 14.2% of all construction businesses. They had employment of 85,300 persons (11.9% of total construction employment), an average of 1.8 persons per business.
These businesses generated $35.4b in income (25.1% of all construction income) averaging $734,500 per business.
Contracting income accounted for 82.9% ($29.4b) of all residential income and was mainly earned from householders (66.5%) and other organisations (20.7%).
Businesses in the residential building industry spent a smaller proportion of their total expenses on labour costs, and more on purchases, than other construction businesses. Labour costs for residential building businesses accounted for $80 for every $1,000 of expenses, compared to an average of $170 per $1,000 across all construction businesses. Payments to contractors and subcontractors accounted for $170 in every $1,000 of expenses, only slightly lower than the average of $180 in every $1,000 across all construction businesses. Purchases were a greater proportion of total expenses than in other construction industries: $560 per $1,000 expenses for residential building businesses and $430 per $1,000 expenses for all construction businesses.
The operating profit before tax for these businesses was $3b resulting in an operating profit margin of 8.7%.
Non-Residential and Non-Building
Non-residential and non-building construction consists of businesses mainly engaged in:
At the end of June 2003 there were 22,553 non-residential and non-building construction businesses with employment of 106,400 persons (14.9% of total construction employment) or an average of 4.7 persons per business.
- the construction of non-residential buildings, in carrying out alterations, additions or renovations or general repairs to such buildings, or in organising or managing their construction; and
- the construction or general repair of roads, bridges, railways, dams, pipelines or other non-building construction projects, the on-site assembly of boilers, furnaces or heavy electrical machinery from pre-fabricated components, or organising or managing their construction or assembly.
During 2002-03 these businesses generated $44b in income (31.2% of total industry income) averaging $1.9m per business.
Income from contracting comprised 80.9% ($35.6b) of all income for non-residential and non-building businesses.
Other organisations accounted for 63.8% of all contracting income paid to non-residential and non-building businesses, while government clients accounted for 19.8%.
Businesses in non-residential and non-building spent a higher proportion of their total expenses on contractors and subcontractors for construction work. They paid an average of $260 per $1,000 expenses, compared to $180 per $1,000 for all construction businesses.
The operating profit before tax for these businesses was $2.6b resulting in an operating profit margin of 6.2%.
Construction trade services consists of businesses mainly engaged in providing special building or construction trade services, such as structural steel erection, carpentry, bricklaying, concreting, plumbing, painting, plastering, tiling and carpeting.
Trade services businesses accounted for 269,228 or 79.2% of all construction businesses at the end of June 2003 and had employment of 524,400 persons (73.2% of total construction employment).
Total income generated by these businesses during 2002-03 was $61.5b. The majority (182,812 or 67.9%) of these businesses were earning income less than $100,000 and accounted for 83.1% of all construction businesses in this income size group. Trade services businesses in this size group generated $7.6b in income.
Trade services businesses relied on both contracting and subcontracting income. For every $1,000 of income, $290 was earned from contracting and $590 from subcontracting.
The main sources of contracting income within trade services were from other organisations (50.8%) and householders (38.8%).
These businesses spent proportionally more than the industry average on labour costs and proportionally less on purchases and payments to contractors and subcontractors. For every $1,000 of expenditure, construction trade services businesses spent $230 on labour costs, $110 on payments to contractors and subcontractors, and $380 on purchases. This compares to averages of $170, $180 and $430 per $1,000 expenditure respectively for all construction businesses.
The operating profit before tax was $8.2b resulting in an operating profit margin of 13.6%.
The construction industry was characterised by a large number of very small businesses. During 2002-03, 64.7% (219,926) of construction businesses earned income less than $100,000 and a further 25.3% (86,035) earned income between $100,000 to less than $500,000. Combined, these small businesses generated $27.3b in income (19.4% of total industry income).
Businesses earning less than $100,000 generated $8.9b (6.3%) in income. The majority of their income came from subcontracting (51.4%), contracting (39.4%) and other sales of goods and services (7.3%).
Businesses earning income of $100m or more generated $29.9b (21.2% of all income). The sources of income and expenses were the same as the smaller businesses, but the proportions varied. Contracting income comprised 79.3% of total income for these businesses, subcontracting 12.7% and other sales of goods and services 5.4%. A large proportion of the total income (42.1% or $59.4b) for construction businesses was generated by businesses earning $10m or more. These businesses comprised 0.4% (1,354) of all businesses.
Selected income by income size
The following graph shows the expenses incurred by the various business sizes. For businesses earning less than $100,000, purchases was the largest single expense item (34.9%), followed by payments to contractors/subcontractors (15.4%) and labour costs (8.8%). Businesses earning $100m or more paid 37.5% in payments to contractors/subcontractors, 32.5% for purchases and 15.3% in labour costs.
Selected expenses by income size
The average operating profit margin for businesses that earned less than $100,000 was 40.4%. This represents an average profit before tax per business of $16,000. A contributing factor to the high profit margin for businesses in this size group was the fact that some of these businesses were operated by sole proprietors and partners; the drawings of these persons were excluded from business expenses, and thus profit calculations. The average operating profit margin for businesses earning $100m or more was 6.1%.
At the end of June 2003 construction businesses had employment of 716,200 persons comprising 439,600 employees (61.4%) and 276,600 (38.6%) working proprietors/partners of unincorporated businesses.
Trade services businesses had the largest proportion of employees (66.4%), followed by non-residential and non-building (21.5%) and residential (12.1%). Most of the working proprietors/partners (84.1%) were found in trade services.
Small businesses (those with income less than $100,000) accounted for a large proportion (72% or 199,000 persons) of all working proprietors/partners, but only 6.2% (27,400) of all employees.
STATES AND TERRITORIES
New South Wales had the highest proportion of total income (33.5%) followed by Victoria (24.4%) and Queensland (20.5%).
The states/territories with the highest performance ratios for total income per head of population during 2002-03 were the Northern Territory, Australian Capital Territory, Queensland and Western Australia. Construction businesses in the Northern Territory earned $11,700 income per head of resident population, the Australian Capital Territory $8,200, Western Australia $8,100 and Queensland $7,600 compared to a national average of $7,100.
Western Australia, Queensland and the Northern Territory were also above the national average for persons employed by construction businesses per 1,000 population. Western Australia employed 42.6 per 1,000 population, Queensland 37.8 and the Northern Territory 36.8, compared to a national average of 36.0. These same states/territories also paid the highest average wages and salaries per employee; $42,100 in Western Australia, $41,000 in the Northern Territory, and $40,600 in Queensland, compared to a national average of $39,600.
The two states that were below the national averages for income and employment per head of resident population were Tasmania ($3,500 income per head of population and 25.4 persons employed per 1,000) and South Australia ($5,200 income per head of population and 28.7 persons employed per 1,000).
OWNER BUILDERS STUDY
The purpose of the Construction Industry Survey was to present data which collected information from businesses whose predominant activity was construction. However, some construction activity, particularly related to residential building, is done by private individuals for their own use. These individuals are generally referred to as owner builders and were excluded from the scope of the Construction Industry Survey.
The ABS undertook a study of owner builders to investigate the relationship between the various inputs, which included payments to contractors, purchase of materials and the value of the owner builders' own labour. Information on the scope and methodology of this survey can be found in Technical Note 2.
The study showed that the proportion of the value of the owner builder's labour was higher in alterations and additions (20%) than in new work (18%). Expenses on materials as a proportion of inputs was, however, higher for new work (43%) than for alterations and additions (39%). Data from the study can be found in Technical Note 2.
Summary of operations by construction industry
Non-residential and non-building
|Employment at end June|
|Working proprietors and partners of unincorporated businesses||'000|
|Income from trade services, building and construction|
|Other sales of goods and services||$m|
|Payments to contractors and subcontractors for trade services, building and construction work||$m|
|Operating profit before tax||$m|
|Operating profit margin||%|
|Industry value added||$m|
|Net capital expenditure||$m|
|Contracting income from trade services, building and construction by type of client|
|Federal, state and local government||$m|
|Same business (as property owner)||$m|
|(a) Operating at any time during the year ended 30 June.|