Multiplier Effect Explained Through Sydney’s Growth

Pete Wargent provides a short report on Sydney and delves into the Multiplier Effect in an interesting article for the website Property Update. According to Wargent, NSW will piggyback on Sydney’s powerful drive towards becoming the hub of Asia Pacific.

Heightened building activity

Sydney is already doing pretty good on counts of employment, population growth and building activity. Retail turnover is displaying an upward curve and too many good projects are underway, Darling Square redevelopment, Randwick Racecourse upgrade, and Sydney Cricket Ground revamp being a few of them.

Government’s expenditure creates a chain reaction

Wargent sheds light on how government’s expenditure on projects enhances the living standards. The line he takes is fundamental yet inarguably solid. Government’s spending on projects add work to the kitty of construction companies which in turn bring the building (and raw material) companies out of slumber.

The Multiplier Effect

A part of their income goes towards wages, increasing disposable income and purchasing power (positively impacting marginal propensity to consume). Government siphons off part of the profit through taxes and redeploys the money through some other route. This way, a beautiful chain is created.

You can read the original article here.

Population growth in Sydney is possibly the biggest bonus in my opinion. The net overseas migration of skilled labour can be seen as the movement of right people at the right time. They give the luxury of choice to construction companies.

Skilled labour at a reasonable cost gives the developers perfect impetus to construct more properties. One look at Sydney and you can see thousands of development projects (off-the-plan, too) coming up. All great signals I suppose!

Do you see red tape and compliance difficulties being sorted out for the construction industry?