Construction report highlights building industry’s economic potential

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It highlights the key role the construction sector has played in the economic growth of the country, and the potential for New Zealand’s construction industry to lead the country out of its current unemployment slump and significantly lift domestic economic performance.
It also provides a review of the place of the industry in the nation’s economy, and sets out policy measures to smooth out the “boom and bust” cycles which have characterised the sector’s performance in recent decades.

The residential property speculation boom added approximately 60,000 jobs between 2000 and 2007, which is almost 50% more than any other sector in New Zealand. In the bust cycle that followed, the sector then experienced by far the largest decline in employment.

The report warns that an approaching potential boom period for the industry arising from the rebuilding of Christchurch, weathertight building remediation and pent-up demand for new housing in main centres such as Auckland, could be followed by a profound bust if past volatility patterns continue.
“There are many things the sector can do to improve career pathways and make businesses more productive and profitable,” Mr Williamson says.

The approaching boom offers an opportunity to address this volatility through government-industry partnership and government actions.
As a buyer of construction services and influencer of private sector behaviour, the Government could improve capital forecasting to provide certainty in planning for the sector and support where necessary, and build closer procurement relationships between central and local government.

It could invest counter-cyclically, thus removing pressure on firms who can’t afford to take on workers in bust cycles. This approach would also provide a steady growth path needed for training and career paths to be better assured and planned.
As an influencer, it could streamline the Resource Management Act and consent processes even more, as well as reduce speculative investment by levelling the playing field between asset classes.

It could also be more responsive to immigration trends, to keep a steady flow of skilled people coming into the country.
The Christchurch rebuild, earthquake strengthening and the remedial work on leaky homes raise the prospect of the largest construction-led boom in history. It also raises the question — do we currently have enough skilled people to do the work?
This reinforces the need to develop skills and capacity in the sector through industry training.

The Government has partnered with the sector through the Productivity Partnership to help fix some of the problems.
Mr Williamson says: “The Partnership aims to lift productivity in the sector by 20% by 2020. This will add around $3 billion to GDP. When you see these sorts of figures, it’s easy to see how important the sector is.”