EasyBuild director and Building Today columnist Mike Fox wonders why, considering the construction industry’s significant contribution to New Zealand’s GDP, the industry continues to be seemingly neglected by government?
Having a building career spanning 40 years has given me the opportunity to experience the many financial, political and technical cycles that affect the construction industry.
And over this time, one thing that’s become more apparent to me is that politicians don’t seem to understand the relevance of our industry, nor the role it plays in supporting New Zealand’s economy.
Let’s set the scene
The construction sector is New Zealand’s fifth-largest sector by employment, with around 200,000 full-time employees, and approximately 54,000 additional full-time employees in construction-related services — altogether, making up more than 10%, and growing, of total employment across the economy.
There’s no denying that our sector plays a large role in New Zealand’s economy, contributing strongly to employment, businesses and GDP.
Construction and construction-related services contributed around 9% of New Zealand’s total GDP in 2015, and have an even greater impact when integration with other parts of the economy is considered.
As a sector, we deliver almost as much GDP as the whole of the Waikato region, and this contribution is growing rapidly.
Over the past three years, core construction has seen 17% GDP growth, overtaking wholesale trade to become the eighth biggest contributing sector to GDP.
Quoting the 2016 PWC Valuing the Role of Construction in the New Zealand Economy report: “For every dollar invested in construction, circa three dollars of activity are generated across the economy” — making the construction industry one of the nation’s most stimulatory sectors.
Out of the top 10 individual sectors by contribution to New Zealand’s GDP, construction supported the highest job growth between 2012 and 2015, with core construction contributing one out of every five new jobs in New Zealand (26,000 new jobs).
This has undoubtedly grown in the five years since, and it’s important to note that this figure excludes construction-related services so, in reality, the total new jobs will be much higher.
In contrast, the agriculture, forestry and fishing sector, for example, contributed a much smaller 330 new jobs over the same period.
With such an impact, you’d expect our industry to be supported and nurtured by Government. Instead, the opposite occurs.
Endless challenges
Our industry continues to face a seemingly endless list of challenges that, for some reason, fly under the radar in the eyes of the Government:
• We work under the Building Act, one of the most confusing and regulated acts in existence. Even lawyers struggle to understand its many vagaries and cross references to other Acts and regulations.
• The national housing crisis has been apparent for at least a decade, and yet we continue to be moribund in red tape and process. Lots of hand-wringing and finger pointing takes place, but there’s no effective ownership or action.
• The LBP scheme has never delivered value or any real stature to the practitioners or the consumer. Currently it just adds cost and process to the build. Builders should be signing off more of their own work like plumbers and electricians.
• Joint and several liability has strangled our industry, driving up costs and wiping out co-operation within it.
• Suicide is ashamedly 34 times more likely in our sector than any other. Why? It can be a dog-eat-dog environment, starting with unfair contract conditions. Unfortunately, Government agencies are some of the worst culprits.
• Our industry is very unproductive and slipping further back behind other similar industries.
• The majority of the laws that impact our industry are set by central government and left to local councils to administer, yet many councils are ill-equipped to resource and administer them.
There needs to be a review and cull of unnecessary regulations.
• Poorly written laws such as the Health and Safety Act where no clear directive is given force businesses to default to the most complex scenario imaginable, almost always beyond practicality and costing the builder and consumer significantly more than it should.
• With zero industry input and at very short notice, the Department of Building and Housing was subsumed into a “super ministry”, the Ministry of Business Innovation and Employment (MBIE).
The result has been a loss of industry focus and watering down of the services provided to the industry.
This list could go on almost indefinitely as to the things our industry needs political and governmental focus and support on to make it efficient and sustainable. At the end of the day, one thing is clear — change is needed.
Leper industry
But why isn’t change forthcoming? Why is the construction industry continually left to fend for itself by Government?
Continued disregard for our industry has us looking like the leper that no senior Minister wants to have.
It is an indictment on successive governments that they don’t give our industry the credence it deserves.
Governments have paid lip service to our industry by giving the construction portfolio to their Minister of last resort, often outside of cabinet or to an inexperienced Minister who seems to come from nowhere and then returns there with little achieved.
Another reason we haven’t had good outcomes is that any Minister for Construction is perversely supposed to protect the consumer as well as represent the industry. You can’t serve two opposing masters and expect good outcomes for both.
We haven’t had a Minister who has really championed for our industry in the entire 40 years I have been involved in it.
For all his faults, Winston Peters really stepped up for the racing and fishing industries as their Minister and actually made a difference.
Yet we have never had that level of representation and, unfortunately, this neglect shows.
And all the while, as stories about insufficient affordable housing, delays and inefficiencies continue to get louder, our industry is seemingly ignored by the day.
The housing crisis is one of the most pressing issues our country faces but, apparently, isn’t important enough to be handled by a top-ranking Minister with the clout and dedication to make impactful change. Or am I missing something?
Broad benefits are to be gained for the economy from support for our sector
There is a large return to be gained by New Zealand’s economy from dedicated support for a sector that continues to struggle with the cyclical nature of work and low productivity.
Since 2012, measured labour productivity has increased by a total of only 1%. But every 1% increase in labour productivity for construction yields an increase in GDP, so it’s surely a no brainer for the Government to focus on boosting our industry’s productivity.
More broadly, improving performance of the sector provides a range of benefits which will be shared by industry and consumers.
For the industry, this means improved profit margins, better skills development and earning opportunities, and a better ability to weather the cyclical nature of the industry.
For consumers, this means that high quality construction will cost less, there will be fewer project delays, and a wider variety of options will be available to satisfy consumer demand — and, ultimately, that more houses are available for more Kiwis.
And what if change doesn’t occur?
Without change, our sector will struggle to meet medium-term demand. There is a significant task ahead to accommodate new private sector and government demand, compounded by the nationwide housing shortage.
The opportunity for the construction sector is significant, but the sector will not be able to meet the challenge without a serious rethink of how we break free of the constraints currently holding the industry and the country back.
Our industry is vitally important to the country, and the quality and amount of leadership, coupled with change, is paramount to the sustainability of the industry and the provision of housing that our nation so desperately requires.
• Note: The majority of statistics in this article come from the 2016 PWC Report Valuing the Role of Construction in the New Zealand Economy.
• This article contains the author’s opinion only, and is not necessarily the opinion of the Registered Master Builders Association, its chief executive or staff.
