The NZ Industry

Further background
What makes the New Zealand building industry special especially compared to Australia, the UK or US?

Just as in our ‘usual’ reference countries such as the UK, US and Australia, the New Zealand building and construction industry is central to the economy, contributing 5% to GDP, employing 8% of the workforce1, and providing the facilities the remainder of the economy depends upon.

Unlike those countries however, the local industry is spread thinly, lacking the ability to create efficiencies of scale because demand is relatively small. Contributing to this, New Zealand has no major cities to stimulate the sort of investment needed to create this scale, apart from Auckland. As a result, the New Zealand industry has grown very efficient at creating bespoke buildings, even housing, and the entire industry, it’s supply chain, and manufacturing base is geared towards that.

Why is this industry important to New Zealand and New Zealanders?

Every dollar spent in the industry passes through numerous hands, lubricating the national economy on the way, and results in buildings and infrastructure (loosely, the “Vertical” and the “Horizontal” built environment respectively) that support the private and work lives of New Zealanders. The built environment is the foundation of the New Zealand economy, supporting every facet of it, from farming to movie making – and in addition to what it makes possible, it is a valuable asset in itself.

The current building stock, excluding land, is valued at around $388 billion – approximately seven times the value of the NZ stock market in December 2008, and that’s before adding the $88 billion of civil infrastructure. Because the built environment is very long-lived, a healthy industry to maintain, modify, and replenish it is a national priority.

What are the great challenges we face?

New Zealand as a whole has a relatively small economy, which is heavily reliant on primary industries that effectively export sunlight and fresh water, and tourism. As top-line focal issues for the government and a large proportion of the population, these are unlikely to change over the next five years. Because of that, the protection of these natural assets is likely to be a driver of change, via such instruments as an emissions trading scheme – in whatever final form it assumes. Our population will continue to grow, with most estimates suggesting it will peak at around 5.5 million in 2040, although a much more pressing change will come from the higher proportion of older people in the population and the increasing preference for urban living. Global factors will continue to affect New Zealand to a much greater extent than many of our trading partners, again because of the small size of our economy. We are largely passive observers in issues such as energy prices and financial

The industry itself continues to be more reactionary to these higher-level trends, rather than proactively anticipating them, possibly due to the small enterprise size arising from our bespoke building culture. Quality issues such as weathertightness require joined-up actions rather than finger-pointing, whilst the legacy of short-term planning horizons – deferred maintenance and ageing infrastructure – will require active leadership to overcome. The industry is also concerned to establish clear career pathways for those considering building as a livelihood, and backing that up with solid trade skills and management training. As the New Zealand economy is very dependent on global factors, and because short – term planning often takes precedent over strategic planning, the industry is also very vulnerable to the peaks and troughs of the general economy. Because of the industry’s importance to the national economy, these fluctuations are often amplified into the well-known boom/bust cycle, which lowers the overall productivity of the sector.

Where is the industry going in the future - what is exciting and promising about the future?
  • The future promises to make building easier and less risky, via product verification and practitioner licensing schemes – if the industry drives what it wants rather than leaving it to the government.
  • New technology will always provide ways of delivering better products, if the right skills are available to capitalise on it. The industry has the opportunity to direct its own skills programme to make sure that this happens.
  • The drive for higher productivity in the industry will reward those that find new ways to do things better – the weathertightness crisis has taught us that it is more productive to do it once, and do it right.
  • New ways of engaging with our clients are beginning to take hold – partnerships and early industry engagement offer much better security for contractors and clients alike.

Much of the industry‘s future is in its own hands. The Construction Strategy Group is therefore paying close attention to ensuring that it puts in place ways to ensure the industry is being heard at government level. It seeks to foster a strong working relationship with industry sector representative bodies through the Construction Industry Council (CIC); and to develop what it regards as much needed closer understanding within the public sector of the complexities of the industry at work. The willingness of central Government to listen to the industry via the CSG has been encouraging. It offers good prospects that future collaboration can find answers to the build issues confronting the community today.

1 From DBH Briefing to Incoming Minister, November 2008: ISBN 978-0-478-32770-0