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We must break building’s boom and bust cycles

David Kelly Chief executive of the Registered Master Builders Association

The past 50 years has seen a succession of boombust cycles in New Zealand’s construction sector.

Back in 1975 the sector was the largest contributor to GDP, usurping even agriculture. A decade later it had dropped to fifth, and by 1995 it did not even feature in the top-10. By 2005 it came back up to fifth but it returned to the doldrums throughout the 2010s, contributing to the current housing crisis. These cycles impact more than just the sector.

Construction is back, now the third-largest contributor, some $20 billion annually and sustaining more than 540,000 jobs. With 95 per cent of building firms employing 10 staff or fewer, our workforce is deeply embedded in their communities. They are responsible for building our homes, schools and hospitals. Construction is therefore doing its bit to help New Zealand recover from the historic disruption that Covid-19 has wrought. The challenge is great and the situation daunting.

Right now, the construction sector is like a fleet at sea, facing huge waves. If that was not difficult enough, it is also facing strong cross-currents beyond its control, such as the Government’s proposed immigration reset, remorseless demand, arch-labour constraints, low manufacturing capacity, and supply chain disruption.

We are navigating our way through it, but the concern is that when the storm is over the fleet will be left becalmed, perpetuating the boom-bust cycle. And once again the impacts will be felt by all New Zealanders.

Master Builders believes the crucial strategic question facing government, and the sector, is how to maintain continuity of supply through all types of weather, fair and foul. This is undoubtedly a strategic question because decades of uneven housing policies have fuelled the boom-bust cycle.

Perverse disincentives for council planning and consenting processes have grown since the 70s. Ad-hoc, incremental government policy changes since then treat symptoms rather than causes, and acute infrastructure financing limits for councils have seen public policy driving the dysfunction of the housing market.

This reinforces the crucial role of government. It is, after all, a significant player in the commercial construction market via hospitals, schools, libraries and other public amenities.

In the residential building market, which accounts for some 60 per cent of the country’s building and construction sector revenue, the market inequities flow from decades of uneven housing policies.

The Government has signalled that it wants to ‘‘build back better’’, as do our members, so we share a common goal. But how?

Housing must be viewed as critical infrastructure. This will ensure government takes faster and more definite action. Timelimited, counter-cyclical measures would smooth the disruptive effects of future bust

Housing must be viewed as critical infrastructure. Time-limited, countercyclical measures would smooth the disruptive effects of future bust cycles by ensuring longterm continuity of supply.

Focus

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2021-07-25T07:00:00.0000000Z

2021-07-25T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/281994675517922

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