Opinion | Boom Bust – The Impact on our Industry

One of our roles as industry leaders is to look out for trends that might affect our industry and give them airtime for us to look for solutions. 

One such trend that worries me is the huge loss of people from our construction supply chain that is currently happening. Forced by the current industry contraction. 

The current downturn we are experiencing has seen a dramatic loss of human resource from our industry. Our supply chain has been hollowed out over the recent past.

Unfortunately, our experienced construction industry players are very good at “right sizing” for the current workload. It’s called survival! That has meant shedding staff over the last 2 years. The industry is now right sized for a much smaller pipeline of work.

Architects and designers are 10-40% smaller. Builders have cut project teams as they finish projects. We are losing good people to Australia and losing them completely out of the industry. 

Workload was already reduced from the post-covid correction, but then the new government came along and further cut anything left standing, from Kāinga Ora for social housing to Ministry of Education for new classrooms to further exacerbate an already worsening pipeline. 

The result of the confluence of those two events is the huge loss of resource of architects, engineers, builders, together with their subcontractors.

The damage to NZ Inc. capability is huge. But also, annoyingly, from an NZ Inc. point of view, the best time for the government, or anyone else for that matter, to get a good deal for their project, is right now. 

If we treat our supply chain so flippantly, we get what we’ve always got…Boom Bust. And it won’t take long in an upturn for our “right sized” / shrunk industry to be stretched and inevitably prices will rise very quickly. Our industry now doesn’t have the capacity for our future workload needs. 

Contrast this to the Melbourne Government in the GFC, who, facing carnage for their industry said “Bring me the projects.” They built infrastructure, social housing and fixed their school shortage at a great price and kept the industry functioning. 

Sounds too hard…well, I suggest what’s harder; waiting to build those schools and housing for when the prices are inflated and time frames stretch, and we run out of gib board…that sounds harder to me. 

Of course, that’s exactly what we did in NZ. When we had the busiest construction industry in living memory, construction costs were going through the roof, and timeframes blowing out. The last government went on a state house building spree, ensuring they paid inflated prices for our social housing, not to mention making the boom worse. It’s time for our government to realise its role in the New Zealand supply chain and make some better decisions.

The cheapest time to build a state house or school is right now, and it would keep our supply chain operating and keep our workers in New Zealand, ready for the next upturn. 

Another lesson from Australia as a previous downturn started to bite, the government offered $10k towards a deposit for a new house build. That small gesture kept designers, builders, plumbers, sparkies and merchants all working, helping with their housing crisis. The increased taxes and GST paid for the incentive. 

It’s time for our government to play their role.  

Let’s treat our construction supply chain with the respect it deserves for our economy and future.