By Richard Harman (author)
The Labour-led Government is already falling behind on infrastructure investment.
Infrastructure New Zealand last night said infrastructure investment projections were down dramatically on those of 2017, “highlighting the problem of uncertainty in the infrastructure sector and raising serious questions about New Zealand’s ability to service new housing.”
In its annual “national Construction Pipeline Report” the Ministry of Business, Innovation and Employment yesterday admitted that it had overestimated infrastructure construction activity this year.
“This year’s forecast is lower than previously forecast," their report says.
“ Actual national growth decreased by 0.3% in 2017, whereas the 2017 report had expected 10% growth.
“All three construction types (residential buildings, non-residential buildings and infrastructure construction) grew less than expected.”
Infrastructure NZ CEO, Stephen Sellwood said the change in projections highlighted the problem of uncertainty in the infrastructure sector and raised serious questions about New Zealand’s ability to service new housing.
Sellwood said research by the Building Industry Research Association (BRANZ) showed that after an increase in capital intentions in the near term, there would be a drop-off from the beginning of 2021.
“Putting the initial bump aside, overall infrastructure capital expenditure is forecast to flatline over the next five years,” he said.
Sellwood said that even with significant Government investment, Auckland would fall behind over the next five years. And the situation around the rest of the country was worse.
“BRANZ projections show that construction activity is projected to fall everywhere outside of Auckland over the next couple of years,” he said.
“We will not be able to address homelessness and meet growth with less infrastructure investment.
“Homes need pipes, roads and cables and new approaches to infrastructure investment need to be implemented.”
Ironically the MBIE report shows that construction has actually been strongest in Wellington.
“In 2017 the Wellington region had the strongest growth of any of the regions featured in this report,” it says.
“With total construction value increasing 11% to $2.8b. Wellington’s total construction value is forecast to remain at this elevated level before growing again in 2020 by 20% to $3.4b in 2023.
“Residential building activity is expected to drive growth in Wellington.
“Residential building values rose 15% in 2017, and strong growth is forecast, with an increase of 65% to $2.5b expected in 2023.“
“Non-residential building activity is expected to reduce slowly from the $0.8 billion in 2017 to around $0.5 billion in 2020. "
Outside Auckland, Wellington and Christchurch, Otago is the strongest region and its residential construction almost matches Wellington in value.
However the Minister for Building and Construction, Jenny Salesa said that for the first time since the Construction Pipeline forecasts were first published in 2013, the modelling forecasts sustained growth, reflecting strong construction demand nationwide.
“Further, national dwelling unit consents are projected to reach historic highs and we have already seen evidence of this with consenting in Auckland currently at its highest level for 15 years," she said.
“New Zealand’s traditional construction boom-bust cycles have undermined the certainty and confidence needed to grow skills and sustain a robust workforce over time.
"Gains made in peak periods dissipate and the effort to gear up again has taken energy that could have been more usefully applied to supporting innovation and efficiencies."