Is housing construction better suited to eradicate unemployment?

The infrastructure industry in New Zealand says it could get working without delay on certain game-changing building work, but the house building industry has suggested it might be better value for money as it will assist more people with employment.

Is housing construction better value for money as far as unemployment is concerned compared to heavy infrastructure?

Infrastructure and home building sectors vye for ''shovel ready'' cash

The New Zealand Government plans to kickstart the economy with $8.8 million in for ''shovel ready'' building projects, under the oversight of Infrastructure Industry Reference Group. Priority projects are to be announced in May.

Infrastructure New Zealand chief executive Paul Blair said there were plenty of jobs the industry could get cracking on while talks on larger investments continued.

“We need to have a shared vision on what the new New Zealand looks like. But between now and then, we can get going quickly on the no-regrets projects that we all stand behind,” he said. 

However, Professor John Tookey, of AUT's built environment department, said helping the residential part of the building sector would potentially assist more people.

A sole focus on infrastructure would not soak up unemployed residential builders because they used different skills, he said.

''There is crossover between residential and commercial. What there isn't is crossover between those two industries and infrastructure - no crossover at all. 

''Infrastructure is all about machines, residential is all about people and commercial is somewhere between the two. The point is, that you employ more people and spend more on wages. 

''[Wages] are about 50 per cent of the bill for a project in residential sector... whereas if you're building a road, only 20 to 25 per cent is direct labour costs.''

Tookey agreed with Infrastructure New Zealand however, that deferred maintenance on assets like schools was one way of immediately saving jobs.

David Kelly, chief executive of the Registered Master Builders Association, said residential was ''the hardest part'' of the construction sector to bolster, because it was not as conducive to big building programmes and relied on individual consumers. 

''Residential construction by dollar value is bigger than horizontal and commercial put together and the vast majority of it is from individual customers. So you can't just substitute a Government programme.''

It really came back to bolstering consumer confidence and the overall economy, Kelly said. 

Blair said wage and business relief was the first of three stages for the Government's Covid-19 response. 

The second was short-term stimulus to restart the economy such as tree planting or installing home insulation, and a long list of essential public works.

The third level was the ''once-in-a-generation chance to transform New Zealand'' through infrastructure.

“The competing ideas about which sectors, regions and outcomes matter most for New Zealand is an incredibly important debate,'' Blair said.

But the May budget did not allow the time needed to address the complexities of the debate and so work in the meantime should focus on no-regrets stimulus spending. 

This work included maintaining and upgrading contracts, less complex and more easily broken up projects.

Certain long-term needs such as clean water and safe hospitals would also not change in a post-lockdown world, Blair said.

However, dozens of disconnected projects could unhelpfully compete for labour and supplies, so a coherent programme of work was needed.

Leveraging local government was also important. Every $1 of extra revenue that the Crown gave to a council could be matched with $2.50 of borrowing, putting $3.50 to work in the economy. 

Blair said the Crown should provide funding to enable the Urban Growth Partnerships promised in its Urban Growth Agenda, and crucial interim reforms were needed to the Resource Management and Building acts.

“We need to rapidly design, consent, and procure a suite of future-focused projects that meet the needs of a future generations.''

“We also need to find ways to increase private investment for public benefit, just like the Ultra-Fast Broadband Initiative so successfully did in the wake of the Global Financial Crisis. 

Grant Porteous, managing director of Deacon Holdings, the master franchise for major building firm GJ Gardner, said there had been consultations between itself and Crown Infrastructure Partners.

CIP was trying to help the Government understand that the big wins for employment and New Zealand in the building industry were in residential construction, he said. 

''It reaches into every town in New Zealand. Not only is it a considerably larger market, per dollar spent, it employs far more people. 

''So grabbing and putting money into horizontal construction or vertical which is high risk, is of far less benefit in the key issue of jobs for tens of thousands and keep thousands of businesses alive.''

Source: Stuff.co.nz