Budget Clarity Welcome, Infrastructure Construction Needs Urgency

Civil Contractors New Zealand welcomes the clarity of the government’s future infrastructure funding plans provided by Budget 2024 but warns projects and work programmes may still be too far in the future, and immediate stimulus is needed to sustain the industry.

Civil Contractors New Zealand Chief Executive Alan Pollard said while the budget provided much-needed clarity about the future work programme, and the government should be congratulated for its focus on delivering infrastructure, urgency was needed to bring work to restore confidence to the market, so infrastructure constructors could be ready to go when projects – both large and small - came online.

“It has been hard for contractors to wait over the past few months. A significant gap in central and local government work has meant contractors have been holding on for more clarity on how, when and where the infrastructure work programme will be delivered.

“The 2024 budget at least gives clarity, but we must work with urgency to resolve the current market downturn, so we aren’t laying off staff when we should be building capacity, and so we can get back to work constructing and maintaining the vital transport, water and other infrastructure networks NZ relies on.”

Mr Pollard said contractors were resilient, but many companies were struggling and downsizing because of a lack of work, uncertainty around future projects and spiralling expenses caused by the rising costs of regulation and procurement.

The going was particularly tough in the Auckland region which had seen a ‘perfect storm’ of projects deferred, cancelled and re-thought. While the agreement with Watercare provided some welcome relief in that region, other regions such as Canterbury had considerable construction capacity and capability, but very little forward work.

He said the delay from project announcements to construction was sometimes lengthy. Government re-alignment and improvement of infrastructure investment planning and policy during this term of office was important, but urgent attention was needed to fill the immediate workflow gap so a strong and stable civil construction industry was ‘ready to go’ when projects hit the market.

It did not make sense to hold off and for businesses to scale down, at a time when infrastructure investment was sorely needed, he said.

“While the prospects for infrastructure investment under the coalition government look very positive in the medium to long term, work in the short term has dried up as clients (central and local government) cancel or defer projects.

“The largest proportion of business failures this year is in the construction sector, while other businesses are downsizing to ensure survival. That creates a significant risk for the delivery of the medium to long term infrastructure programme, as scaling up again will require confidence to return to the industry.”

Mr Pollard said it was great to see funds for cyclone recovery. But longer term adaptation works such as seawalls and stopbanks to protect communities from severe weather events needed specific attention. While considerable cyclone recovery work was planned for in Hawke’s Bay and other impacted regions, much was still in the design phase rather than under construction, and a more coherent package of adaptation work was sorely needed.

“The latest Investment Statement from Treasury put our combined infrastructure gap at a whopping $210 billion. To make headway and create a thriving New Zealand for future generations we need a lasting commitment, from all political parties, to build and maintain the transport, water, energy, and communications infrastructure that’s desperately needed.

Lack of workers and specific, targeted mental health support for under-pressure workers in construction were other key challenges faced by the industry, both during the gap in work and later, as industry scaled up to deliver on government’s vision for infrastructure, he said.

“It has been disappointing to see the lack of recognition for the skills of civil construction workers, who operate high-risk machinery at a large scale, over several decades.

“We need the education and immigration systems to better recognise the targeted skills that construction workers have and need – not just engineers and planners, but also skilled civil tradespeople who will construct the physical works we need.”

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