Forgot to post some about the “other side”... Which is the side...

Forgot to post some about the “other side”...
Which is the side currently profiling itself to us right now?


“New Zealand’s construction sector has been struggling to keep up with demand in the face of capacity constraints. While there is plenty of work taking place, profitability has been getting squeezed as a result of cost pressures and delays. A BDO survey found many construction firms and sub-contractors are operating on unsustainable margins.

As a result of these pressures a growing number of companies have been forced into receivership or posted material losses. Perhaps the most noteworthy example is Fletcher Building which has lost almost $NZ1 billion over the past two years on large construction projects and posted a loss of $NZ190 million in 2017-18 – its first annual loss since the GFC.

This is not to say Australia is inevitably heading down a similar path. There are several important differences across the two countries.

Capacity utilisation began to accelerate in New Zealand much earlier, prompted by the 2011 Canterbury earthquakes, meaning spare capacity has been lower for longer than in Australia. Australia’s construction capacity was ramped up during the mining boom.

It’s likely the interstate migration of workers away from the mining sector in Queensland and Western Australia toward the housing and infrastructure sectors in Sydney and Melbourne has helped relieve pressure on labour availability. Labour availability has been a significant constraint in New Zealand.”
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“At the national level we are not seeing much evidence of cost pressures in Australia. But the details across New South Wales and Victoria, as well as anecdotes from ANZ clients, confirm this story is worth keeping a close eye on.”

Daniel Gradwell is a Senior Economist at ANZ

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