It’s a tricky time to write about the construction industry without getting drawn into political commentary (which is not generally the intent of this column), due to the sheer volume of change enacted or proposed to legislation or spending priorities.
Phil Mackay
For many in the industry, currently enduring a challenging economic environment, it certainly feels we’ve been poorly served by successive governments. This is due in no small part to the workings of the political system itself, nevertheless our governments continue to make decisions in a blindly ideological way, with insufficient consideration of the economic climate.
In recent years we’ve had a left-leaning government continue to add spending fuel to an economy running at full capacity, now followed by a right-leaning government intent on cutting spending with the economy in recession. Just as the previous government was naïve to believe that increased spending would automatically lead to improved outcomes, it is now equally naïve to think government spending can be easily cut without impacting front-line services.
Like many others, I remain concerned by New Zealand’s productivity. We continue to lose ground compared to other OECD countries, with Stats NZ measuring average annual productivity growth of just 0.5 per cent since 1996.
While it seems that nearly all our public services are in dire need of investment, we will find it increasingly challenging to meet this cost, particularly given our aging population, if we cannot significantly increase our productivity.
A key driver of improved productivity is investment, in plant and equipment, systems and processes, research and development, and in workforce education and training.
Businesses need confidence in their pipeline of future work to justify investment in plant and equipment, systems, and R & D. Likewise, businesses need the same confidence to provide continuity of employment, and employment opportunities, to retain the skilled workforce we have collectively invested in educating and training.
While the construction industry, like the rest of the economy, is inevitably cyclical, there is opportunity for the government to soften the impact by investing more counter-cyclically. Particularly with physical infrastructure spending, if the government was more measured in its own spending during boom times, and more stimulatory during tough times, it would go a long way towards smoothing the cycle. This in turn would provide businesses a more reliable pipeline, and confidence to invest in growing capacity and improving productivity.
To close on a positive note, business leaders too have an opportunity to soften the impact of the economic cycle.
Businesses can pay down debt, invest in efficiency enhancements, and build reserves during the boom times, to be better positioned to weather the challenging years.
Equally, spare capacity in quieter times can be put to good use refining processes, assisting with research, or developing new skills.
There are only so many hours in the day, and working more isn’t the answer to better quality of life.
If we hope to maintain and improve living standards in New Zealand, both business and government together must work smarter.
