By Richard Michael
CEO, New Zealand Contractors' Federation
The Government’s long awaited announcement on bringing forward infrastructure spending has finally been made. In this column I will look at the details of the package and where to from here. Also, as many of you will know, I have resigned from the NZCF so this will be my last column as CEO and as such, I want to make a few general observations about the sector.
The first tranche of the Government’s fiscal stimulus spending was pretty much as expected, with money going to schools, state houses and roads. The total package amounted to about $500 million of accelerated spending over four years, of which $142 milliion is to be spent on roading.
The projects accelerated were the Kopu bridge, two projects in Hawke’s Bay, Muldoon’s Corner on the Rimutaka Hill road in Wellington and the Southern Motorway project in Christchurch.
What needs to be kept in mind is that these projects were on the books already, they have just been bought forward, which is likely to mean reduced spending at some stage in the future.
However, the Minister of Finance is still talking about another $4 billion of extra spending over the next four years – a significant chunk of which is likely to be spent on civil infrastructure.
These projects are all consented and ready to go so the money should start being spent almost immediately.
The Government has wisely spread the investment around the country to ensure regional economies are boosted. This is particularly useful as many local councils seem to have stopped spending in an effort to minimise rate rises this year.
In addition to this package, another $100 million of spending has been earmarked for upgrading the national electricity grid. This may also provide some work for our sector.
This is a good first step and has been well thought out. Another more substantial spending announcement has been foreshadowed for later in the year, when some larger projects will be able to be bought forward. Proposed changes to the Resource Management Act could speed up this process.
One of the key benefits of this package and others will be to retain skills in New Zealand. I see this as a crucial issue for the sector. We have spent considerable time and resources on expanding and upskilling our workforce to meet supposedly insatiable demand for infrastructure over the next 20 years or so. It would be a terrible waste and a long-term drag on the industry if those skills are lost.
If the duration of the downturn is reasonably short and we are looking at a gradual recovery starting sometime before the end of the year, we are going to need those skills again. However, it will be much more difficult to attract that talent second time around. This can only accentuate the damaging effects of the boom-bust cycle, leading to inflated prices and lower quality.
In a recent report by the Center for Advanced Engineering on such boom-bust cycles, one of its conclusions was that there is need for better planning and information if we are to try to minimise the effects. The Government has announced that it intends to produce a 20-year infrastructure plan. This has got to seen as crucial to our future and needs to be worked on as a matter of urgency.
On another more personal note, in view of my resignation from the NZCF, I want to thank all those members of the federation and industry who I have worked with over the past five years. The federation is a strong, well-organised group driven by the passion of its members, and it has been a privilege to be involved.
Over that time we have faced some difficult issues, but the level headedness and commitment of the organisation has allowed us to keep moving forward. I am sure that in these difficult times the federation will continue to lead the sector and ensure the industry, as a whole, is a profitable, safe and exciting place to work.
Contractor Vol.33 No.2 March 2009
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