Economic performance of New Zealand’s construction industry

This research aims to improve our evidence base on the economic performance of New Zealand’s construction sector. In particular, this work focuses on the heavy and civil engineering construction sector.

In this research we measure and benchmark several key economic metrics for the construction sector, including changes in labour productivity, construction output prices, labour requirements, firm profitability, and solvency and liquidity risks.

Key findings

• While overall news is positive for the construction sector, low productivity growth in civil construction is concerning as it represents about 80% of the cost of building and maintaining New Zealand’s infrastructure networks.
• Construction productivity grew rapidly between the early 1960s and mid-1970s, prior to stagnating between the late 1970s and late 2000s. Productivity levels dropped sharply during the recessions of the late 1970s and early 1990s, followed by slow recoveries to previous levels.
• Since the 2008 Global Financial Crisis construction productivity has entered a period of sustained improvement.  
• In 2000, construction made up slightly less than 5% of New Zealand’s GDP (1.1% building construction; 1.2% heavy and civil construction; 2.5% construction services). By 2020, construction had grown to nearly 8% of GDP, mostly driven by growth in building construction and construction services (2.0% building construction; 1.6% heavy and civil construction; 4.0% construction services).
• During the early stages of the COVID-19 pandemic (2020–2021), large construction firms’ profitability, solvency risk, and liquidity risk improved slightly. This highlights the resilience of the construction sector during this period and significant government financial support through measures like the COVID-19 wage subsidy. However, the sector remains vulnerable to ongoing cost pressures and demand risks.