Economic performance of New Zealand’s construction industry

This is the September edition of our Research Insights series. Research Insights looks at a wide-range of topical issues that impact the infrastructure sector.

About the report

Te Waihanga Director of Economics Peter Nunns and Economist Hannah Oullet explore the economic performance of New Zealand's construction industry. Their research shows that 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.

Other findings include:

• 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.