Week in Review

‘Brain drain’ could follow border re-opening

Construction work is being rescinded, delayed and deferred - all of that doesn't bode well for what might happen to the sector when travel restrictions between Australia and New Zealand are lifted

A trans-Tasman bubble could lead to an exodus of skilled tradespeople unless more is done to keep them employed.

Confidence in the construction sector is drying up. Councils and commercial enterprises are cutting back on work. The closure of borders has decimated the business cases of several major projects. And the sector as a whole is trying to restart itself after grinding to a complete halt under Level 4 restrictions.

AUT construction professor John Tookey said a likely contraction in the construction market meant Australia could end up a lot better off - at least in terms of the flow of skilled tradespeople - if border restrictions were lifted.

"I've heard some pretty stark numbers bandied around ... companies [in New Zealand] losing 20 to 30 percent of their order book.

"Why on earth would somebody who's got a tradable skill set, not go and look at, you know, going elsewhere?"

Now that we've successfully conquered levels four through to two the focus will inevitably turn to the potential economic gains from re-opening our borders to Australia. 

Prime Minister Jacinda Ardern was in no hurry to lay out the timeline for such a move at her post-Cabinet press conference on Monday.

Those calls had already started before she made her announcement we would move to Level 1. On Sunday, National party leader Todd Muller put out a press release asking her to do exactly that.

"At the moment there's a bit of a fool's paradise in the sense that people don't really understand quite what the impact is."

Civil Contractors CEO Peter Silcock said a likely exodus of skills wasn't a reason to put off re-opening the trans-Tasman border.

However, it was a good reason to release more details around when already-announced investments like the New Zealand Upgrade Programme would actually go to market.

Of the $6.8b announced for transport investments at the end of last year$11.9m of that had been spent by the beginning of April. 

"There's a lot of work over in Australia. We've known that. We've known that for a long time," Silcock said.

"What's changing is: what's the prospects of work here in the next year?"

'Weeks not months'

Tookey said the full impact Covid-19 had wrought on the construction sector would be felt over the next few weeks.

Even an announcement around what specific projects would be funded through the Government's $3b "shovel-ready" fund wouldn't change that.

"The fastest shovel-ready project is months or potentially even a year away.

"We're dealing with job losses which are working on the basis of weeks."

Some construction companies had imposed pay and time cuts on employees, effectively cutting both down by 20 percent.

One architecture firm had lost 15 to 20 percent of their commissions - a sign that less work would be coming in the future as well.

"At the moment there's a bit of a fool's paradise in the sense that people don't really understand quite what the impact is."

Amalgamated Workers Union National Secretary Maurice Davis said $2b worth of suspended Auckland Airport infrastructure investments were a sign of how uncertain the business climate was for construction. Especially as planned pieces of infrastructure like the second runway would not have opened until 2028. 

Banks and others would see Auckland Airport's move as a sign that the old levels of economic activity would not return for many years. 

"There's plenty of jobs being deferred, cancelled or held up.

"The banks are scared and the developers are scared they're going to get caught with their shirts off."

The Government's infrastructure investments would plug part of that gap, but private sector investment and confidence would determine what happened to 285,000 workers in the sector over the next three years. 

Lund South managing director Russell Lund said a mass exodus of construction personnel across the Tasman during an economic downturn wouldn't be unprecedented. 

"Twenty-two years ago in the late nineties people just absolutely flocked to Australia.

"That's one of the reasons that we've got this huge skills gap at the moment ... experienced tradesmen left for better job security and higher wages and no one was training.

"If their industry is less affected than here then most certainly it's going to be a huge problem."

The most likely to leave

Kiwis were already a common sight on Australian construction sites before the pandemic. They were lured by wages that were on average 25 percent higher across the board. 

Davis said work sites across the Tasman were sometimes entirely staffed with New Zealanders.

"To be honest it's like being at home sometimes.

"If you're on $21 over here and you can get $38 over there plus penal rates plus superannuation ... isn't it a no-brainer?"

The first to make the jump would be the steel fixers, crane drivers and riggers. 

Those who might be able to transfer their skills over to the mining industry could also move across. Iron ore prices have hit a 10-month high as China has ramped up its production of steel. 

Tookey said Australia's construction sector had also fared better than our own because they hadn't had to stop work during the lockdown. 

The most problematic sector of workers who could be lured across the Tasman would be those tied up in residential construction. 

Their skills were highly transferable to Australia and work was already slowing over here despite the huge domestic need for more houses to be built.

Jobs, jobs jobs

What's needed was a guaranteed pipeline of work over 30 years and an immediate set of initiatives that would keep workers employed in the construction sector. 

For the latter, Tookey suggested the Government focus on catching up on pumping billions of dollars into deferred maintenance work on schools, hospitals and water infrastructure.

Replacing things like pipes didn't often require fresh resource consents. It also meant more of the money invested would be spent on keeping people employed. 

While new infrastructure investment might be sorely needed, the funds for it were often first spent on new equipment.

"If you want jobs and skills then you get to work on those deferred-maintenance type things.

"If you start work on infrastructure projects then you're actually paying for machines, because infrastructure projects use more machines. More grading machines ... and all the other toys that they have on big projects.

"We have to build people first."

As for a pipeline of work, Tookey echoed the suggestion of Infometrics economist Brad Olsen: KiwiBuild 2.0.

Tookey said KiwiBuild has many flaws, but there was still a need to achieve many of the goals the scheme had set itself. 

We could avoid many of the pitfalls that had hampered the original scheme by spending that money through community housing providers who had "shared equity" schemes already in motion. They had already demonstrated an ability to build and deliver affordable housing, he said. 

"There is actually an opportunity to turn that [KiwiBuild] around if there was a willingness to do so."

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