The construction sector experienced strong employment growth over the past five years and we expect this strong growth to continue throughout the next few years. Between March 2011 and March 2016, employment in core construction grew by 26%, compared with just 7.5% employment growth across the rest of the economy. Looking at regional data, it’s no surprise where that employment growth in the construction sector has occurred. Auckland and Canterbury each contributed over 40% of the lift in employment, with the rest of the country responsible for just 15% of the new jobs created.
The upper North Island is due to dominate economic growth in New Zealand over the next five years. The relevant authorities need to ensure that there will be an adequate supply of skills to facilitate this growth. To understand these issues Infometrics was recently involved in a project that analysed the future labour force demands of key sectors in the upper North Island.
With the recent Brexit vote creating waves around the world, it is likely that Michael Gove, one of the leaders of the Leave campaign, is rethinking his comments before the vote. He was asked why he should be trusted over the overwhelming list of economists and international authorities who opposed Brexit, to which he retorted “People in this country have had enough of experts.”
New analysis by economic consultants Infometrics shows the supply response to the housing crisis is on its way, with homebuilding consents forecast to hit record levels by 2018. Infometrics Chief Forecaster Gareth Kiernan has predicted a 39% increase in the number of new dwelling consents over the two years to June 2018, taking consents to an all-time record high of 40,044pa.
Soaring international visitor arrival numbers have thrown the spotlight on New Zealand’s tourism sector, with concerns expressed about whether we have the infrastructure to cope with the massive lift in arrivals that has occurred over the last three years. John Key has pledged $12m to provide better facilities, such as public toilets, to areas with small populations but a big tourism presence. The government has also established “Project Palace” to try and attract investment for the construction of new hotels, with the availability of accommodation becoming a significant constraint in many parts of the country.
Over the next ten years, the increase in infrastructure spending in the top half of the North Island is projected to be larger than the lift in infrastructure spending nationwide. This outcome is one of the key findings of our recently launched Infrastructure Pipeline Profile.
Fears that we’d have to lower flags to half-mast to mourn the demise of the domestic economy during 2016 now seem to be ill-founded. Confidence levels have improved over the last six months, and indicators of the labour market and household spending have been fluttering in the wind. Tourists and immigrants have been flocking to our shores and boosting activity – once they’ve realised that our four-star offering is superior to Australia’s six-star version.
Heading into 2016, the Chinese economy is dominating our thinking as we try and work out how much more of a slowdown will occur this year. Less buoyant growth in China potentially has flow-on effects for monetary conditions both here and overseas, and may also influence the rate at which international dairy prices improve this year. And while the Reserve Bank may look like its latest loan-to-value restrictions have helped it get on top of the Auckland housing market, we are sceptical about how long that feeling of control will last.