Why construction productivity has flatlined

The productivity of the construction industry has barely increased in four decades, according to a report from the New Zealand Chinese Building Industry Association.

“Construction productivity – namely a lack of improvement – is the key underlying issue facing the sector,” the report stated. “After improving from the late 1950s to a peak in 1990, progress has stalled. The current level of productivity is similar to what it was in 1985.”

One major reason for the construction industry's productivity problem is the plethora of small firms, which limits investments in new technology, training, systems and processes.

As a result, construction firms may employ under-skilled workers, use unsuitable plant and equipment, and make mistakes with project estimates – all of which affect productivity.

The report said that, based on international experienced, there were three ways to increase productivity:

• Improve skills.
• Streamline processes.
• Provide better information and policy signals to make it safe for those in the construction system to make commitments to scale up or commission work.

NZ needs more homes, at lower cost

Building and Construction Minister Chris Penk said the construction industry contributed $99 billion in sales in 2023 and indirectly supported 20% of all jobs in New Zealand.

“However, the report paints a grim picture of the sector, finding that productivity levels have remained the same since 1985 – an extraordinary statistic considering how much technology has advanced since that time,” he said.

To make matters worse, the time to build a home had increased by 50% since 2013, from 13 months to 19 months, which was contributing to “an unaffordable housing market”. 

“This is reflected in the report, which asked New Zealanders to describe the construction sector with one word, with the most common response being ‘expensive’,” Minister Penk said.

“The findings of the report are exactly why the Government is focused on streamlining the building consent system and removing unjustifiable red tape that is slowing down the build process.

“Lifting productivity in the sector will not happen overnight but it is vital to build more homes so more Kiwi families can benefit from living in a stable home and gain all the associated social and health benefits.”