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Westpac economist warns a plan-of-action is needed to manage the end of the Canterbury rebuild as thousands of jobs run their course

Business
Westpac economist warns a plan-of-action is needed to manage the end of the Canterbury rebuild as thousands of jobs run their course

Westpac economists expect around 14,000 construction jobs to be lost in Canterbury over the next few years as the rebuild winds down.

The rebuild has plateaued and activity is set to drop off over the next 18 months or so.

Residential activity is falling sharply and non-residential and infrastructure and civil projects are expected to wrap up by 2022.

Westpac warns a serious plan-of-action is needed to manage the impact this downturn will have on those employed in the construction sector, as well as the wider regional economy.

Crunching the numbers: locals to take the punch

Westpac’s analysis suggests most the workers who have added to the construction sector expansion are locals, rather than migrants.

Westpac industry economist, David Norman, says 22,000 workers were employed in Canterbury following the February 2011 earthquake.

Around 14,000 of these took up jobs in the construction industry, which saw the size of the local construction workforce nearly double.

Westpac maintains the vast majority of the 22,000 workers came from within Canterbury.

Official data shows the unemployment rate in Canterbury dropped from 5.5% in March 2011, to 3.4% in March 2014. In other words, 6,200 people living in Canterbury who didn’t have jobs in 2011, found jobs by 2014. This accounts for 28% of all job growth in the region over this time.

The labour force participation rate also grew to 72% from 70%, meaning 7,600 people who weren’t in the labour force in March 2011, had joined by 2014. This accounts for 35% of all new workers in Canterbury.

Furthermore, natural population growth saw around 3,900 new workers added in Canterbury, as people reached working age and entered the workforce. Westpac estimates this accounts for 18% of all new workers.

Westpac acknowledges overseas migrants also added people to the workforce.

Based on the fact net overseas migration into Canterbury was 3,700 in the three years to March 2014, Norman estimates 2,500 new workers from overseas were added to the labour force. This makes up 11% of all new jobs created in Canterbury since the quakes.

Norman says these calculations leave only a net 1,800 workers (8% of all new jobs) that likely came from other parts of New Zealand. He notes there is low mobility of construction workers between regions, confirming the point that relatively few of the new construction workers in Canterbury are likely to have come from other parts of New Zealand.

Furthermore, Westpac says data on industry level employment suggests that not many people shifted into construction from other industries.

9,000 construction industry workers expected to be jobless and remain in Canterbury   

Norman has pulled all these figures together to estimate that as construction activity returns to normal levels, 9,000 construction industry workers will be left jobless and probably won’t relocate if current mobility trends continue.

He comes to this figure assuming migrants from outside Canterbury will relocate and a very small number of construction industry workers will be able to shift back into other industries.

He notes this will create “significant downward pressure on Canterbury economic growth”.

On the upside, Norman says we know what to expect, so can plan ahead accordingly.

He says businesses need to kick into action and figure out how they’re going to cope with the downturn.

Central and local government agencies need to work with local industries to encourage inward investment and develop other industries.

Norman says Christchurch needs to diversify, as in many ways it’ll be a brand new city when the rebuild is complete.

Finally, he maintains government agencies and the private sector should be taking practical steps to increase worker mobility, both geographically and occupationally. This could include upskilling or job fairs where regions short of workers can recruit staff.

Norman says we also need to think about how we can make it easier for workers to relocate to areas of high demand, like Auckland, particularly with regard to housing. 

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21 Comments

This is from the same organisation that has lobbied and broadcast the need to maintain or raise interest rates over the last 7 years at the cost of the general NZ economy and consumer/household spending. Now we are facing emergency recessionary settings needing stimulus and sustainable broad growth. Wouldn't it have been more sensible not to suppress the economy so much and let interest rates drop sooner in line with global conditions, or did we think that NZ would remain immune forever due to Chch rebuild and foreign money pouring into Auckland?

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Mortgage rates did drop even more than the nominal changes over the last 7 years, relative to the level of capital gains that property has 'produced'?
The problem is, that real production didn't have a show of attracting capital to grow true business enterprise in the face of asset appreciation. Why run a business if owning ( pick your favorite number here) houses made you more than the risk involved in any other business? I'd be the first aboard the 'drop the OCR to 0% !!" train IF the inwards flow of debt was used to productive purpose and not speculation. But that didn't happen, and still isn't happening. What we are left with is: No business development; increased gross national debt and asset prices that underpin that debt that are not supported by jobs/wages. Imagine where we'd be if we hadn't been 'lucky' enough to have a destroyed Christchurch to rebuild? It looks a might messy to me!

We are at the stage, now, where lower interest rates mean nothing to anybody. Those with savings have very little left to lose, comparatively, and those with debt must just be about at saturation point when compared to any kind of rational debt servicing capacity.

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We are at the stage, now, where lower interest rates mean nothing to anybody. Those with savings have very little left to lose

Whoa - if the OCR drops from 3.0% to 1.5% that represents a halving of interests rates. That is a lot of NPV coupon bond cash flow dollars since DV01 is very high at such low interest rate values when calculated over term investment horizons.

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Quite right! Perhaps I should have phrased it more as an emotional view than a practical one!

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Makes me wonder who might have captured BERL.

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Why go to the hassle of starting up a business *inside* NZ, you end up working for free for the government for more than 50% of your working life and taking all the contractable risk.

Stick with the houses

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Exactly Cowboy!

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Don't worry Westpac, the Alpine Fault has an increasing probability of rupturing - that will take up any slack.

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Even if the imported workers are only a part of the picture they must return to where they came from to help local workers face the reduction in work.

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Why should they go back? I want more competition amongst builders/tradies. I don't want to overpay for a service just because someone was popped out their mother locally. Let the market work on its own. Competition is required.

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so you would pay more tax to have locals on the unemployment benefit where is the sense in that

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How about tradies/farmers/workers take out their OWN unemployment insurance while they are employed. No reason to increase my tax. No reason to have a public dole.

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Yes, the reason is we choose to have a dole.

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You have a very simplistic / one sided view of the world me thinks. I know a few tradies and the overheads like petrol etc is hurting them a lot, not many making good money NET. In fact 2 of the ones I know went to chch to work, 2 years back due to lack of work, they'll be coming back or going to OZ as the chch work dries up.

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What's your point steven? That they are masters of their own fate?

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As long as you compare apples with apples Onwards and Upwards when using a builder/tradies.......I get sick of those who want to undercut by doing cashies and dropping the GST off......or sometimes it is those who won't comply with all the other bureaucracy and red-tape.......sneaking up on buildings without scaffolding, no health and safety on-site, haven't had their tools tag tested etc........sometimes those demanding competition are really demanding something else entirely different!!

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remember the song we sang at Sunday School:
"The wise man built his house upon a rock,
house upon a rock
house upon a rock
The foolish man built his house upon the sand
house upon the sand
house upon the sand
And the rain came falling down"
.........
Why don't we plan for a sustainable future and plan for ups and downs. Instead the only real live political idea is growth, growth, growth?

I'm assuming population growth is government policy and that is to a large degree the result of lobbying and buying favour from National,

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immigration will solve everything??

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I've found that a lot of rebuild workers are NZers who came to Chch from other regions. Many are young and mobile. On top of this the foreign workers seem to be transient (whether from Ireland, South America or the Phillipines) I doubt they would want (or be able) to stay if there is no work.

In short many will up and leave in a downturn, perhaps revealing the exodus that actually occurred after the quakes.

The reality is that the $3k to Chch idea was pretty short lived, and construction workers are not needed under skill migrant categories.

A real downturn is on its way...

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Agree with Chris_J comments on rebuild workers, it appears the peak was actually last September in overall activity.

The real change in economic activity currently in Christchurch now is the reduction in professional services for the rebuild, this is starting to effect engineering and legal firms based in Wellington/Auckland.

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I wonder if part of the delay from insurers has been staff buggerising around so that their cushy jobs last as long as possible? Maybe top management should have been more involved??

In regards less professional services work - one of the engineering firms we had (pre EQ) used occasionly, told us they were far too busy to take on any of our work a couple of years ago, so we went elsewhere and have formed a relationship with two other firms. We now have heard that the firm we used to use is eager for business and has excellent turn around rates... of course now that we still have lots of work to do and won't be giving that original firm any of our work because being tossed to one side when we needed assistance is a lasting memory...

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