New Zealand to invest in ‘shovel-ready’ construction projects post lockdown

15 April 2020 (Last Updated April 23rd, 2020 11:16)
New Zealand to invest in ‘shovel-ready’ construction projects post lockdown

The Government of New Zealand has imposed strict measures to try to contain the spread of Covid-19, announcing a four-week nationwide lockdown from 26 March to 23 April, which stretches to parts of the construction industry. As per the government’s lockdown directive, only ‘essential’ business can remain in operation; others are to work remotely if possible or to remain closed during the lockdown period. The construction industry has not been categorised under the essential businesses list, but ongoing construction work has been allowed on certain construction projects that have been deemed essential and include:

  • Construction related to critical infrastructure and essential services, including supply of water, electricity, sewage and drainage, gas, and telecommunications.
  • Building and construction work related to maintaining health and safety either at work or at home
  • Building and construction work required immediately to avoid safety risks or environmental hazards.

Apart from this, companies involved in regulatory, compliance and consent services necessary for the above purposes, as well as those that provide materials and are involved in the supply chain for the above have been also deemed essential and are allowed to operate during the lockdown.

As a result of the strict implementation of the nationwide lockdown and social distancing guidelines, the daily rise in the number of infected cases has started declining in the past week following a peak of 85 new cases being detected on 5 April. Since 10 April, the daily number of new cases has remained below 50 and has been decreasing gradually. However, despite calls from some sections to lift the lockdown due to the adverse effect on the economy, Prime Minister Jacinda Ardern has announced that the government will take a decision on 20 April on whether to extend or exit the lockdown beyond 23 April.

The impact of the lockdown on the construction industry in New Zealand will be hard. According to the Infrastructure New Zealand, the country’s infrastructure body, one-third of construction sector jobs are at risk due to the coronavirus outbreak. The construction companies are expected to cut around 30% of their staff over the next three months if immediate action is not taken to restart construction projects and protect construction workers.

However, in order to provide a boost to the economy in general and the construction industry in particular, the government has announced plans to fund large ‘shovel-ready’ infrastructure projects following the withdrawal of the lockdown. Accordingly, on 1 April, the government announced the formation of the Infrastructure Industry Reference Group (IIRG), comprising a group of industry leaders, and tasked them with identifying public, as well as private sector infrastructure projects with a value of NZD10m or above that can be started immediately or latest within the next six months. These construction projects would be in addition to the existing provincial growth fund (PGF) infrastructure investments, as well as the New Zealand Upgrade Programme announced in late 2019.

The IIRG has announced that most of the identified projects would include horizontal infrastructure such as roads, railway and water, but may also include other projects such as schools and hospitals, as well as landmark legacy projects, including state housing schemes. The Auckland Council, which accounts for about two-fifths of the country’s GDP and one-third of the population, has already submitted a list of 73 shovel-ready projects to the IIRG, including 30 key projects and 43 other projects. The Wellington Council too has submitted a list of ten shovel-ready projects, as well as a list of several other projects that would ready for construction in six-18 months.