This is an economy running at capacity. There is more work available than competent people to do it. It is a good problem to have.
Big construction companies have been facing the problem for several years now. The shortage of skilled labour has forced them to pay far more than they estimated in their tenders for contracts.
Fletcher Building is losing so much on the Auckland international conference centre and other major projects that in February it announced it will be bidding for no more for the time being.
Last week Ebert Construction went into receivership and this week the whole sector came trooping to the Government looking for some sort of help. Even the Specialist Trade Contractors Federation whose members must be in clover, don't want their big payers falling over.
None of the construction leaders and ministers who met at the Beehive on Monday sounded very clear about what a government should do for them but this being a Labour Government they got generous sympathy, and jargon.
Building and Construction Minister Jenny Salesa said, "One of the things in terms of contracting in the government sector we have not always adhered to is having a whole of life approach. So we are looking at getting some advice from MBIE (Ministry of Business, Innovation and Employment) about taking a leadership position to reset this." What?
Every working day I pass the rising construction of Auckland's conference centre and give thanks that John Key encouraged Sky City to take it on. Had it remained a public project as originally envisaged, there is little doubt taxpayers would have bailed it out.
Fletcher would have pleaded that the rates it was having to pay to get contractors in this building boom could not have been foreseen when it won the contract, and even a National Government would probably have agreed to pay more. It's what happens with public money.
But a business spending its own money would not listen to that plea. It was Fletcher's miscalculation and the loss will be borne by Fletcher's shareholders, not Sky City's. This is good not just for public finances but, much more important, for the economics of national investment.
Every time a construction company loses money on a project, it and its rivals become a little more careful about their next bid. Every time one is rescued by a government renegotiating its contract partway through the project, the greater the risk the economy will be lumbered with expensive projects of dubious value.
if Salesa's "whole of life" contracting means government agencies are going to more accommodating of rising costs within the life of construction contracts, the under-pricing of tenders would be worse and costs would rise more readily.
Poorly evaluated public projects would be able to draw skilled labour away from private projects which account for 80 per cent of the construction cranes on the Auckland skyline today and greatly increase their costs.
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This boom is very good for trades people and subcontractors, less good for those who need them. It is a good problem to have but still a problem, since an economy running at capacity has only one way to go.
The solution is to increase its capacity with skilled immigration or training. Immigration helped the Christchurch rebuild, with mixed results. Training is better. We've paid a price for running down apprenticeships in favour of tertiary institutes, as the Government seems to acknowledge with this week's offer of the dole as a wage subsidy for employers who take on the unemployed.
This country should never be short of builders and other trades well suited to Kiwi can-do. If their numbers grew with demand, there'd be no end to the boom.
