Editorial: Government must act on building costs

Housing Minister Megan Woods. Photo / File

Editorial

Don't be surprised if the cost of building supplies becomes the next focus for the Commerce Commission as pressure builds on the Government to do something about the cost of living.

Having released its final report into fuel prices last year, the competition watchdog is primed for its next market study and odds are shortening that the home-building industry will be the target.

Either that or the grocery market, which is another area of angst among consumers amid rising living costs.

Renewed scrutiny of the country's powerful supermarket duopoly could play well for the Government in election year. However, it is understood Labour has its sights set on building materials - even though the Greens are putting the pressure on food prices.

Both industries are long overdue for a crackdown and Labour must back up its previous comments with action.

Way back in 2014, Labour's then housing spokesman Phil Twyford (now Transport and Urban Development Minister having lost the housing portfolio) was critical of the then National Government for a lack of action on addressing housing costs.

"The Government has been talking a good game but has totally failed to tackle the market monopoly," Twyford said in November 2014.

"The Commerce Commission must investigate the competition problems facing the industry as a whole. It will be the only way to get the Government to act," Twyford said.

He again called for an inquiry into the price of building materials soon after coming to power in 2017.

However, after nearly three years in power still no action has been taken.

Construction costs in the main centres have risen by more than 30 per cent in the past decade, while the price of land has gone up by half during the same period.

New Zealand remains one of the most expensive places in the world to buy building materials, with prices 20-30 per cent higher than Australia, according to some estimates.

While this has much to do with scale and the tyranny of distance, there are only two major manufacturers of building materials and price competition is limited for some materials.

Twyford has also blamed the high costs on "deals, rebates and incentives for the retailers".

Labour now needs to back this up, especially after its flagship housing policy KiwiBuild has been such a failure.

The New Zealand building sector contributes more than 6 per cent to gross domestic product, employs more than 250,000 people and is the third-biggest industry in our economy by the number of businesses.

NZ First and Winston Peters may be pushing for a market study into the banking sector, which, like food, would have wide appeal in an election year.

But the banks are already in the firing line, having just endured a capital review by the Reserve Bank and a culture and conduct review.

New Housing Minister Megan Woods is understood to have written to Commerce and Consumer Affairs Minister Kris Faafoi and there is now an informal agreement among Labour that building supplies will be next.

Given the initial KiwiBuild promise was a key plank in Labour's campaign at the last election and 10,000 houses are still contracted to be built through the scheme, it seems likely the building supplies industry will be next.