Infrastructure spend lands as builders warn of hollowed-out industry

Wednesday, 24 September 2025

The Government has announced big spends on school, defence and hospital builds, and the construction industry says the move has come in the nick of time.

Over recent days, the Government has unveiled it will spend $100 million upgrading hospitals around the country, invest $413m in improving classrooms and other school infrastructure, and has a new defence housing plan that will cost up to $600m.

Each of the announcements emphasised the build spend would support the construction industry, and create jobs for builders and tradies.

Certified Builders chief executive Malcolm Fleming said the Government could not have left the opening up of the pipeline of infrastructure work much longer.

The industry was getting hollowed out due to the downturn in building activity and it would have lost the capacity to do the work if the Government’s pause on infrastructure spending had continued, he said.

“Also, you can only kick the can down the road for so long in terms of infrastructure maintenance, repair, and replacement. Infrastructure just gets worse and worse if left.

“These infrastructure funding announcements are very much needed, and will boost the pipeline of work for builders who have been hit hard by the drop in building work over the last year.”

The latest GDP figures showed the value of building work fell 2.2%, over $170m, from 2024 to 2025, so the package of funding was a considerable lift for builders struggling to find jobs, he said.

'We’re hearing from our members that inquiries are starting to pick up, but competition for work remains tough, with larger contractors moving into markets they previously wouldn’t.

“This infrastructure boost gives local builders the ability to pivot and keep their businesses strong.”

Fleming said the sector was crying out for work, and there was capacity in the market to carry it out now.

The work was likely to come in waves, as much of the school building had consents and was near ready to go while much of the defence work still had to go through the design and preparatory stage, he said.

“So it will flow through the system in stages, with the defence work going to architects first and then builders further down the track, but builders will have the school and hospital work more immediately.'

The time is right for good prices

The timing was not bad for the Government either. AUT construction professor John Tookey said if there was ever a time to make use of the downturn in the sector, that time is now.

“If you want to get a good price on government contracts this is the time. They can drive a very tight deal because there is a lack of contracts in the market place at the moment.

“When things open up, and capital is available to be borrowed at lower rates, and projects start happening again that will translate into increased construction costs.”

Government procurement was a massive boon because revenue was guaranteed and building projects tended to be too, although negotiating with government could be like negotiating with terrorists, he said.

“But these announcements are a good thing for the industry, the spending is very much needed because at the moment even the OCR cuts don’t seem to be getting through to construction.

“Lots of companies have gone into liquidation but the people have not gone, there’s skilled labour out there. The companies that are still around can flex to meet the increased demand without much problem.”

Greater certainty helpful

For Canterbury-based construction expert Mike Blackburn, it felt “a bit like it’s a dollar short and a day late”.

The Government put an immediate stop on scheduled build work when it came to power, and many contractors working in that part of the industry were forced to let people go, he said.

“I understand why the Government did it, because the way buildings were being built in that space was as bad as what was going on with Kainga Ora. So they had to stop and assess the situation, but it was tough for the industry.”

But any time the Government spent money on infrastructure builds it was good for the industry, and for the wider economy, he said.

“One of the biggest problems is when the forward pipeline for the next six to 12 months is uncertain, so the Government bringing this amount of work to market and staying it is going here and here helps.

“And it is not just builders who will benefit, it's sub-contractors, and merchants and suppliers, and so on, and they all employ people.”

The industry would still have some way to go to recovery, but looking at the latest consent numbers suggested things were not too bad, Blackburn added

“They might be a long way from where they were in 2021 to 2022, but they are sitting at about 34,000 at the moment. Back in 2020 the long-term average was around 28,000.

“It’s not all doom and gloom in the industry, there are hints of improvement, especially in the South Island.”