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Prime Minister ‘wrong’ about industry capacity

14 February 2006

Prime Minister ‘wrong’ about industry capacity

Civil contractors cannot be blamed for rising costs leading to delays in much-needed roading projects in Auckland and elsewhere, industry group, the New Zealand Contractors’ Federation (NZCF) says.

In her Statement to Parliament on Tuesday, Prime Minister Helen Clark referred to Auckland infrastructure and said that “the pressure on construction capacity has been escalating costs”.

“This is simply not true,” said NZCF Chief Executive Richard Michael. “There is considerable excess capacity in the sector at present, including in the Auckland region. This can be seen by the number of tenders and the very competitive prices for the latest round of Transit projects.

Mr Michael said that while costs had risen during the past two years this was being driven by input prices - including fuel, cement and steel.

“These are international commodities and are not directly affected by New Zealand demand,” he said. “Increases have not been caused by inflated contractor margins, which actually remain at unsustainably low levels. This is clearly understood by Transit and LTNZ.”

Mr Michael reiterated that the NZCF has consistently being saying to funders and government that capacity is not a problem.

“But the message is not getting through. It seems to be more convenient to blame our hardworking contractors than get to the real issue, which is flawed Government funding mechanisms.

“Using Excise Tax and Road User Charges to fund roading expenditure leads to uncertainty and wasted effort. New Zealand needs a more certain approach so that our resources can be efficiently utilised.”

Mr Michael said that it now looked as if the amount of roading work promised by the Government would not now eventuate due to cost issues, leading to even greater excess capacity within the industry.


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