The Nation: Construction Minister Jenny Salesa

Lisa Owen: The construction industry is under pressure, with demand for both residential and commercial work pushing the sector to full capacity. It’s estimated that just a 1% increase in productivity would increase national GDP by around $139 million. And productivity has to increase for the government to hit its KiwiBuild targets. I’m joined now by Construction Minister Jenny Salesa. Good morning, Minister. Malo e lelei.

Jenny Salesa: Malo e lelei, good morning.

Tell me, you’ve got 100,000 homes to build over the next 10 years, but you’re 46,000 workers short at the very least. So what are the two most significant things that you’re going to do to turn that labour shortage around?
So, we have already convened a ministerial working group that consists of eight different ministers. We know that construction skills is one of our main focuses, and we know that we don’t have the current numbers of skilled people in this area. Right now, we’re told that we’re short by about 30,000 but that by 2020 it will increase to about 46,000. I’ve got to say, though, Lisa, that one of the other things we’re looking at is building not just traditional ways of building houses; we’re also looking at new ways, innovative ways of building houses — prefabrication.

And I want to talk about prefabrication a little bit later, but you are aware of those numbers, so you’ve got a working committee with eight ministers. You’ve got a problem now, though, with shortages, so how long is it going to take you to get the labour you need, and how are you going to get it?

So, right now, as of 2017 December, we have over 10,000 people — 10,700 — who are here on work visas for construction. The majority of our workforce, though, Lisa, in this area — 2560 people — are New Zealanders. So we’re looking long-term at how we train up our own people, because when we look at the construction sector — yes, we are looking at bringing some skilled people from overseas, but the majority of our workers are New Zealanders; they are local people.

So how many workers — skilled workers — are you going to bring in from overseas? As you say, you’ve got close to 12,000 construction visas right now, so how many more workers are you going to bring in from overseas?

So, what I can say, Lisa, is we have the KiwiBuild visa scheme — that will be just in addition to all of the current skills categories that people can bring in. So, right now, we have businesses, we have developers — nothing is stopping them; they can go overseas and bring in the skilled workers that they need. So, at the moment, the short-term solution is that we need skilled people, yes. But what we’re doing as a government, for the first time, is we’re looking at a skill strategy and an action plan. And we’re doing it not just myself as Construction Minister, I’m actually doing it together with seven other ministers and eight ministries together. So we’re looking at what we can do. We have to start the training sometime. If I can go back, Lisa, in 2011, 2012, Auckland Council and construction industry employers, they got together here in Auckland, they wrote a report and they presented it to the minister of the day. And that report actually stated that by this year, 2018, we will be short in Auckland by 30,000 skilled workers. That was in 2013. What we’re doing as a new government is we’re actually addressing that issue head on—

But how are you addressing it head on? Because if you’re talking about training new people — and that’s great, it’s laudable — but it’s three to four years to get an apprenticeship through, so you’re going to be past what the projections are for your peak labour requirements by the time you train those apprentices. So, right now, how are you addressing that labour shortage?

So, right now, we have just over 23,000 young people who are training as apprentices right now in polytechnics. But if I can go to the new methods — so prefabrication. In terms of KiwiBuild, we’re not looking just at the traditional way of building houses. So, at the moment, the majority of our builders are small businesses. They employ about five people or so, right? 90% of our construction workers are small businesses. But when you look at the traditional way of houses being built, those small businesses with five workers, they build about two to three houses per year. What we’re looking with prefabrication is— there is actually quite a few prefabricated folks here in New Zealand; I visited one of them over at Masterton. They actually pre-cut the houses in a factory right here in Masterton. But when you actually look at how fast those houses are built and put up, it takes one registered builder— one licensed builder and four senior skilled people, and they can put up, build a whole house within four to six weeks. So, yes, we’re looking at addressing the skilled folks right now — we’re doing that. But in addition to that, we also have to look at other innovative ways of building—

So prefabrication, then, what are you doing to encourage upscaling of prefabrication? Because I’m told that there was discussion about a factory going in at Pokeno to do prefabricated houses. Are you in talks with someone about that?

So, one of the things that Minister Twyford and I did — this was a few weeks ago — was we opened up the conference for prefabrication. It had several hundred people who are already in this industry here in New Zealand. What they informed us, both myself and Minister Twyford, is that in a year and a half — by 2020 — prefabrication here in New Zealand will be able to produce and build 7000 houses — medium-built prefabricated houses—

But they want guarantees. To upscale, to increase their labour force, to increase their production, they want guarantees. So what are you offering them in terms of that?

So, one of the things that we’re doing with this ministerial group that we’ve got convened, which includes myself, Minister of Housing, Minister of Education, Immigration, Infrastructure and other ministers, is we’re looking at the training component. So, at the moment, we’re looking at ensuring that we have skilled people that we train up here in New Zealand—

But that’s not a guarantee. This is about scale of production. They want to know that there’s going to be contracts for them if they expand their businesses. So what can you do about that?

So, KiwiBuild will begin on the 1st of July. So the lead minister for KiwiBuild is Minister Twyford. So from the 1st of July onwards, we will know much more about the details of KiwiBuild, including for prefabrication. In terms of procurement, if I can just cover—

Is there going to be some announcement about prefabrication? Are you in talks with any particular builders or firms about a large-scale prefabrication factory?

We — both Minister Twyford and I — have had a few discussions with a few people. There are no announcements to be made. And any announcements in this area will be made by the lead minister, Minister Twyford. But what I can say is, in terms of prefabrication moving forward, it’s definitely one of those options that we’re looking at. One of the experts that this conference brought over was from the UK, Mark Farmer, who— one of the statements he made was that in order to meet our KiwiBuild targets, we have to look at prefabrication. We agree with Mark Farmer. We have to.

Okay. Prefabricated houses are hard for people to get mortgages on, so how are you going to address that?

One of the things that Minister Twyford is looking at is that issue, in particular, financing.

Okay, I want to go back to the KiwiBuild visas, which you talked about. So that is only up to 1500. Your policy is up to 1500 overseas construction workers on KiwiBuild visas at any one time. Do you think that you’re going to have to increase that number in order to meet labour shortages?

KiwiBuild visas is only one of the visas that is a new kind of visa we are bringing on — so 1500 for KiwiBuild, yes. But right now we already have more than 10,700 people who are here on construction-related visas. All of those categories are open to building firms and to construction enterprises to apply for.

But even taking into account those 12,000 visas that are already with construction workers, your ministry tells you if you do nothing, in two years’ time, you are going to be 46,000 construction workers short, so those 12,000 are not enough.

Lisa, you’re not actually counting the numbers of people. As I said, right now in construction we have 256,000 people employed in this industry. The majority of them are New Zealanders. So you’re not counting the ones who are currently now learning construction trades…
…are in training.
…who are already—they’re in polytechnics. You’re not counting our architects. So, just last year, in terms of architects, engineers graduating out of our universities — over 6000 people. So we’re not just looking at overseas people coming through. We are long-term. We have to actually train up our own.

I get that. But you do accept that you are going to require some overseas workers in construction in order to meet these targets. Do you accept that?

And what I’m saying is that the visa categories already are for that. KiwiBuild is only an additional visa.

So you’re saying that there will be no increase in the KiwiBuild construction visas.

We already allow for companies to be able to hire plumbers, electricians—

Under the skilled…

Under the skilled-workers, yes.

Yes. I’m asking about KiwiBuild. So that’s stuck at 1500?

KiwiBuild, after it’s announced on the 1st of July— We’ve already mentioned a number of times that KiwiBuild will have to be ramped up. In the first year we’re looking at 1000 KiwiBuild homes; in the second year 5000; in the third year we’re ramping up to 10,000 KiwiBuild homes and then, from then on, ramping up to more houses. And so for us to be able to meet our KiwiBuild targets, we should be able to, in the first year, meet that 1000 target.

With the workers you’ve got, you’re saying?

The other thing I need to mention, Lisa, is one of the things that we’ve done — both myself and Minister Twyford — is we’ve talked to industry. So, for example, Master Builders, who have about a third of our construction builders as members of their organisation, they’ve told us today that this year, as an umbrella organisation, they can build 1000 houses. That’s just Master Builders.

But that’s just the beginning, because the lion’s share of your houses are going to be built in the back five years in your target for KiwiBuild. So you’re telling me you’ve got enough labour to do the first two or three years. Is that what you’re saying?

Yes. And we’re training. As I said, the training will take some time. Lisa, we’ve been in government five months or so.

That’s a sixth of your term, yes.

You cannot expect us to come up with the magic of actually having all these skilled people. Had we—

No, people are asking what the plan is now, and that’s what I’m trying to get to the bottom of. So, in terms of the budget, because you have— Obviously the KiwiBuild start date is when the procurement comes in. So what have you asked for in the budget to help boost the construction sector? Have you asked for anything?

So, I cannot say anything about the budget, not right now. We’ll all have to wait until May. But I can say this — in terms of procurement, one of the things we’re looking at, and we expect this to happen with KiwiBuild, is we’re looking at those companies, those developers that will take on KiwiBuild contracts. One of the things that will be new, moving forward, is that we expect them to take on apprentices. So in addition to all of us now—

In exchange for a KiwiBuild visa worker, they have to take on an apprentice on a living wage. Is that what you’re talking about?

What I’m saying is that we expect, as part of taking on government contracts in the procurement process to build KiwiBuild homes, that they will agree, hopefully, to take on apprentices.

Is that going to be a requirement — to get a KiwiBuild contract, you’re going to have to take on apprentices? And are you going to specify how many?

What I’m saying is it’s not set in stone yet, but I expect, moving forward, that is one way. We have to look at several different ways of ensuring that we get to the skilled numbers of people that we need right here.

Including a target for the number of apprentices they would need to take on in order to get a KiwiBuild contract. Is it going to be that set in stone?

We would expect that our developers, our construction companies, would be in agreement, moving forward.

What about small companies, though, Minister? Because you were just saying it’s like 26% of companies that build houses build one to five houses a year, so is that a realistic expectation for them — to need to take on apprentices in order to get KiwiBuild contracts?

It should not rule out small companies, and I’ll tell you why. We have Master Builders. We also have the Building Council. One of the things that we’ve had in terms of discussions with Building Council, who have about one-third of the builders under them, is they tell us that already, right now, it’s part of what they do. They’re already mentoring between 40% to 60% of folks that come through. They really are training apprentices right now, and they are small business with four to five employees.

Okay. We’re running out of time. So, you have acknowledged the 1500 KiwiBuild visas and said that people can bring construction workers in under the skilled immigration jobs, but here’s the thing. Labour wants to cut immigration by about 20,000 to 30,000 people. That was what you campaigned on. So if it comes to it, what is more important, Minister — cutting immigration or meeting your KiwiBuild goals?

When we look at construction and we know that there’s already 10,700 coming through under construction skills visas now, KiwiBuild visas are only 1500. We expect that we would be able to have enough people coming through and enough people that we’re training ourselves in New Zealand to be able to meet our KiwiBuild targets, especially when we’re looking at 1000—

So you won’t compromise your pre-election immigration targets in order to meet your KiwiBuild requirements?

When we’re looking at the KiwiBuild target of 1000 for the first year, 5000 in the second year and 10,000 in the third year, Lisa, I’m pretty confident that we will be able to meet our KiwiBuild targets.

Do you have any projections for how many workers? So 12,000 at the moment on work visas in the construction industry. Do you have any projections for how big that number is going to get during the KiwiBuild construction phase?

I can tell you how many workers we do need now, which is 30,000, so we’re hoping—

But you don’t know how many of them are going to come from overseas.

When we look at, as I say, prefabrication — and it doesn’t need that many workers to build a non-traditional house in an innovative way — we are pretty confident that mixing the two, training up our own people and getting into prefabricated houses, we will get to our targets.

So prefabrication is the silver bullet?
It’s part of the solution. It will provide part of the solution for KiwiBuild.

All right. Thank you for joining me this morning. That is Jenny Salesa, the construction minister.

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