8. Building and Construction Industry—Labour Productivity and Government ResponsePHIL TWYFORD (Labour—Te Atatū) to the Minister for Building and HousingBuilding and Construction Industry—Labour Productivity and Government Response8. PHIL TWYFORD (Labour—Te Atatū) to the Minister for Building and Housing: Is the construction sector report released today correct that labour productivity in the sector has increased only 1 percent since 2012; if so will he back the industry's call for more Government involvement in the building sector including procuring houses at scale?Hon Dr NICK SMITH (Minister for Building and Housing): Statistics New Zealand figures on labour productivity in the construction sector actually show a 7.6 percent increase over the last 3 years. So no I do not think the figures are correct. The same Statistics New Zealand figures show an increase of 11.1 percent since we became the Government and actually also show a decline of 2.7 percent in productivity under the 9 years of the former Government. The Government has been involved in scale procurement on sites like Awatea Welles Street and Colombo Street in Christchurch and Tāmaki Hobsonville McLennan and Moire Road in Auckland. I will be announcing further projects later this year and where it makes sense for scale procurement the Government will pursue it.Phil Twyford: I raise a point of order Mr Speaker. The Minister answered a number of questions but not my one and it was laid down. It was specifically about labour productivity since 2012. He answered on two other periods but not the period that I asked about.Mr SPEAKER: I will hear from the Hon Dr Nick Smith.Hon Dr NICK SMITH: Mr Speaker in the start of my answer I very specifically addressed the Statistics New Zealand construction labour productivity figures—they are on the public record—and pointed out what they were for the last 3 years: 7.6 percent.Mr SPEAKER: The difficulty is in fact that it is a different period. The member specifically asked for figures from 2012. The Minister in his answer refers to the last 3 years which I would take to be from 2013. [Interruption] I do not need much assistance. Certainly it was then disputed the fact of the 1 percent by saying it was in fact a 7.6 percent increase. I am unable to determine whether the question has been answered correctly because it may have been although in the way it is answered it is not clear. The best way forward is we will accept that that question has been addressed by the Minister and I will allow the member now an additional supplementary question.Phil Twyford: Is not the obvious way to smooth out the boom-and-bust cycle that the construction sector report talks about through a Government-backed building programme like KiwiBuild which over 10 years would deliver 100000 affordable homes for first-home buyers?Hon Dr NICK SMITH: I just saw a pig flying through the House—because anybody who believes that Labour with the minuscule amount of money that it has budgeted can build 100000 houses also believes in the tooth fairy and Father Christmas.Stuart Smith: Have any difficulties arisen in the productivity gains in house prefabrication offshore; if so what steps are being taken to resolve these?Hon Dr NICK SMITH: Yes some companies have chosen to prefabricate homes offshore. The Government through my ministry issued a determination that councils were correct in granting building consents for such homes. But I am disappointed that the Auckland Council has challenged that decision in the court. That is a difficulty because actually the competition from prefabrication offshore is actually one of the answers to improving both the supply and the competitiveness in the building industry; that is an issue that the Government will be joining in those court proceedings and vigorously defending the need for additional competition and productivity improvements.Phil Twyford: Does he agree that the shortage of labour that is preventing the industry scaling up to meet demand in Auckland driving up prices and causing the epidemic of shoddy building—Hon Steven Joyce: But you want to stop migration.Phil Twyford: Be careful because you might be the housing Minister next.Mr SPEAKER: Order! Just stick to the question.Phil Twyford: Does he agree—[Interruption]Mr SPEAKER: Order! That is certainly what happens when we get interjections initiated by my right-hand side to which the member then responds with some justification. If we could now have the supplementary question without any further assistance from the Hon Steven Joyce I would be grateful.Phil Twyford: Does he agree that the shortage of labour that is preventing the industry scaling up to meet demand in Auckland driving up house prices and causing the epidemic of shoddy building is largely a result of the boom-and-bust cycle because so many skilled tradespeople were lost to the industry at the time of the global financial crisis?Hon Dr NICK SMITH: It is correct that in 2007 and 2008 the number of homes being constructed in New Zealand plummeted to the lowest levels in 40 years. It is also true that over the last 5 years the number of homes being constructed in New Zealand has gone from 12000 a year to over 29000 a year. It is a little bit inconsistent for the member in one breath to say that there are labour shortages and in the next breath to say that there are not any new houses being built. I would note that my colleague Steven Joyce has substantially increased the investment in skills training so that we now have more apprenticeships in the construction industry than at any time in the last 25 years.Phil Twyford: Given that his officials have advised him that the industry is still building 8000 fewer homes than Auckland needs each year just to keep up with demand is it not clear that the Government needs to be a more active player using procurement and boosting apprenticeships far beyond the current level to support a sustained expansion of the industry?Hon Dr NICK SMITH: In this term of Parliament we are going to build in Auckland the number of houses that there are in Whangarei. In the next term of Parliament that is to occur again. We have got the strongest building boom with over $12 billion of residential investment. In Auckland we have seen the number of houses constructed grow from 4000 per year to over 9800 a year. I also note for the member's information that in the last year Government agencies have completed over 1000 houses and that too is more than in 25 years.Phil Twyford: Does he accept that in an undersupplied market developers will always build high-end homes to maximise their profits so surely the role of Government is to build enough homes priced so that most people can afford them?Hon Dr NICK SMITH: The primary reason that the building industry—and in the last decade as well as this decade—has built mainly expensive homes in a market like Auckland is that the section price has become ridiculously high under planning policies. The key changes such as the Resource Management Act changes the changes in the national policy statement and the changes in the unitary plan that the member opposite has opposed are pivotal to getting reasonable land prices and with that will go reasonable house prices. No; members on this side of the House do not agree that the only way to have houses being built is to have them built by the Government.Phil Twyford: Will he listen to the construction industry when it says that after 8 years of little progress and little Government support for productivity reforms is it not time for a Government-backed building programme that would smooth out the boom and bust cycle and allow the industry to sustain growth and lift productivity?Hon Dr NICK SMITH: I have noted that member has promised that Labour would remove any of the boom-bust cycle. Well he has got a greater chance than King Canute. The reality is that there always will be business cycles and I do not know of any Government in the world that has completely removed those. When the member says the Government has made no progress I simply point out the fact that there were 4000 homes being built in Auckland per year and there are now nearly 10000 homes being built per year in Auckland.