Fletcher Building’s annual meeting was a gloomy event with Chairman Ralph Waters stating “in New Zealand our outlook is for no material improvement in trading conditions in the first half of calendar 2012, based on curent Treasury estimates”.

He went on to say “in Australia there is a risk that residential and commercial residential activity will remain around the current low level for the balance of the current financial year, and possibly deteriorate further”.

The Group has a number of problems in New Zealand including;

–          The very low level of residential housing construction

–          The slower than expected Christchurch rebuild

–          The Crown is slowing down its major construction projects because of financial constraints. 

The biggest problem in New Zealand is the low level of residential housing consents, which were only 12,350 in the October year compared with 23,000 four years ago. Waters said that Fletcher Building would make fantastic money if consents were 30,000 and would do very well at 23,000.

But our low population growth, particularly compared with Australia, indicates that 20,000 consents is a long way away.

Population Growth

Australia Natural Net migration Increase Population Change
2011 145,000 167,100 312,400 22,546,300 1.40%
2010 154,700 220,000 374,700 22,234,000 1.71%
2009 151,200 310,900 462,100 21,859,300 2.16%
2008 147,300 261,500 408,800 21,397,300 1.95%
2007 139,000 205,000 344,000 20,988,500 1.70%
New Zealand          
2011 32,800 800 33,500 4,414,400 0.76%
2010 35,700 13,900 49,600 4,380,900 1.15%
2009 34,400 17,000 51,500 4,331,300 1.20%
2008 35,500 4,400 39,900 4,279,800 0.94%
2007 35,000 8,300 43,300 4,239,900 1.03%

(NZ figures are for the September year and Australia for the March year.)

 Australia’s population growth has been far higher than New Zealand’s in recent years, mainly driven bynet migration. Australia’s net migration inflow has exceeded its natural increase every year whereas New Zealand’s net migration has been extremely low, mainly because of the major exodus across the Tasman.

New Zealand has 1,650,000 dwellings at present and the number of residential housing consents should be fairly consistent with population growth over the longer term. Based on this 1,650,000 figure the number of building consents should be as follows under different population growth rates.

NZ population growth & residential housing consents

  Population growth Implied consents
NZ’s latest 0.76% 12,500
NZ’s highest 1.20% 19,800
Australia’s latest 1.40% 23,100
Australia’s highest 2.16% 35,600

There seems to be a clear relationship between population growth and building consents as New Zealand latest population growth of 0.76% suggests consents of 12,500 compared with the actual figure of 12,350.

New Zealand will have to convince the younger generation to stay at home and develop a far more aggressive immigration policy for Fletcher Building to benefit from 23,000 annual residential housing consents on a sustained basis.

Brian Gaynor