Some building industry problems ’intrinsic’

Press, Volume CXV, Issue 33783, 4 March 1975, Page 19

Some building industry problems ’intrinsic’

Problems in the building industry had been worsened by the Government actions and lthere were other problems intrinsic in the industry's financial structure. Mr -I. G. Russell, managing director of Securitibank, Ltd, a merchant bank, said yesterday. The industry was quicklyaffected by changes in the 1 economy Mr Russell told the annual conference of the New Zealand Master Builders Federation at Wanganui. There were many in the industry who thought it was singled out by Government to be the first hit with adverse regulations and re- ■ strictions, he said. However the industry’s financial I structure made it difficult I for many firms to adapt to changed economic condij tions. A situation of chronic under-capitalisation and over-trading did not lend it- | self readily to adjustment! (when there was a downturn in the economy. The position i was made much worse if 'builders had undertaken

their own development pro-i jects. Mr Russell said the Government would show great intelligence if it deterred the imposition of the com-1 pulsory superannuation scheme to: 12 months although he did not think it would do 'his Accordingly an extra S7om in the first year was to be loaded on to employ - ers. The building industry would have to beat its proportion of these additional costs. Rising cost* The mortgage market had been kept starved of funds as part of lovernment policy. It was time for further releases of mortgage funds; by reduction of the Govern-! ment securities ratio imposed upon savings institutions. ■ Building costs were now; ■rising to the extent that 1 considerable buyer resistance: I was likely to set in. In addition the Government kept handing out cost-of-living increases and extra holidays! “with such alacrity that one 1 seems to be having to raise the wages of employees I every few weeks.” he said. The cost of extra fringe benefits, such as an extra 1 week’s holiday, was quite, dramatic.

It will now take New Zealand two vears, at the lo fore the extra week was granted In addition there is tit? extra cost of -uper annuation i nduction- coming up These are to begin on April I "I nv orthv tartio ’ The Housing Corporation had been on a subsianv.al buying spree and propetties vendors who were desparat»‘ to sell because of the la«.k of mortgage funds. "In some cases, which have come to my notice, the Housing Corporation hapurchased properties at well below cost,” he said. These sort of tactics were, in his opinion, not worthy of a Government Depart ment. The corporation was taking advantage of adverse economic conditions and an extreme shortage of finance, a situation which had largely been created by the acI tions of the Government it'self. The building industry would need to cut material and labour costs of new structures. The new modular housing concepts seemed a , move in the right direction, Ihe said.