Building costs

Updated: 19 November 2009

Labour costs increase more slowly but some parts of capital and production costs fall

The Capital Goods Price Index (CGPI) measures movements in price of various fixed capital assets in the economy. In the year to September 2009, the CGPI decreased 1 percent for residential building and 3.1 percent for non-residential building but increased 4 percent for other construction (see Figure 10). The increase for the overall CGPI (that is, for all industries) in the same period was 2.3 percent.

Figure 10: Cost of building and construction (to September 2009)

Source: Statistics New Zealand

Another cost indicator, the Producers Price Index (PPI), measures change in the levels of prices for the production sector of the economy. The PPI comprises output indices¹ (which measure change in prices received by producers) and input indices² (which measure changes in the cost of production, and exclude labour and capital costs).

The PPI input index for the construction industry increased 0.5 percent in the year to September 2009. The PPI output index for the construction industry also fell 0.1 percent in the year to September 2009.

In comparison, for the year to September 2009, the PPI input index all industries fell 5.8 percent and the PPI output index for all industries fell 2.1 percent.

The Labour Cost Index (LCI)³ which records changes in salary and wage rates, showed an increase of 0.6 percent for the construction industry and 0.4 percent for the construction trade workers, both from the June to September 2009 quarters. In comparison, the LCI for all industries and occupations combined increased by 0.5 percent over the same period.

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1.  The PPI output indices cover the prices of primary products, manufactured goods, revenue from renting and leasing, the provision of services, capital work undertaken by own employees and margins on goods purchased for resale. The output indices exclude interest and dividends, royalties and patent fees, receipts from insurance claims, government cash grants and subsidies and GST and other indirect taxes.

2.  The PPI input indices cover the prices of materials, fuels and electricity, transport and communication, commission and contract services, rent and lease of land, buildings, vehicles and plant, business services, insurance premiums less claims. The output indices exclude wages and salaries (measured in the Labour Cost Index), capital expenditure (measured in the Capital Goods Price Index), ACC levies, land tax, government licence fees, road user charges, rates, royalties, patent fees and bad debts and donations.

3.  The LCI was rebased to June 2009 quarter = 1000 in the September 2009 quarter data released by Statistics New Zealand.