Equity analysts at Forsyth Barr say the list of projects up for a fast-tracked consent have the potential to give the downbeat economy a “much-needed injection of energy”.
In a note to clients, the brokerage firm welcomed the Fast-track Approvals Bill and the first 149 projects that will be included in it. New Zealand was “moving out of the slow lane” it said.
“Paired with all but certain continued interest rate cuts, the contours of an economic recovery are starting to take shape,” they wrote on Tuesday.
Kiwi stock market analysts generally pay minimal attention to Government policy, and even macroeconomics, as the performance of individual listed companies can be unrelated.
This makes it notable that the equity research team chose to publish a note endorsing the bill and outlining its possible benefits for a dozen NZX-listed companies.
Of these, securing fast-track approvals could have a material impact on the Port of Tauranga, Mercury Energy, Precinct Properties, and Winton Land.
Kiwi Property Group, Genesis Energy, Manawa Energy, Sanford Limited, and Summerset would see a smaller boost. While Infratil and Fletcher Building’s projects weren’t big enough to impact their outlooks.
But analysts said the biggest beneficiaries would be building material companies, such as Fletcher Building and Steel & Tube, who will experience higher demand from the consents.
Privately-owned businesses in these sectors will presumably also get a boost — although it is harder to measure the impact on unlisted companies.
Forsyth Barr said NZ had been in a deep per capita recession for almost two years and the August earnings season was the worst on record.
“After the U-turn from the RBNZ, followed by its first interest rate cut in over four years, sentiment has improved. The 149 projects included in the fast-track approval process have the potential to build on this improved sentiment.”
Being included on the list doesn’t guarantee consent, as the expert panel will be able to decline projects, but it has been set up to favour fast approvals. Environmental factors will be considered but mostly addressed through consent conditions, rather than denials.
The analysts’ note said construction only made up 6% of the NZ economy but it was highly cyclical and could have an “outsized role in driving an inflection point in the economic cycle”.
“Economic downturns need a circuit breaker. The main circuit breaker for New Zealand will almost certainly be materially reduced short-term interest rates, but the cumulative scale of the announced projects has the potential to elevate the impact.”
There were 44 housing projects with up to 55,000 new homes, 43 transport projects with 180km of new road and rail, 22 renewable energy projects, 11 mines, eight quarries, and seven aquaculture farms.
Specific winners
Listed-property developer Winton will likely benefit the most from the fast-track as it breathes new life into the $1.7 billion mixed-use community called Sunfield in Takanini, Auckland.
Winton’s share price jumped more than 6.5% after the announcement of its inclusion in the Fast-track approvals bill. The development’s previous attempt at getting sign-off failed.
This was one of the projects which sparked concerns over conflicts of interest. Winton director Christopher Meehan has donated more than $200,000 to the National and Act parties, and former minister Stephen Joyce serves on the company’s board.
Infrastructure minister Chris Bishop said any real or perceived conflicts of interest were carefully managed but he wouldn’t reveal any specific details.
Kiwi Property Group has also been working on a new town centre in South Auckland. This mega-project is located in Dury and could provide up to 22,000 homes. Forsyth Barr said having this fast-tracked was “helpful” but the project was already well advanced.
Precinct Properties will be able to proceed more quickly with its $1.2 billion twin towers set to replace the Auckland Downtown Carpark building.
Much of the Government’s sales pitch for Fast-track Approvals related to building more renewable energy generation and shifting more of the country’s energy away from fossil fuels.
Of the listed electricity companies, Mercury Energy had the largest proportion of its development pipeline included in the fast-track list. Meridian Energy missed out, despite likely submitting two major projects.
Energy Minister Simeon Brown said the 22 renewable electricity projects were worth three gigawatts of electricity, which would roughly be a 30% boost to grid capacity.
It has planned an open pit and underground gold mine in Central Otago which it says could contribute several billion dollars to the domestic economy over 10 years.
20 Comments
We are at the Limits to Growth and faltering under the encroaching maintenance.
Forsyth Barr do not measure this; reporting them is therefore invalid.
It's not a matter of 'kick-starting' 'the economy'; it's a matter of what we will be able to maintain, through the bottleneck period. And we're now a ship down, so repelling boarders just got more moot.
But be very sure, this is reporting, not journalism.
We all see what will happen given enough time. The US would invade Venezuela to get at the vast quantities of oil reserves they hold, and likely any other countries along the north part of South America. Ecological destruction will come before the reduction in fossil fuel usage, and in place of the west 'reducing' usage, less developed countries will simply use more to improve their standards of living, until the house of cards comes down.
The few residential ones that have been added to the list in greater christchurch are for large residential developments not currently connected to existing communities and with no mention of how they expect the councils to fund and maintain all the required infra. It will also add pressure onto mostly rural roads that are already overloaded by unplanned devlopment.
Both the plans outside of Rolleston and in Ohoka have already been declined by hearing panels because of this and reasons such as for being flood prone.
The only way these developments make economic sense is if you only track the initial short term economic hit from construction, not the longer term costs of providing the infra or dealing with the negative externalities of urban sprawl.
I am no Nimby, but lets do residential where it makes sense AND is actually needed - within existing built up areas by allowing for more intensification. Like most other proper functioning cities in the world.
A lot of eggs in the construction basket here. Some of these projects look positive (some are awful).
Couple of things to counter the 'these projects will save the economy' vibe. First, we have already lost 11,000 construction jobs in the last year. The most construction jobs we have ever added in a single year was 15,000 in 2021 and 2004. We have hit 10,000 additions a couple of other times.
Let's say we exceed that expansion and add 20,000 constructions jobs through mid-2025 to 2026. That will be about $2bn worth of additional labour. Now, labour costs on construction projects are roughly 20% to 30%. So, if we add $2bn of labour and we face no supply constraints on materials, plant, machinery etc, then that gives us the bandwidth to get about $8bn of projects in train.
Worth noting at this point that Govt deficit spending (fiscal stimulus) next year is forecast to be about $20bn less than last year.
This is what frustrates me about Govt strategy - they don't think about the real resources required to make stuff happen, nor the broad investment required to regenerate the economy. Oh well.
'they don't think about the real resources required to make stuff happen,'
touche
Most of this wish-list won't see the light of day; the business case for almost everything is going backwards - for very obvious reasons. Obvious if you're not steeped in economics, that is.
At the earliest, these projects will receive consent (assuming approval) around July/August 2025. That’s why, together with falling interest rates and the underwrite scheme, I see some light at the end of the tunnel for residential construction in late 2025.
That’s positive for jobs, at least.
But the projects themselves? Meh. In far flung locations, and they won’t be affordable. Lack of well located, relatively affordable housing is the issue, not lack of housing…
"Equity analysts at Forsyth Barr say the list of projects up for a fast-tracked consent have the potential to give the downbeat economy a “much-needed injection of energy.”"
Not even remotely close to what the RBNZ coming to it senses would.
Not. Even. REMOTELY. close.
And like I have said - ad nauseum - had the RBNZ started the cutting cycle earlier we would not need this obscene graft from our government.
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