Rider Levett Bucknall’s latest Infrastructure Forecast 003 – New Zealand Trends in Infrastructure Construction signals that investment in Aotearoa’s infrastructure pipeline remains positive, even as growth slows.
Infrastructure growth slows, outlook remains positive
RLB Director Ed Cook commented, “While infrastructure construction growth has slowed and cost pressures are easing in the short term, the overall outlook for investment remains favourable, especially for transport and water projects.”
Prepared exclusively for RLB by the New Zealand Institute of Economic Research (NZIER), Infrastructure Forecast 003 finds that easing capacity pressures and shorter time‑to‑market for major projects are contributing to a further slowdown in construction cost inflation.
Civil construction cost pressures continue to ease amid weaker demand. Building‑sector firms report cautious optimism, expecting lower interest rates to support a recovery once demand rebounds.
Pipeline snapshot: $204 billion in projects
Te Waihanga’s December 2024 Pipeline Snapshot values upcoming infrastructure work at NZ$204 billion. Of that, NZ$107.9 billion is already funded – an NZ$8.1 billion increase for the quarter. Transport infrastructure continues to dominate, valued at NZ$131.6 billion, while water infrastructure is second, at NZ$30.2 billion. Transport projects alone account for 51 per cent of the total projected 2025 spend and are expected to attract 62 per cent of capital investment over the next decade.
Economic developments and trends
Gross Domestic Product (GDP) grew 0.7 per cent in the December 2024 quarter. Retail spending rose 1.9 per cent, indicating that lower interest rates are supporting household consumption. The Reserve Bank of New Zealand began cutting the Official Cash Rate in August 2024. While business confidence has improved, firms still face weak demand. Weaker population growth, reflecting a recent moderation in net migration, may also weigh on the recovery in construction activity.
Annual CPI inflation eased to 2.5 per cent following a 0.9 per cent increase in the March quarter. Global oil and iron ore prices are stabilising, and steel prices have softened on rising production volumes.
Civil cost pressures ease further
Ed Cook continued, “Despite soft demand in the near term, the infrastructure investment outlook remains positive. Lower interest rates and a strong pipeline should support a medium‑term rebound.”
RLB expects civil construction cost inflation to decline further this year, reflecting continued easing of capacity constraints. Annual inflation is forecast to trough at 0.5 per cent toward the end of 2025, before gradually increasing to 2.6 per cent over the medium term.
The downward revision to our longer‑term forecasts reflects the subdued growth outlook, which will temper input‑price escalation. We expect cost inflation to rise modestly from 2026 as lower interest rates stimulate demand
Ed Cook
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