Duties on plasterboard, reinforcing steel bar and wire nails and tariffs on building products like roofing, cladding, insulation, paints, electrical and plumbing fittings will be removed temporarily to increase competition and improve housing affordability.
Reducing the costs of building materials is an important part of the Government’s programme to improve housing affordability.
Removing these duties and tariffs will increase competition and reduce costs, with an expected saving of around $3500 for the construction of a standard New Zealand home.
New Zealand is a small market for construction materials with limited competition for some products. Reducing the barriers to competition ensures that we have a more competitive market.
This reform will reduce costs for residential building construction with positive spill-overs for commercial and industrial building.
The three-year suspension of anti-dumping duties on plasterboard, wire nails and reinforcing steel bar will be implemented by an amendment bill to be passed under urgency as part of Budget 2014.
It will take effect from June 1, 2014.
A bounded public interest test will be introduced into the Dumping and Countervailing Duties Act 1988 following a public discussion document and consultation on the detail of the amendments.
From July this year, a zero concessionary tariff will be introduced on residential construction materials. It will be reviewed after five years.
The zero concessionary tariff will cover around 90% of the materials used in a standard house construction. It will include roofing, cladding, framing, partitioning, windows, doors, insulation, plumbing and electrical fittings, kitchen cabinets and paints.
The regulations to implement the concessionary tariff will apply to thousands of specific products and will be finalised in consultation with industry to come into effect in July.
The building materials market is growing rapidly following the Christchurch earthquakes and with the increase in Auckland residential construction.
Imported building materials will need to meet our building standards.
I am also confident our building product manufacturers can adapt and innovate to match up to the international competition.
The reduction in duties and tariffs from this initiative will reduce Crown revenue by $27.8 million over five years as provided in Budget 2014.
The savings to the residential construction industry are considerably larger at approximately $75 million a year because the major benefits flow from increased competition and lower building material prices.
The decision to remove these duties and tariffs comes from the work of the Productivity Commission into housing affordability and the residential construction sector market study by the Ministry of Business, Innovation and Employment.
Further work is also being done on standards and regulations to increase competition and reduce the price of New Zealand building materials.
Reducing building material costs will complement our wider programme to improve housing affordability which focuses on freeing up new land for development, improving sector productivity and reducing compliance costs.
The combined effects of these measures will make a lasting difference to affordability and see more New Zealanders realise the dream of owning their own home.
Craig Foss is Commerce Minister of New Zealand