5 Apr 2012

Construction boost could hide rising costs

8:03 am on 5 April 2012

ANZ senior economist Mark Smith says a massive ramp-up in the construction sector this year won't move the sector's activity beyond its historical average till 2014.

Official figures last week showed a slight increase in the seasonally-adjusted number of housing consents, excluding apartments.

Mr Smith says low interest rates and an increasing population is driving the recovery, but he does have some reservations.

"There are some question marks that we do continue to have have over the (ability of the) construction sector to generate this increased activity without running into increasing costs," he says.

"While (construction costs) did tick down this month, they still remain quite elevated and they will be a key barometer.

The National Bank's latest monthly business outlook showed construction as the sector most confident about profits, employment and investment intentions.