Height launches a free Infrastructure Index and Tradie Lunchonomics

Great news – inflation is down to 2.5%, but why are my construction and maintenance costs not mirroring that?

We’ve got the answer, along with a fresh take on inflation. Introducing – Tradie Lunchonomics!

Our procurement team has created the Tradie’s Lunchbox Index which tracks the cost of a classic Kiwi tradies go-to lunch – a pie and a can of V.  It offers a light-hearted but surprisingly relevant way to observe how inflation impacts everyday spending.

The upshot – the cost of a pie and a can of V has increased by 44% in the past 12 years from $7.20 to $10.39.  At the same time, infrastructure costs have increased by 39%, slightly less than a tradie’s lunch.

What does this mean?

We recognise that the infrastructure sector operates in a dynamic environment where cost fluctuations directly impact project viability, business profitability, and risk management. To address this, we have developed a free custom-weighted index tailored to the infrastructure sector.

For contractors, procurement specialists, and government agencies, keeping a pulse on cost trends is crucial for budgeting, forecasting, and decision-making. Our Infrastructure Index consists of two core components:

• The Construction Index tracks cost movements for new-build projects, covering materials, labour, plant and equipment, hired plant, transport, and consulting services.
• The Maintenance Index focuses on cost trends in the ongoing upkeep and repair of infrastructure, including reactive and planned maintenance expenses.

This unique tool uses extensive research, real-world contract data, statistics from Stats NZ and key insights from the Height procurement team. The Infrastructure Index provides:

• Transparency – real-time and historical views of price movements
• Benchmarking – the ability to compare trends against industry standards
• Risk mitigation – helping businesses plan around price volatility
• Procurement strategy optimisation – enabling informed purchasing decisions.

How the Index can benefit your business

Each quarter, we update the Infrastructure Index to provide an in-depth analysis of cost trends in the sector, covering:

• Current cost drivers and economic factors
• Long- and short-term price trends
• Expected future cost movements based on global and local market shifts.

To stay ahead of cost fluctuations, businesses could leverage the Infrastructure Index for strategic advantage by:

• Monitoring the index regularly – use the data to anticipate cost changes and adjust procurement strategies accordingly.
• Adapting pricing models – incorporate index insights into contract pricing to mitigate financial risk.
• Optimising supply chains – work with suppliers to secure competitive pricing and manage cost volatility.
• Leveraging technology – use digital tools to improve cost forecasting, efficiency, and sustainability.

Context – about inflation

Inflation in New Zealand is currently sitting at 2.5%, well within the Reserve Bank’s target range for the second consecutive quarter. But if inflation is under control, why do some construction and maintenance costs continue to climb at an even faster pace?

Understanding inflation: Tradeable vs Non-Tradeable components

The key to answering this lies in how inflation is measured. The Consumer Price Index (CPI), which tracks inflation, consists of two main components: Tradeable and Non-tradeable inflation.

• Tradeable (international) inflation – this covers goods and services exposed to global markets and competition, making up 40% of the CPI. It includes imported materials and products, and is heavily influenced by global supply chains, exchange rate fluctuations, commodity prices, and international demand.
• Non-tradeable (domestic) inflation – this makes up the remaining 60%, and reflects price changes driven by domestic factors. It includes utilities, local services, and wages, which are influenced by labour costs, local policies, and domestic supply and demand.

According to Statistics NZ, Tradeable inflation is currently at 1.6% up from -1.25% in the previous quarter, meaning costs for internationally sourced goods are actually quite stable. This explains why we are seeing slight reductions in fuel prices and imported materials. However, domestic inflation remains at approximately 5.8%, which is why many businesses continue to see rising costs for domestic goods and services.

The role of labour costs in construction and maintenance

While the rate of labour cost increases in the infrastructure sector is starting to slow, wages are still rising by 2.6% year on year. This is down from the relatively steady 4% annual increase seen since 2022 - growth that has not aligned with inflation over the same period. This persistent labour cost increase is a major contributor to ongoing cost pressures within the infrastructure sector.

What inflation measures should the infrastructure sector really be watching?

CPI is a useful economic indicator, but it doesn’t necessarily reflect cost changes across every industry. We recognise that the infrastructure sector operates in a dynamic environment where cost fluctuations directly impact project viability, business profitability, and risk management. Our custom-weighted index, specifically tailored to the infrastructure sector, is designed to address this.

Photo: Susan Thomas, Dany Rassam and Chris Lord from Height join real-life tradie (and good sport) Shaun, for a Tradie’s Lunch. (Note – this was not an active building site.)