Bernard Hickey: City of cranes has a boom that's a bust

Auckland's crane-filled skyline gives an impression of a booming hive of industry, but productivity is a major problem. Photo / Nick Reed

Auckland feels like a boom town. Its shortage of houses, hotels, roads, schoolrooms and tradies dominates the conversations at barbecues, bars and on talk-back radio.

It seems like growth is all around and, strictly speaking, that's true.

Auckland's population is growing at a rate of close to 200 people a day and all around town the signs of expansion are in the air - literally. The RLB Crane Index report found a record-high 47 cranes on the skyline around Auckland in April - up 48 per cent from six months earlier.

ANZ's estimate of regional growth rates in the March quarter found Auckland's GDP grew at an annualised rate of 3.7 per cent, faster than the nationwide growth estimate of 2.6 per cent and Christchurch's 0.6 per cent and Wellington's 2.4 per cent.

So surely any and all growth for the City of Sails is good?

It is certainly better than no growth or a recession, but the quality of the economic growth matters because sometimes growth for the sake of it doesn't make everyone richer in any sort of sustainable way.

This isn't just an Auckland problem.

All around the world, policy-makers in governments and central banks are scratching their heads over a strange phenomenon - falling productivity growth.

Output per worker per hour is the most important determinant of wages and wealth in the long run. Unless productivity increases, workers and economies don't grow much.

Growth can be pumped up in the short run by adding more workers - often migrants - and working longer hours, but new technology, training, management, systems and infrastructure are needed to make that growth sustainable.

Productivity growth across the developed world has sagged from around 2 per cent a year in the late 1990s to around 1per cent now.

It helps explain why all sorts of stimulus from low interest rates and money printing hasn't restarted the global economic engine and why interest rates have stayed surprisingly low for such a long time.

There are all sorts of theories. Some think globalisation and increasing use of technology has shifted workers out of high-productivity jobs in factories into low productivity and wage jobs in services industries such as hospitality and aged care, which has dragged down the average.

Others think ageing populations and a lack of investment by governments and companies in new infrastructure, technology and education are to blame.

Whatever the reason, Auckland has a bad case of the productivity blues. The city has underperformed on its target of 2 per cent growth in output per hour worked for a couple of decades.

Output per hour has been flat to falling since 2012. Total GDP has grown in the city because of all the extra people working all those extra hours, but output per hour hasn't changed much, which means real wages have barely moved.

They have certainly gone backwards once adjusted for housing costs and, more importantly, for useful leisure time.

This year's TomTom travel survey found Aucklanders spent an extra 158 hours a year - or 20 working days - travelling to work last year because of traffic congestion, which was 7 per cent worse than in 2008.

Auckland may feel and look like a boom town, but quantity does not necessarily equal quality. That's made clear in the woeful productivity figures, in the city's dire commuting times and in disposable incomes depleted by the cost of housing.

Auckland needs a big dose of investment in its infrastructure, people and technology, but mostly it needs leaders and voters to think first about the wealth per capita of that growth rather than its sheer size.

The phrase "never mind the quality, feel the width" needs to be turned on its head.