Auckland region's economy tipped to take off

By JIM EAGLES

Auckland is still the nation's economic powerhouse - but the rest of the country is catching up.

Economic reports last year seemed to show the region had fallen behind.

But a business and economic report issued this week by the eight regional and district councils that make up Greater Auckland shows that has not happened yet.

In the crucial area of GDP per capita - the amount of wealth created by each person - Auckland still has a decisive lead over the rest of the country.

Last year, its GDP per capita was reckoned to be $29,495. The figure for the rest of the country was $27,246.

In other words, people in the Auckland region work more efficiently than those in, say, Wellington. And it has been that way for a long time.

But the gap has started to narrow in the past couple of years. Last year, for instance, per capita GDP in the Auckland region increased by 1 per cent and that for the rest of the country rose by 2 per cent.

Auckland's overall GDP has for many years been helped by the fact that its population has been growing far more quickly than the rest of the country's.

Last year, the number of Aucklanders increased by 1.3 per cent. The rest of the country grew by 0.1 per cent.

But even with the region's population growth, overall GDP rose by only 2.3 per cent compared with a national figure of 2.7 per cent.

The report notes that was due partly to the rural boom resulting from good export prices and a low dollar.

"But it also highlights more deep-seated issues that are illustrated by the fact that the region has not generated significant per capita economic growth for much of the past decade."

The report forecasts things will be neck-and-neck this year, with Aucklanders expected to improve their output by 1.8 per cent and those in the rest of the country by 1.7 per cent.

That, plus faster population growth, means the Auckland economy may grow by 3.5 per cent this year compared with predicted growth of 3 per cent for New Zealand as a whole.

But that would still be a far cry from 1994, when Auckland's GDP per capita jumped by 5.6 per cent while the rest improved by 3.7 per cent. In those halcyon times faster population growth meant the region's overall economic growth was almost double that of the rest of the country.

The report shows that in recent years fewer Aucklanders have been available for work. At the start of 2000, for instance, 66.7 per cent of people in the region said they were available to work compared with a national figure of 65.5 per cent.

At the end of last year the proportion of Aucklanders available for work had dropped to 66.2 per cent and the national figure had improved to 66.9 per cent.

"Slower economic growth during the late 1990s dampened labour demand," the report says.

"And while employment growth has picked up over the last year it appears some workers remain discouraged from seeking work."

That may be connected with what the report describes as "relatively lacklustre manufacturing activity despite a very competitive exchange rate".

Employment in manufacturing in the region fell by 2.3 per cent last year. "This sector shows few signs of being the engine of growth for the region's economy."

But the news is better on other fronts.

Huge investment in the region's infrastructure, most notably spending of around $500 million over the next few years to improve public transport and roads, is predicted to give the local economy a big boost.

A marked turnaround in net migration, which has already started, is forecast to bring a net inflow of more than 20,000 people to New Zealand this year, in sharp contrast to the net outflow of about 13,000 a year ago.

"The positive impact ... is likely to be most pronounced in the Auckland region," the report says. "The main spinoffs will be stronger retail and real estate markets."

The report predicts that retailers and the real estate industry will do very well this year.

Tourism is another industry in good shape, in spite of the global downturn. Visitor numbers are expected to rebound by the end of the year, a big boost coming from the Louis Vuitton regatta and the America's Cup.

"Auckland is faring better than the rest of New Zealand, as Asian tourism has remained relatively healthy," the report says.

Perhaps the strongest sector has been business and financial services, where the number of Auckland jobs has increased by 14 per cent over the past three years.

Growth has slowed recently, with brokers such as Merrill Lynch and JP Morgan, and big companies such as Lion Nathan, Baycorp and Nufarm leaving the country.

But that has been offset by companies such as Fonterra, Holden and CS First Boston deciding to focus on Auckland, mostly at the expense of Wellington.

The report also takes a very positive attitude to the focus on innovation and enterprise started by the Knowledge Wave conference last year.

Competitive Auckland has been established, and has produced an economic strategy based on potentially high-growth areas such as marine, biotechnology and exporting education.

For the first time the region's councils have come together to develop an overall economic strategy, due to be completed in June.

A better partnership has been developed between universities, businesses and government agencies.

The report says this already has been reflected in developments such as the opening of Massey University's Business Enterprise Centre on the North Shore, Auckland University's creation of The Icehouse - a centre for entrepreneurship - and the further development of a research and technology park at the Tamaki Campus.

Those factors should help the regional economy take off again.

And, it notes, "Auckland's performance is seen as vital to national economic progress".