Heading for the sun: Auckland wage rises 'growth key'

Auckland, take a bow. A Treasury analysis shows that Auckland's fast-rising wages are driving overall improvement in New Zealanders' living standards.

The study shows that, after adjusting for inflation, real wages in Auckland rose from $19 an hour to almost $22 an hour in the seven years to 2004, while real wages in Wellington stagnated around $21.50. Real wages in Christchurch, other cities and rural areas rose only gently from around $17-$17.50 to $17.50-$18.50 an hour.

The study debunks previous reports suggesting slow productivity growth in Auckland is dragging down national economic progress.

The Treasury argues that real wages are a better measure of productivity than the measures used in the previous studies - and show Auckland leading, rather than lagging, national economic growth.

Auckland wages are higher and rising faster, and Aucklanders work longer hours and are less likely to be on benefits than anywhere else except Wellington.

These conclusions tally with a theory that big cities are driving economic growth in the "knowledge economy" era by pulling together large numbers of highly skilled people who spark ideas off each other.

Authors Geoff Lewis from Treasury and Steven Stillman of Wellington research group Motu said Auckland "appears to be a relatively good performer and this is consistent with agglomeration economies being at work".

"Our study should give pause for thought to those who view Auckland as underperforming and a drag on the rest of the country," they say.

But the picture is not totally clear because Auckland also has a lower employment rate - only 77 per cent of people aged between 25 and 60 are in paid work, compared with 80 to 82 per cent in Wellington, Christchurch, other cities and rural areas.

Despite having a third of New Zealand's population, Auckland completely dominates population growth, producing 60 per cent of the country's total population increase from 1986 to 2001 and projected to account for 61 per cent of the growth from 2001 to 2016.

Aucklanders are more likely than other New Zealanders to be in the young adult, child-bearing years, producing a higher birth rate and a lower death rate.

In the five years to 2001 Auckland also attracted 54 per cent of the inflow of immigrants and New Zealanders returning from overseas, but produced only 34 per cent of the outflow of Kiwis heading abroad.

In spite of these impressive statistics, the National Bank's quarterly regional economic activity index suggests that Auckland's economic growth was the fourth-slowest of the country's 14 regions from 1997 to 2004.