Laurence Kubiak: Economic influence of port runs deep

The cruise ship industry is one way the Port of Auckland is important to the city. Photo / Chris Gorman

The ferry from Half Moon Bay is a kaleidoscope of Auckland on the water. Pleasure crafts abound; beaches teem with swimmers and surfers; cruise ships or freighters loom in the distance; fishermen fish; ferries ferry; and the port bustles with activity. In Auckland, Tangaroa beckons from every corner.

So when the New Zealand Institute of Economic Research (NZIER) was asked to carry out some analysis on the Port of Auckland, we were relieved when it turned out that the council wanted to know how long the port could continue within its current footprint and what this meant for the surrounding transport infrastructure.

We weren't asked to arbitrate between competing interest groups, or calculate the costs and benefits of moving to another location. We were asked to examine how Auckland could best play the cards it has now, not how it might play a different hand.

The Port of Auckland is New Zealand's main import port. The largest cargo (45 per cent) is vehicles, but large quantities of sand, road metal, cement, gypsum, coal and machinery are also landed to support building and infrastructure growth in the city and regions. Last year almost one million containers were landed, bringing ashore an enormous range of commodities.

The port's location in the heart of the city is unusual, but not unique: Vancouver and Helsinki also have downtown ports. Goods landed in Auckland are landed very near where most of them will be consumed, and the main motorway and rail interchanges are nearby.

The cruise ship business is also important and growing. Over the 2013-14 season, cruise ships brought more than 200,000 people to Auckland. Here again the port's central location offers advantages: a few minutes' stroll from Queen's Wharf will take the visitor to Queen St, the Wynyard Quarter, ferries to the gulf, or to transport connections further afield.

Demand for the port's services will continue to rise. GDP levels continue to increase among our Asian trade partners, Auckland is growing, and cargo and cruise ships are getting larger and longer. Vehicle ownership rates have now returned to pre-global financial crisis (GFC) levels, and new vehicles with new technologies will continue to arrive via the Port of Auckland, which has processing and testing infrastructure in place.

NZIER has projected annual growth in container throughput at 3.2 per cent, lower than the 4.7 per cent per annum experienced over the past two decades, but recognising the continuing effects of the GFC and demographic changes.

NZIER does not expect the container port to reach capacity until around 2035. However, this timing is sensitive to small, plausible changes in container growth, and in the worst case scenario, capacity could be reached as early as 2024. The non-containerised operation of the port is already constrained at times of peak demand.

In these circumstances the prudent course is to find ways to add capacity sooner rather than later. As for transport, figures from NZTA show that heavy commercial vehicles account for only 8 per cent of the traffic in the key Grafton Gully bottleneck. Background traffic causes the jams, not trucks from the port.

In John Masefield's poem Cargoes, the "Quinquireme of Nineveh" and the "Stately Spanish Galleon" of the first two verses, with their cargoes of ivory, diamonds and other exotic luxuries, give way in the third verse to a defiantly unromantic "Dirty British coaster" with a cargo of "coal, road-rails, pig-lead, firewood, iron-ware and cheap tin trays".

Masefield's point is a good one. These items might be mundane and easily taken for granted, but they are beneficial, and they indicate general prosperity, not luxury for the few. It prompts the question: what benefits are conferred on the city by the port?

Market Economics has estimated the value-add of Ports of Auckland Limited at $247.6 million, or 2027 jobs, but the economic influence of the port runs much wider. For example, 90 per cent of light vehicle imports into New Zealand come through the Port of Auckland. These imports sustain Auckland's motor vehicle wholesale industry, which employs about 3500 people, mostly in South Auckland.

In the 2013 to 2014 year, this industry contributed $380 million to Auckland's economy, $200 million of it in wages.

The port is important to Auckland's prosperity in ways that are not always obvious.

If rising demand is not met by capacity increases at the port, demand will move elsewhere. This would not only inhibit the growth of parts of Auckland's economy, it would also impose extra financial and environmental costs because a large part of the goods landed elsewhere would have to be transported to that part of the country where demand is strongest and growing: Auckland.

Views differ - widely - on the proper role of the port and the harbour in the life of Auckland, but let us not take for granted that most mundane of qualities: prosperity.

Laurence Kubiak is the chief executive of NZIER.