Peter Wilson: It's not as bleak for Auckland as you might think

Auckland has a number of challenges, but many of them result from issues that other cities would love to have, writes Peter Wilson.Photo / Brett Phibbs

Opinion

Aucklanders could be forgiven for thinking their city is doomed, but it is important to maintain a balanced view, writes Peter Wilson, Principal Economist at NZIER.

Auckland's rate rises, soaring house prices and transport woes are hogging the headlines, but the outlook for New Zealand's largest city isn't as bleak as recent coverage would suggest.

The average residential ratepayer faces a 9.9 per cent increase, due to a number of factors including the new Interim Transport Levy, a reduction in business rates and the rise in residential property valuations compared to other types of property.

With wall-to-wall media coverage about rates, Auckland's rapidly rising house prices (up 26 per cent in the past year according to REINZ) and ongoing transport headaches, Aucklanders could be forgiven for thinking their city is doomed.

But it's important to maintain a balanced view about Auckland, because while it has a number of challenges, many of them result from issues that other cities would love to have.

These could be called "nice to have" challenges. They include building enough houses, keeping the city moving and creating the necessary infrastructure to cope with an increase in population from 1.5 million to 2.5 million over the next 30 years.

In contrast, about one-third of territorial authorities in New Zealand are experiencing falling populations making it harder for them to fund their infrastructure. They must be looking at Auckland with envy.

Auckland is arguably better equipped to deal with these challenges now it has a Super City governance structure, with one council in charge of the whole Auckland region.

The Auckland Council may not be getting any Christmas cards from ratepayers facing big rates hikes, but the rates situation would probably have been worse if the amalgamation hadn't taken place.

It's worth remembering that Auckland Council inherited a 9 per cent rates increase and proposed average rates increases of 6 per cent per year from legacy councils.

This compares to the overall 2.5 per cent average increase in general rates in the first year of the 2015-2015 Long-Term Plan, 3.2 per cent in the second year and 3.5 per cent increases for the remaining eight years.

The difference in rates is due to greater efficiencies and economies of scale allowing cost savings; Auckland rates are among the lowest in the country compared to property values.

The key question to ask is: "Is the combined Auckland Council providing better value-for-money than would have been the case under an eight council model?"

The evidence available says that it is starting to.

Auckland is a victim of its own success.

Having one council to rule Auckland has also enabled cohesive plans to be put in place for the region's housing, infrastructure and transport needs.

The Auckland Unitary Plan, which is due to become operative in 2016, is the first ever unified planning document for the whole region and maps out projected growth for the next 30 years.

This has given investors confidence and certainty in the city's future, which may not have been possible with the bickering and infighting between councils that went on under the previous regime.

Auckland still has to sort out infrastructure bottlenecks and develop new funding models, while high house prices present economic, social and political risks.

But for the most part, Auckland is a victim of its own success. It is a global city and a popular destination for international tourists and migrants.

It is also New Zealand's major business hub, which is why NZIER recently set up an office there. If Wellington is the political capital of New Zealand, Auckland is its commercial capital.

With a unified governance structure, Auckland has the chance to sort out its weaknesses so it can take full advantage of its world-class natural amenity and physical environment.

Peter Wilson is a Principal Economist at NZIER. He moved to Auckland from Wellington four years ago.