Housing Minister Chris Bishop is indicating he thinks Auckland’s population should double.. Photo / Peter Meecham
OPINION
Housing Minister Chris Bishop is indicating he thinks Auckland’s population should double.
It’s currently 1.7 million, having doubled over 36 years since 1988.
Bishop cites a 2007 paper, which he says suggests doubling a city’s population might increase its productivity or per-capita GDP by 15 per cent.
If so, doubling Auckland’s population to 3.4 million over the 36 years to 2060 would increase Aucklanders’ average earnings by 0.4 per cent a year.
New Aucklanders could come from elsewhere in New Zealand, although the idea is to double Whangārei, Tauranga, Hamilton, Rotorua, New Plymouth, Napier/Hastings, Palmerston North, Wellington, Nelson Tasman, Christchurch, Queenstown and Dunedin too.
New Aucklanders might arrive from rural New Zealand, especially if the emissions trading scheme converts pastoral land to forestry.
Christopher Luxon jokingly suggested Kiwi women have more babies, but our fertility rate of 1.61 is unlikely to reach even the 2.1 needed for population stability.
The 1.7 million new Aucklanders will need to come from overseas.
However, Bishop’s suggestion that doubling a city’s population increases productivity by 15 per cent is probably wrong.
It’s based on a study in China and another in Germany in 2003, and two academic papers published in 1975 and 1976.
In the real world, Manhattan’s population has fallen by nearly a million since 1900 to 1.6 million, without obvious productivity issues. New York as a whole has sat around eight million since 1950, while Auckland grew five-fold.
Before the new Aucklanders arrive, Bishop says we need to fix the residential property market.
He says the market is “broken”, with rising prices and insufficient new builds.
That’s news to Aucklanders, perhaps explaining why Bishop announced his plans in Wellington.
Through last year, Labour opened the floodgates to new immigrants, which made headline GDP look better in election year.
Our natural population increase was just 19,000 and a record 47,000 Kiwis left, so Labour brought in a record 226,900 immigrants, more than 600 a day to try to prevent an election-year recession.
That’s a time-honoured political tactic but no previous Government was as extreme.
The 226,900 new New Zealanders came mainly from India, the Philippines, China, Fiji and South Africa.
Our population grew at its fastest rate since World War II soldiers returned.
They mostly had homes to return to, while new houses were needed for last year’s arrivals.
Far from being broken, the housing market proved highly efficient, accommodating the biggest increase in population in nearly 80 years with prices remaining largely stable.
Treasury advised Bishop that by far the biggest influence on house prices is interest rates, which is why they soared when Grant Robertson and Adrian Orr printed money during Covid.
Nevertheless, Bishop worries that “young people stare at our broken housing market and think they have no hope of ever owning their own home. And for many, they’re right.”
But that’s only true if Bishop plans to open the market to overseas buyers or keep ramping up immigration.
A housing market closed to foreigners and with a stable population must clear from one generation to the next.
If young people have found it difficult to purchase a home, that’s because successive governments have artificially grown the population for political reasons.
That’s exactly what is proposed again.
In December, Bishop advised Cabinet his plan is “to flood urban housing markets”.
That’s necessary for a doubling population, but Bishop wants the market to be so oversupplied that prices fall.
That’s okay for Baby Boomers and Gen X, but those Millennials or Gen Zers who recently bought with low deposits would be ruined. There’d also be flow-on effects to business loans backed by home equity.
Massive new investment would be needed in water infrastructure, public transport, roading, electricity and new schools and hospitals.
Finance Minister Nicola Willis would struggle to find the money, already suggesting this week no return to surplus until 2027/28.
By then, we’ll have run a cash deficit for a decade, the worst performance since the reform era. Worse still, since Michael Cullen handed over to Bill English in 2008, we’ll have run cash deficits in 18 out of the previous 20 years.
We’re right back to Muldoonery, yet none of our political leadership has the mettle of Roger Douglas, Ruth Richardson, Bill Birch or even Winston Peters or Cullen to fix it.
Since 2008, our efforts after 1984 to achieve and maintain fiscal discipline have been squandered.
Crises are no excuse. Peters and Birch maintained fiscal discipline through the 1997 Asian economic crisis and Cullen after 9/11. Having borrowed for the 2008 global financial crisis, the Canterbury earthquakes and Covid, English and Robertson might have at least got around to paying some of it back.
Bishop has promised to “explore new funding tools for infrastructure, including value capture, ensure transport funding settings facilitate housing and investigate options to improve council incentives for growth, including potentially sharing a portion of GST from developments”.
But such tools would need to be hugely innovative to generate the hundreds of billions needed just for the existing infrastructure deficit, let alone the hundreds of billions more needed to support doubling the population.
To be in a single urban market, Bishop suggests Aucklanders living on one side of the city should be able to get to the other in 30 minutes.
For that to be remotely feasible, an unimaginably vast investment would be needed in world-class rapid transit. You don’t need to be a way-out urbanist to know no amount of extra cash would enable Auckland’s roads to serve twice as many drivers.
After rightly cancelling Labour’s $30 billion light-rail project, Willis won’t be keen to fork out for something massively more elaborate.
This argues against any further outward expansion of Auckland.
But Bishop says the first element of his Going for Housing Growth policy is to “smash urban limits”. That would lift the value of land on the rural side of the boundary, with Bishop reporting that urban land at Auckland’s fringe costs at least four times more than nearby rural land. It would be a bad look if those recently buying such land turned out to be major National Party donors.
But just who else would benefit from doubling Auckland’s population and flooding its housing market with townhouses and apartments?
Obviously, the millions moving to New Zealand from New Delhi, Manila, Xi’an, Suva and Johannesburg would win. So would residential property developers and construction companies building the millions of new apartments they would need.
But it’s difficult to see why existing taxpayers, ratepayers, residents and commuters would be so keen. A promised 0.4 per cent annual productivity gain isn’t quite enough.
Disclosure: Matthew Hooton has over 30 years’ experience in political and corporate communications and strategy for clients in Australasia, Asia, Europe and North America, including the National and Act parties, and the Mayor of Auckland.
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