Auckland Set to Solve KEY Problems – Or is it?

 

 

In my “Auckland Economic Performance Improving #1” post I had posted a one liner right at the end stating: “That Auckland still has a way to go before its economic performance is where it should be.” And the City does have a way to go in boosting its economic performance. Addressing this concern about Auckland’s economic performance – as well as it lifting, Mayor Len Brown gave a speech to the Greater East Tamaki Business Association. The full speech notes can be found over at Bob Dey’s Property Report piece “Mayor talks earlier rail link, control over PPPs, the Auckland prospectus (Transforming Auckland’s economy: State of Auckland).”

Stuff also picked up on the speech and broke it down into bite size pieces – which makes running commentary bit easier to do. Using Stuff’s “Auckland set to solve key problems” article I will look at some of the indicators the Mayor this morning pointed out.

From Stuff.co.nz

Auckland set to solve key problems

LAURA WALTERS

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Auckland’s economic growth this year was projected to be about 3.5 per cent, up from 2.8 per cent last year. Building was up almost 25 per cent compared to a year ago, and consents for the 2014 financial year were set to double the number issued in 2011.

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These figures coincide back with the good news from Ports of Auckland, and Precinct Properties ( partnering with Waterfront Auckland) back in the ‘Auckland Economic Performance Improving #1” post. But as I have warned before in the “A Perspective on the CBD and Waterfront” it is our Port of Auckland technically leading the growth (and keeping the CBD alive) while MAJOR FOCUS is needed back on our industrial complexes and their supporting (Super) Metropolitan Centres and/or Town Centres. My Unitary Plan submission did make mention of this in-part if we am in Shaping (Auckland to be a) Business Friendly City (as the Council puts it). Our Metropolitan Centres and industrial complexes (most if not all located in Southern Auckland and Penrose-Onehunga) are where significant engine rooms (Auckland has a few) are going to be located as Auckland grows. That said the CBD will continue to play its part too.

I also see that the Mayor points out that the Auckland economy grew by 3.5%. That is 1.5 percentage points short (so 5%) of the Auckland Economic Growth Goals set out by Council which can be seen below:

Auckland’s waterfront plan will not deliver 

ROD ORAM

OPINION: Auckland, given its people and place, has the potential to be one of the world’s great cities. To help achieve that, its council has set a bold economic strategy.

However, some studies for the council show that the initiatives under way won’t deliver on the city’s goals. That’s particularly true on the waterfront, the jewel in the crown.

The council’s economic vision could not be clearer:

• An average annual increase of regional exports greater than 6 per cent
• An average annual real gross domestic product increase greater than 5 per cent
• An average annual productivity growth greater than 2 per cent

Work needs to be done to get to those goals…

 

HOUSING

Auckland has suffered a squeeze in housing supply, leading to rising house prices. Brown said the council’s new housing plans meant consents could be approved faster to ramp up the pace of house and apartment construction. During boom times Auckland built a lot of houses, but during a bust it barely built any, he said. The costs of materials for building houses in Auckland were as much as double those in Australia. There were 22 special housing areas in Auckland, with more than 15,000 new housing units for the city. There would soon be a mix of homes available across a range of prices depending on where people were looking to buy, Brown said. For example, the central development in the middle of Manukau had units available for between $218,000 and $350,000, he said.

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That development I believe is the Weymouth Special Housing Area and slightly further south the Addison Special Housing Area which recently got under way. It is good that these SHA’s are kick-starting the housing supply side again but the major brake to actual affordable housing will be eventually the Unitary Plan and all its low density and restrictive development controls. I pointed out that situation with the Unitary Plan in my “Milford Development to Go Ahead” which had the link to the Herald’s “New plan ‘big blow’ to home buyers” from this morning. Both that post and Herald article illustrated the main consequences against freer housing choice and affordability if we continue allow the Unitary Plan to predominately have low density residential zoning and very restrictive development controls.

The Mayor will struggle to get housing supply back on track unless the Unitary Plan in regards to residential zones and development controls are liberalised.

 

INTERNATIONAL INVESTMENT

Brown said Auckland’s growth rate would be determined by the national growth rate unless it shifted its focus to exports. An international development office would offer opportunities for domestic and overseas investment in large Auckland and council-controlled organisations. The service would then be offered to owners of other large projects, such as NZ Transport Agency (NZTA), universities and the private sector. The city needed to attract international investment on a much bigger scale than it had in the past and actively promote itself to the international migrant market, Brown said.

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The full post where the following excerpt comes from is located here: A Perspective on the CBD and Waterfront. That excerpt below already points out the challenges to the Mayor’s International Investment situation:

Continuing on with Oram’s piece – on the economic side

Yes, employment on the waterfront will grow, PwC forecasts for the area between Wynyard Quarter in the west to the Marsden and Cook wharves in the east. This excludes the bulk of the Ports of Auckland employment in the container terminals further east.

Direct and indirect fulltime equivalent jobs will grow 2.7 times from around 14,500 this year to 39,400 by 2040. But the economic activity they generate will grow only 2.8 times to $4.12 billion (in constant dollar terms). So, the non-port waterfront’s contribution to regional GDP will barely shift from around 5.5 per cent currently.

It is obvious why Auckland Council is failing to start the fundamental change in Auckland’s economy. Some 12,600 waterfront jobs in 2040, about one-third of the total, will be in low-value, part-time and seasonal work in the cruise, tourism and hospitality sectors, PwC forecasts. Another 12,500 jobs will be “high productivity”, which PwC doesn’t specify nor give any indication of where they will come from; and a further 14,300 in “other” work.

So, how might Auckland fulfil its ambitions? The goals are right. The region needs to be far more deeply linked with the global economy. Currently only 9 per cent of Auckland’s economy has anything to do with the rest of the world. The vast bulk of activity is generated from serving the needs of its population, and the wider country.

To develop such engagement, Auckland needs to become very good at attracting interest and investment from overseas businesses, while many more Auckland businesses must learn how to earn a living internationally, not just in this tiny domestic market. But Auckland will develop these two powerful economic drivers only if it locks on to the seismic economic and social shifts in the world. The most potent of all is the economic and environmental sustainability of urban areas.

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We see some economic number crunching in the above section from Oram based on PwC’s analysis earlier this year. Yes we are seeing growth in the CBD and the immediate fringe areas as outlined in the ‘Strong Growth in Auckland‘ post. While that is good what Oram and PwC were pointing out that we should have reasons for concern:

• Direct and indirect fulltime equivalent jobs will grow 2.7 times from around 14,500 this year to 39,400 by 2040
• But the economic activity they generate will grow only 2.8 times to $4.12 billion (in constant dollar terms). So, the non-port waterfront’s contribution to regional GDP will barely shift from around 5.5 per cent currently.
• Some 12,600 waterfront jobs in 2040, about one-third of the total, will be in low-value, part-time and seasonal work in the cruise, tourism and hospitality sectors
• Another 12,500 jobs will be “high productivity”, which PwC doesn’t specify nor give any indication of where they will come from;
• and a further 14,300 in “other” work

Just quickly in regards to “other work” I wonder if they mean this: “On the Phenomenon of Bullshit Jobs.” While it is a fascinating read and gives some interesting insights it does raise concern if that if those 14,300 “other” jobs come from err BS Jobs then this in truth the Port will be providing the only real and relative boost to the CBD and wider Auckland Economy. Meaning we in real terms stagnate around that 5.5% mark (quoted in bold above) as we have not realises this:  ”many more Auckland businesses must learn how to earn a living internationally, not just in this tiny domestic market.”

So where will the real growth come from is the CBD looks to be stagnating at 5.5% contribution without port help. Our exporting sector that earns and attracts currency and investment overseas. That catch is though you will not find the bulk of the exporting sector (apart from Port of Auckland) in the CBD regardless of an innovation precinct being there (or not).

You will find our exporting sector and even our start-ups (unless subsidised beyond the hilt to be in the CBD/Wynyard Quarter) here: “ The export jobs won’t be found down here. Look south instead to Manukau and surrounds.” That came from a Waitemata Local Board member on Facebook.

And it is true, you will find your exporters and most likely start-ups in actual established industrial areas near good commercial and transit links. Manukau and Wiri are two places that tick those boxes although they are not the only ones in Auckland. Of course this will lead to another post on why Innovation Precincts done or subsidised by Local and/or Central Government(s) are a waste of time and that exporters and start-up often search out established areas.

Ironically given time if enough exporters or start-ups flourish and mature through time, they both regeneration the urban area they are in. As an example we have the exporters and “innovator” start-ups cluster around Wiri and Manukau – two very established areas that over decades flourish and mature. .

In those decades of maturing the surrounding urban area and fabric change and urban renewal kicks off. While a Council might get involved with say civic and physical infrastructure, the free market and the established exporters and mature start-ups guide and dictate the regeneration for their needs. This in-turn causes critical mass and are able to self-attract more like-minded exporters or innovative start-ups. The economic and social benefits flow through and the surrounding population is lifted up – all without Council sinking $1 billion over ten years (into Wynyard Quarter) that looking at PwC and Rod Oram’s assessment could not deliver the outcomes nor return in investment for the amount of our ratepayer money sunk in…

Questions Council need to ask and to ask of ATEED and Waterfront Auckland

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Seems the Mayor still has A LOT OF WORK to do in terms of attracting international investment. And because of that work to do; Auckland still has a way to go before its economic performance is where it should be.

 

TRANSPORT

“Auckland has suffered from decades of underinvestment in public transport and a lack of joined-up planning,” Brown said. The council and the Government were also committed to dealing with Auckland’s traffic congestion. The focus would be on the East-West link, the main freighting link across the city, and the early completion of the second harbour crossing, he said.

NZTA and the council were also working on a plan to unblock Tip Top corner and the Takanini interchange.

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I believe with the East-West Link they are toying around with a modified Option 1 after stern community action took the other options back off the table earlier this year. As for the second additional harbour crossing – oh boy. Can we wait until the City Rail Link and Western Ring Route is built first before deciding on whether to go road/rail or rail only for the second Harbour crossing.

As for Tip Top Corner and Takanini Interchange – please – get a move along please. Although it has been mentioned before that the Takanini Interchange upgrade could start as early as next year (hopefully it does).

 

So the Mayor gave a speech on lifting Auckland’s performance. While that is good to hear Auckland still has a way to go before its economic performance is where it should be!