Auckland lifestyle on sale

In many ways Auckland has epitomised New Zealand’s economic and social transformation since the economic reforms of the 1980s.It is big, bold and brash.   It has gone for growth and achieved it.   But thereis a slightly uncomfortable tinge to its style of growth.

Auckland’seconomy has grown admirably.   Over the economic boom years from 2000 to 2008 itgrew on average by almost 4% each year.   By the end of the boom its economy was35% bigger than at the start making it the fastest growing region in New Zealand.

But to what extent did Auckland’seconomic growth translate into an improved standard of living for each of itsresidents?   The answer is not very much.   Auckland’s economic growth rate movesto near the bottom of the regional list if we adjust our growth estimate totake into account population growth.

Auckland hasexperienced population growth during the current decade which by developed worldstandards could be described as spectacular.   In 2002 and 2003 the region’spopulation grew by more than 3% each year.   At times this decade it was addingmore people to its population than Sydney, a city four times its size.       

Auckland’s lowGDP per person growth suggests that much of the region’s economic growth hasmerely come from adding more people to the region.   This has a familiar ring toit.   It parallels New Zealand’s growth and productivity woes.   As a country wehave relied heavily on working more hours each week to increase our outputrather than producing more for each hour that we work.

Why has Auckland’s per capita growth beenso much lower than the rest of the country?   It is not to do with the type ofindustries that are located in Auckland.   In fact the reverse is true.   Theindustries that have performed well in New Zealand during the boom years arebetter represented in Auckland than those industries that have performedpoorly.

The answer possibly lies in the nature ofits population growth.   Auckland is the first destination for most immigrantsarriving in New Zealand and strong net migration has been the biggestcontributor to Auckland’s population growth this decade.   New migrants make animmediate contribution to the economy of their new home through their demandfor accommodation and other goods and services.   But research suggests that althoughmigrants provide a net boost to economic performance, the gain in GDP perperson can be quite small, and even negative for a period as migrants adjust totheir new environment.   As a result regions in which migrants make up asizeable portion of population growth may experience lower growth in GDP perperson than regions whose populations have grown primarily through naturalgrowth (births exceeding deaths).

Research published by Treasury shows thatmigrants tend to go through an initial adjustment period that can last 5-10years as they adjust to their new country, work culture and sometimes language.In this period their productivity is below their potential.   As an immigrantmyself I know how unproductive the first few years in a new country can be.  

For New Zealand Auckland probably bearsthe greatest cost of acclimatising new migrants as it is the gateway to New Zealand for many new migrants.   After finding their feet in Auckland, many new migrantsmove to other parts of New Zealand.

Auckland haseffectively been achieving much of its growth through selling its lifestyle toforeigners.   It has lifestyle in buckets and Auckland consistently performswell in international quality of life surveys.   In the 2009 Mercer survey itwas ranked joint fourth out of 215 cities in 2009, up from fifth in 2008.And immigrant populations can contribute in non-economic waysto reinforce the quality of life, especially through their infusion of cultureand cuisine.

Is what has happened in Aucklandindicative of a fundamental change in the economic model of New Zealand?   Historically our wealth has revolved around exploiting our relative abundancein arable land, combined with hard work and smart thinking, to produceexports.   Now it seems a major means of expanding wealth is to sell the landdirectly to migrants.   This subtly changes our source of competitive advantageaway from the productivity of our land to factors that enhance lifestyles.   New Zealand, and Auckland in particular, is an embodiment of the shift to a service basedpost-industrial society.

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