The keys to lifting Auckland’s economy
The Auckland Council has highlighted Māori youth as one of the keys to the city’s economic growth. Its economic development arm ATEED, in its annual data report to be released today, says converting this youthful, creative and connected population into economic success can give Auckland a competitive advantage that will set it apart from other global cities.
The Auckland Growth Monitor is a wide-ranging snapshot of how the super city does business, drilling down into the numbers to highlight strengths, failings, and areas where there is potential to lift economic performance. It paints a picture of a globally connected region being boosted by tourism, booming construction, and immigration.
Without those three factors however real productivity growth is minimal - the addition of 43,000 new residents in the year to June 2017 has masked GDP per capital growth of around one percent in recent years. Growth in Auckland is actually slowing, after years of exceptional increases. The numbers for the year ended March 2018 show the city's growth rate (2.2 percent) has fallen below that of the rest of New Zealand (3.1 percent). It's the first time in eight years that's happened.
"This has the potential to impact on the prosperity of many Aucklanders," the report says.
ATEED CEO Nick Hill says New Zealand’s productivity issues are well-documented, and while the national economy – and Auckland’s regional economy – are growing, our long-run productivity performance has been poor compared to overseas markets. "There has been some improvement relative to high-income OECD countries since the global financial crisis, but we’re not making sizeable progress.”
One of the answers to lifting that figure could be in ICT investment, and Hill says we have seen companies invest heavily in technology in recent years. "Creating a productive, resilient economy is the key to sustainable economic growth," he says. The Growth Monitor looks at some sectors thriving in this regard including screen, creative and tech industries, food and beverage and international education.
"Immigration, and activity in the construction and tourism sectors, have been running high for some time, but these are all subject to external market forces which could potentially have a sudden impact." Hill says that's why it's critical to attract highly-skilled talent by making sure Auckland consistently rates as a great place to live. Ironically he said this the day Auckland slipped down the global rankings of The Economist's world's most liveable cities list - from eighth to 12th.
The Māori economy
Zooming in on the unlocked potential of the Māori economy could be the edge Auckland needs. ATEED has promised to get behind opportunities in this sector, and seek "ways to leverage Māori culture and matauranga Māori (indigenous knowledge) as a platform to build economic strength. This approach will form the backbone of ATEED’s new Māori economic growth strategy being developed in 2018".
Hill says last year NZIER estimated that the Auckland Māori economy grew from $3.7 billion to $4.2 billion over two years. He says that's smaller than might be expected given that the Māori population makes up around 13 percent of Aucklanders, but it's not surprising given that a third are under 15 years old. More than half are under 25 - far younger proportionately than the general population. Business enterprises in Auckland are also more likely to focus on services rather than the national concentration on agriculture, forestry and fishing.
Around 164,000 Aucklanders either identify as being of Māori descent or have Māori ethnicity. About 40 percent of Auckland’s schools offer some level of Māori education, including bilingual and full immersion options. The Polyfest event has now been running for 42 years. "In Auckland we are seeing a cohort of young people who are deeply connected to their culture and their communities," the report says.
"This youthful, creative and connected population is a strength for Auckland," Hill says, "and ATEED’s role is to create opportunities and programmes which convert this creative potential into economic potential, and then economic reality." It is involved in The Southern Initiative, which aims to increase Māori youth employment and help build future leaders in industries such as construction, tourism and the creative sector. It's also about to launch a new campaign to encourage youngsters to consider tourism as a career. "“There are lots of ways for visitors to Auckland to experience Māori culture, but we need more Māori tourism products to meet market demand."
Māori are playing an increasing role in the Auckland labour market. In the five years between March 2012 and March 2017, Māori employment increased by 21.6 per cent, adding 14,763 people to the Auckland workforce.
The report pinpoints areas where potential lies, including knowledge of native natural medicines like active mānuka honey - something that is of significant interest from the huge Chinese health food market. There is also an increasing practical use of Māori language and design in consumer product branding, where companies use that unique global identity to provide label authenticity to New Zealand-made products. But by far the biggest opportunities lie in tourism, a $3.34 billion annual industry in the region. Visitors cite Māori culture as one of the key reasons they choose to visit Aotearoa, alongside scenery and outdoor experiences.
"Once the right strategies are in place to help Māori youth and Māori businesses realise that potential, they can be at the forefront of the next wave of product development and growth in Auckland’s tourism sector – at the same time benefitting from its future economic outcomes through good jobs, and more of them," the report says.
Hill says ATEED is prepared to put a lot of effort into, for example, presenting a business case for the development of new ventures. That also ties into its new focus on areas such as west and south Auckland, and job creation in those areas.
"What those authentic Māori and cultural values are about is about what New Zealand is about, but we are the gateway to New Zealand," he says.
That doesn't mean it will back every idea on the drawing board. "We can always be an advocate but we need to exercise judgment in where we will jump in," he says. "But if there is something from an economic point of view where there are some options, and we feel we could make a difference and add something to the debate, we absolutely would .... if we could do that in a way that's informed and constructive."
City of Cranes
The construction industry nation-wide may be hitting some speed bumps but in Auckland, it's open highway. The Growth Monitor says construction is surging again. There were $28 billion worth of projects underway in the first quarter this year and 73 cranes on the skyline - one more than last year. The big projects are the City Rail Link (a seven year, $3.4 billion job), International Convention Centre ($700 million), the Commercial Bay redevelopment downtown ($425 million) Auckland Airport's expansion ($400 million) and Wynyard Quarter's regeneration ($200 million).
Auckland is New Zealand's largest and most consistent source of job growth .... adding more than 190,000 jobs in the last five years. The city's unemployment rate is 4.5 percent, which in itself is a worrying sign - push any more construction into the pipeline and there will be no one left to build anything. Labour force participation rates are at 71.1 percent - the second highest since 2000. The report says this "may place constraints on future growth as capacity within the active labour market declines". Just 11.5 percent of young people are not in employment, education or training.
Hill describes what's happening now as an unprecedented level of building an investment into infrastructure, current and planned.
ATEED has put considerable effort into doing all it can to make sure the risks that come with building booms are mitigated - building up construction training programmes, getting people working through a city jobs and skills hub, and helping employers upskill their workers. The Growth Monitor is part of that work, providing comprehensive data to mine that is updated every quarter.
"It's designed to help keep industry, investors, and anyone with an interest in Auckland’s economic performance informed on all aspects of our regional economy, as well as our place on the world stage," says Hill. "Sharing this intelligence provides a real understanding of Auckland’s economic development opportunities.”
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