Ruminating on Auckland

Perhaps not many other long-term residents of Wellington share my taste, but I’ve always been fond of Auckland.  Partly that might just be good memories from five years there in my youth, but there is also the great physical location, a better (and certainly warmer) climate, deciduous trees, flourishing citrus trees in so many suburban gardens, and so on.   We’ve just had a family holiday there, and I was reminded again of what I liked about our largest city.  By contrast, I’ve always regarded Wellington as the public’s revenge on the public service.

Of course, as holidaymakers we didn’t have to grapple with the horror of the housing market, and between reduced school holiday traffic, the new Waterview tunnel, and largely avoiding the rush hour, not even the traffic was too problematic for us.  Coming from cramped Wellington, we were staying just off a not-overly-busy road that seemed wide enough that a whole new subdivision could have been constructed down the middle of the road.   We were mostly being tourists, but a curious and analytical 14 year old prompted discussions around the absurdities of housing supply restrictions –  explaining the oddities of the isolated high rise apartment blocks on Jervois Road, or Stanley Point, or Remuera Road, sticking out now just as those same buildings did when I was his age in the 1970s.

But staying in an older part of town I was also reflecting more generally on both past and present Auckland. 100 years ago, Auckland was the largest city in one of the two or three wealthiest countries in the world.  By the standards of the day, it must have offered ordinary working people some of the best material living standards on offer anywhere.  And if Auckland was our largest city then, it certainly wasn’t a dominant one.   In the 1911 census, the total New Zealand population had just crept above 1000000 (1008468).  And here were the total populations of the main urban areas (encompassing surburban boroughs, not just the respective city council areas).

Greater Auckland 102,676
Greater Wellington 70,729
Greater Christchurch 80,193
Greater Dunedin 64,237

Auckland’s population was just 10 per cent of the total.  At the same time Hamilton borough had a population of 3500, and Tauranga a population of 1300.

These days, Auckland makes up almost 35 per cent of the total population.   These days, with New Zealand GDP per capita around 30th in the world (depending which list one uses), there are likely to be many many cities (perhaps 100 or more, given that big countries such as the US, Germany, Japan, France, and the United Kingdom are richer than us, as well as many small countries) offering better living standards to ordinary working people than can be found in Auckland.  That would be true even on metrics like GDP per capita, with the problems accentuated by the disastrously unaffordable housing market.

Of course Auckland’s relative decline is largely part of the overall stark relative decline of New Zealand.    I’m sure we’ll see plenty of bluster from the current government in the election campaign that is getting underway, but I dug out the Prime Minister’s campaign statement from the 1911 election campaign published in the Herald on 6 December 1911.  It is partisan of course, but when Joseph Ward asserted that

The Liberal Government can claim without fear of contradiction to have made New Zealand in every department of social activity the most advanced country in the world.

Present and Future. New Zealand’s prosperity is solid and beyond question. Its population today is greater by 400,000 people than in 1893 and obviously the work of the Government has greatly increased. In the history of every country there are periodical fluctuations, seasonable ups and downs. We are influenced by the conditions ruling in other parts of the world. We cannot be always on the crest of the wave. But look round on the other countries. Mark what vicissitudes and oppressions they have passed through. Familiarise yourselves with the facts regarding the rich and resourceful United States of America, and then decide whether I am not justified in my reiterated assertion that New Zealand to-day is the most prosperous country in the world.

It is hard not to think that, even with the benefit of hindsight and the best efforts economic historians can do to compare living standards across countries, Ward was speaking the truth.   (It didn’t do his party much good, as they lost office –  after 20 years –  shortly afterwards).

These days we get fatuous comparisons of growth rates across countries, rarely adjusted for rapid population growth, but no one dares to claim New Zealand is even close to the most prosperous country in the world.

Wandering around Auckland was also a reminder of the extent to which Auckland’s economy is largely about supporting its own rapid population growth.  Check out the names on the high rises in the central city and you’ll struggle to find many New Zealand owned brands or companies (the banks and insurance companies, eg are almost all foreign-owned), and especially not if one is looking for firms making it in the international markets.  I’m all for foreign investment, but in a thriving economy it would be a two-way street –  not only would we have much more inward foreign investment but there would be a lot more offshore foreign investment too, as successful New Zealand firms took themselves to the wider world.  The pictures are never entirely black and white.  There are success stories like Air New Zealand (although with majority state ownership and the constraints of that industry who knows if it would still be New Zealand owned and run in a fully competitive market).  On a (much) smaller scale, I noticed billboards for ACG, which has taken its educational offerings abroad.

And there is, of course, the export education industry.  But even the reputable bits of that industry have the ground skewed in their favour by “industry subsidies” –  whether it is cheap access to PhD programmes for foreign students, or the way export education is bundled with preferential access to work rights and residence options in New Zealand.  And then there are the less reputable bits.  We took the kids ice-skating in Aotea Square and while they skated I contemplated the prominent building across the street with the big Cornell name and crest.  Not, surely, we thought the top US university with an operation here?  And no, it was the Cornell Institute of Business and Technology about which the authorities (and former staff) seem to have some pretty serious questions.  It was the most prominent tradables sector building I noticed in Queen St.

And yet, this is the city in which the hopes and dreams of the New Zealand agglomerationists are invested.   If the strategy –  putting more and more people into Auckland, even as New Zealanders have been leaving –  was any sort of economic success, surely we’d be seeing a succession of strong outwardly-oriented private sector businesses increasingly dominating the Auckland skyline?   But there is simply no sign of it.   Perhaps these successful firms are skulking in the suburbs and industrial areas?  I’m sure there are some highly successful examples, but there is no sign of it happening on the sort of scale needed if a non-natural resource based economy, successfully taking on the world and winning, is to develop in ways that would support top tier living standards for many more people.    If the model were correct, Auckland should be leading the way.  But it isn’t.

Really successful cities internationally, in economies that have gravitated away from dependence on (fixed) natural resources, tend to have GDP per capita a long way above that in the rest of the country.  And, typically, that gap is widening.

I ran this chart last year

gdp pc cross EU city margins

Here is the Auckland chart for the years since the regional GDP data began in 2000.  It shows average GDP per capita in Auckland relative to that in the rest of New Zealand (so the margin is larger than in the chart above, which uses the relationship between the biggest city and the whole country –  the biggest city typically being a large chunk of the country).

Akld GDP pc

The ratio does appear to be somewhat cyclical.  Probably what is going on is that when there is a big surge of immigrants (as in the early 2000s and recently) there is a big increase in the activity required simply to accommodate the new arrivals (building houses, roads, schools etc), but the trend is downwards.  Average incomes in Auckland are higher than in the rest of the country, but the margin is small and has been shrinking.

In the annual regional GDP data, SNZ also provide an industry breakdown.  As regular readers know, I’ve highlighted previously the pretty dismal state of the New Zealand tradables sector –  the main bits (agriculture and mining, manufacturing, and exports of services (mostly tourism and export education)) that compete with the rest of the world.   In real per capita terms, there has been no growth in that measure since around 2000.

We can’t do that calculation at a regional level.  But here is another proxy.    In this chart, I’ve included agriculture, forestry, fishing, mining, manufacturing, and education and traning as a loose proxy for Auckland’s tradables sector.  Of course, lots of education is totally domestic-focused, but export education is probably the main export sector centred in Auckland.   It has grown quite a bit in recent years.

akld tradables

There will be successful internationally-oriented Auckland-based firms lurking in some of the other services sectors, but (I’d assert) not many and not very large.   This simply isn’t what one should be expecting to see if the Auckland-focused (de facto, since that is what a large immigration target amounts to in practice) Think Big policy were working for New Zealanders as a whole.

It is close to a tragedy.   A deeply misguided policy, however well-intentioned, has reduced what was once one of the richest cities in the world to a rather mediocre mess: with few industries successfully competing internationally (in a small country the only long-term basis for prosperity), economic activity doing well only when a lot has to be built to accommodate yet another huge surge of new people, and houses so expensive that ever-fewer of the inhabitants can afford to buy.   It is still a great location and a wonderful climate but think how much better material living standards Auckland might offer its ordinary working people if, say, in a country of 3.5 million people, we had an Auckland of perhaps 750000.  Quite plausibly, that is how things might have played out with less overall population pressures –  deferring to the wisdom of the New Zealanders leaving, rather than superimposing politicians’ and bureaucrats’ judgements –  and a much lower average real exchange rate.

It isn’t too late to fix up New Zealand, but it does require a pretty dramatic change of course.  Wouldn’t it be wonderful if in thirty years time some campaigning Prime Minister could once again honestly make the sorts of assertions about economic and social success that Joseph Ward was making in 1911?  Sadly, judging by the political rhetoric this year none of our politicians is interested.

 

51 thoughts on “Ruminating on Auckland

  1. NZ companies are up against some big gorillas in the international mist they have to be managed by great senior management teams, look at how poorly Fletcher has executed outside it’s cozy NZ monopoly. CEO was well paid but could not execute to save himself. These management teams hold their staff to high standards but those same standards are not applied at senior management level, rather it becomes a grazing place to slack off until they fall down the greasy political pole they have previously climbed.

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    • When you have Maori intent on extracting maximum dollars from sacred mounts and sacred caves and Nimby groups intent on preserving their BBQ patches, Fletcher with most of the infrastructure projects would also bear the huge unbudgetted costs of delays.

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      • Fletchers not doubt encounters those problems but if they execute correctly they should have built it into the price of the building contracts which have blown out. By all accounts Adamson was trying to boost the share price through adding contracts or revenue with the hope the profits would follow. Fletchers core problem common to many corporates appears to be a lack of feedback from the frontline and middle management specialists close to the customer. The CEO had an overinflated ego and desire to be surround himself with people who agree. This creates a toxic culture resulting in many blind spots e.g. restructuring out management with specialist skill sets in property development. This is how you destroy shareholder value lack of alternative views and lack of experienced specialists in senior positions. Specialists tend to be prickly personalities that don’t fit well in corporate political circles, but these people a vital cogs in ensuring jobs get done properly.

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  2. Personally, I prefer the new, moderately dense Auckland of 1.5m to the old Auckland of 750,000. But the land use restrictions in the inner suburbs are batty. The last time I went to Ponsonby (about a year ago) I commented that the city must be a gerontocracy judging by the preponderance of over-50s out and about in the evening. With some better economic management at the national level it could evolve into a really special city.

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    • Thanks Blair, just curious; what aspects of “economic management at the national level” do you envision that would transform Auckland.

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      • There is a lot to like there Blair. Due to my interest in housing affordability, I particularly liked : )

        9. Limit the ability of councils to regulate land use, for example by capping the level of complexity that can be zoned at roughly the Japanese level (see here), guaranteeing a “right to build” up to at least a terraced housing level of density, capping the number of buildings per city that can be heritage listed, and empowering the Commerce Commission to break up an anti-competitive market structures in building materials and construction with extreme prejudice.

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      • Funnily enough, I was chatting to a French banker in his 50s yesterday about Macron, and he said both his parents (in their 80s) were against him. He said it is very much a generational thing, and both his parents were content to “sit on their real estate” and were against any change. Similar for older workers with their protected jobs and benefits. Which is why Macron has brought in so many younger legislators; he is trying to unpick the biases inherent in the system. I think some such seismic shift will be needed in NZ (to see some kind of resurgence in productivity and hence good jobs). But as we have a lot of very left leaning young people in NZ there is a lot of work to be done to get them to realise that well-meaning socialism is behind a lot of the inequality they see in day to day life. But some days you see someone like a Julie Anne Genter having a civil discussion with say an Eric Crampton and you think hey, it could happen here.

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      • Absolutely, and noting that the Danes have had a very interesting political evolution on the population question, and Copenhagen is still around three-quarters of a million people. But I think NZ has enough trade advantages (FTAs, container ports etc) to be able to substantially increase its income to near-Danish levels in a few decades, if we level population out at current levels.

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  3. It would be great if it could (“evolve into a really special city”) but there has been no sign – for decades – of the possibility being there. Instead we have a city that was supported for decades by manufacturing protectionism, and by exceptionally rapid immigration policy driven population growth. That generates a great deal of activity, but hasn’t demonstrably generated much productivity or new large successful outward oriented private sector industries. Isolated islands – and Auckland could be thought of as one all of its own – have big disadvantages wherever they are.

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  4. Thank you for your rumination on Auckland. I think you brought the weather with you and left it with us. I ought to be in our full section Auckland garden but it is too wet again.

    I hope someone at the NZ Herald has the intelligence to reprint Joseph Ward’s campaign statement – front page with no comments.

    In 1893 the population was 600,000 and 18 years later it was a million. That is fast growth; NZ had a reputation for big families but there must have been heavy immigration too but NZ stayed on the top of the wave. It seems as if we have fallen off the surf board and are still looking for it as we wallow in the trough.

    Ambivalent about Auckland – on one hand it made me an unexpected millionaire and I haven’t yet decided to leave but on the other hand I see things getting worse. It is said that the elderly always see the past with rose tinted glasses but this is not just a lack of enthusiasm modern architecture. There is a potential problem developing with social stratification (must be a snappier way of saying that) but for many reasons the haves and the have-nots in Auckland are separating and eventually they will hardly ever meet. A sad betrayal of New Zealand’s famous classless society.

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    • Sitting in sunny Goldcoast for the last week and enjoying the billion dollar theme parks designed to extract maximum tourist dollars, I look at the NZ equivalent tourist industry that just sells free air and beautiful landscape as just pathetic. Instead the cost of looking after the waste and pollution of the 3.5 million tourists is being borne by ratepayers and taxpayers.

      In the Goldcoast, the permanent population is only 500k, but there is massive roading and housing infrastructure to cater for 12 million (6 milion international) tourists a year. The hotels and apartments towers can be 60 levels and the the oversupply keeps prices very reasonable. NZ is just pathetic in comparison in catering for only a tiny 3.5 million tourists.

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    • Stayed clear of the casino and Sky tower…….

      Yes, in principle tourism might change the picture a bit but (a) for most tourists Akld seems to be a gateway quickly passed thru rather than a destination, and (b) we know that services exports in total, as a share of GDP, are still materially lower than they were 15 years ago.

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      • This share of GDP comment is rather intentionally misleading when Tourism and International students make up $15 billion of that total GDP today when it was pathetic 15 years ago.

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      • When there are more hotels, restaurents and pubs in Auckland than anywhere else then tourists are more than just passing through. 18 million passengers through the gates of Auckland which is well beyond the 3.5 million international tourists suggests a huge number of domestic tourists coming into Auckland as well.

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  5. Your comparison of GDP per capita in metropolitan areas and the remainder of the country emphasises Auckland’s failure to produce successful home-grown exporting businesses.

    With Auckland you are comparing an entire country with a third of the country; the other countries it would be a smaller ratio. Obviously when everyone lives in Auckland the margin will be zero.

    A second issue would be non-GDP positive activities outside of the big city; I’m thinking of Port Moresby with its street kids and significant deprivation compared with the rest of PNG where despite virtually no income nobody is homeless or hungry. But on this graph Moresby would be an easy winner – with most of the countries wealth and the majority of paid jobs.

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  6. Hi Michael:

    How do you reconcile low GDP per capita in the AKL region with the firm-level value added MOTU reports by David Mare and co? AKL firms have VA 40% higher IIRC. Downtown AKL firms have VA 140% higher than firms located elsewhere.

    Also, how does AKL compare once Taranaki and Wellington are removed? The naki is digging up buried treasure – GDP per cap not reflective of productivity.

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    • This economic info is still difficult for an elderly layman to grasp but search for a report by MOTU / David mare I found: http://www.mbie.govt.nz/publications-research/publications/economic-development/2008-occasional-papers/Labour%20productivity%20in%20Auckland%20firms%20-794%20kB%20PDF.pdf

      And from its executive summary “”However, even firms in industries that are neither over-represented in Auckland nor atypically concentrated within Auckland have productivity that is 23% higher than their non-Auckland counterparts.””

      My experience covers installing software in legal firms and it did seem that the nearer you get to the centre of Auckland the wealthier and larger the firm. This is like the best soccer players gravitating to the most famous teams (Real Madrid, Man U. etc) the most self-confident and aggressive want to match themselves against the best. And get paid for it.

      A second factor for some businesses must be potential customer density. I often think of running a coffee/sandwich bar. If I did I would choose a fairly quiet place low rent place with a pleasant view where I would be busy for a couple of hours and sit and read blogs when the business was quiet; suitable for a pensioner but when I was young it would have been an expensive small outlet at the busiest place I could find (say Queen st).

      Am I beginning to understand? Are their other factors? I do wonder if some of the businesses even in wealthy North Shore are run by almost desperate immigrants. Is it possible that my excellent local fish and chip shop run by an Asian family is willing to work harder for less reward than a similar establishment in Otago? if so it would tend to pull the average Auckland GDP per capita down. Does it make a difference if some of the younger family members are unwaged?

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      • Remember that since wages are higher in Akld than in the rest of the country, productivity has to be higher to enable firms to successfully survive. Only the more productive survive.

        My argument of course isn’t that productivity levels, on average, are not higher in Akld. They clear are. It is that (a) the margin is modest by international stds, and (b) seems to have been shrinking.

        On my first point, there is a similar argument sometimes made around returns to capital in NZ. Some studies have suggested that firms operating in NZ earn higher rates of return than in some other places. Some see this as a sign of success. My counter is that since the cost of capital is higher in NZ (eg higher risk-free rate), only firms/projects that can earn higher returns can expect to cover the cost of capital.

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    • On your second question, if one excludes Wgtn and Taranaki, obviously Auckland’s margin over the rest of the country is larger (23% vs 13%) but over the 16 years for which SNZ report the data, the compression in Auckland’s margin has been even greater. For Akld relative to the rest of NZ (the chart in the post) a fall from 24% to 13%, but for Akld relative to the rest ex Wgtn and Taranaki a fall from 39% to 23%. For just the last decade, there isn’t much difference between the extent of the falls in the two margins.

      On your first question, I don’t know, mostly because i haven’t dug far enough into what Motu has done. But it is worth remembering that downtown Akld is a pretty small part of overall Akld (much smaller than say central Wgtn is for the Wgtn region). The other thing that will be going on is that a lot of the high-paying (high labour productivity) professional services firms and the like in NZ are based there. As they mostly service the domestic economy, they will tend to be based in the biggest city. But since they are mostly servicing the domestic economy, all it really tells you is that it makes sense for them to be there rather than in Napier or Dunedin. They are more productive by being where most of the people are (and in part by being close to each other), but it isn’t telling you anything much about Akld’s ability to compete internationally. After all, as i noted in the post, it doesn’t look like many genuinely market-driven tradables sector firms are in central Akld. One could apply the same logic to Wgtn. The public servants (and all the consultants and prof services firms who hang off them) are inevitably in that location, since it is where govt is. Even assuming that public servants are getting paid roughly their marginal product, it tells you nothing about the ability of outward-oriented non-subsidised private sector firms to successfully compete from there.

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      • Thanks Michael.

        Regarding the agglomeration effects you are alluding to in central Auckland – yes, precisely – which is why low GDP per capita in AKL is somewhat puzzling – especially when Motu’s findings are consistent with agglomeration effects in AKL.

        Regarding the size of AKL – it is possible that Motu omits out Franklin and Rodney. I do not know.

        Let’s pivot towards what I now understand to be the main point of this post – Auckland’s ability to compete internationally. I agree that AKL could be doing better. But there are plenty of firms that are nice little earners for the country that are located in Auckland that do dominate their niches. But you won’t find their names plastered on skyscrapers. Compac fruit processing (recently sold to Norway) is number two globally in their niche. Movio/Vista accounts for a huge share of global theatre software. And we will have to wait and see whether rocket labs will take off (pun intended) and dominate the small satellite niche. What can we do to support these kinds of firms further?

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      • But I guess my point is (a) any higher productivity in Akld is modest by international standards, and (b) appears to be primarily resulting from domestic non-tradables sectors. That is very different from, say, San Francisco or London.

        Yes, not disputing that there are successful tradables firms based in Akld (altho the reference to the sale abroad of one of them is consistent with my story – smart firms get developed here (not that many) but mostly are more valuable abroad). To me, the two biggest things we could be doing would be things that supported lower interest and exchange rates (my immigration story) and lower taxes on capital income. Sadly, almost all the political/rhetorical pressure on the latter is running the wrong way at present (and even when people talk about the company tax rate, that would benefit foreign investors but not NZers developing NZ-owned companies).

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      • To Ryan’s point, it is worthwhile thinking about what a similar sized country, Denmark, has in terms of brands: Lego, Maersk, Ecco, Bang & Olufsen, Georg Jensen, Novozymes, Vestas, Carlsberg etc. In most cases they’ve developed over many decades. Why does Denmark have so many great brands and we don’t? I’d suspect a) part of a bigger free trade area b) corporate tax rate of 22% c) no FX volatility relative to major trading partners c) adequate domestic savings to fund capital expansion (pension funds, but also arguable because they’ve made the tax system favourable enough for big profitable corporates to stay) d) education system produces both engineering, financial and creative talent.

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      • To which list I’d simply add “and location probably helped too”, and “a population that has increased by about a quarter, whereas ours has increased by three quarters, in the last 50 years probably isn’t irrelevant either”.

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      • Hi Michael –

        But if the point of the exercise is to establish how internationally competitive Auckland is, intra-NZ comparisons of GDP per capita are not all that useful (quite apart from any measurement issues we have touched on). It could be that all of NZ is competitive internationally. Note that your proposed solution to the problem as you see it – a lower exchange rate – applies equally to Auckland as it does to the King country. If Auckland has an agglomeration problem vis-a-vis the rest of NZ, a lower exchange rate does not help, at least not directly.

        Regarding lower immigration: These high tech firms appear to rely heavily on high-skilled immigration. (I am sure you are aware that the IT sector is periodically vocal about this.) You have done a good job on this blog documenting that much of our work-based immigration could not be considered high-skilled. But cutting down on genuine high-skilled immigration would be very bad if you are worried about a lack of agglomeration. It would be great if we could get our kids to study more STEM fields – but in the medium term we need immigrants.

        To answer my own question on how to support and encourage these firms: Policies that directly assist agglomeration in Auckland are what we need. Peer-reviewed paper after peer-reviewed paper show that a high cost of housing is a sure fire way to stop a city growing. We can start there… A lower exchange rate helps, but the kinds of firms we want to encourage fill unique niches and have a fair bit of market-power. The exchange rate matters less for this kind of firm relative to a commodity exporter.

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  7. Not wishing to answer for Michael but just my observations.
    There are a lot of high wage and (theoretically) high added value firms in Auckland with many head offices, government institutions etc. HQ’d there but they are outweighed by a lot of people doing very little – some very low level stuff the two dollar shops, fast food and the services sector generally. Perhaps the high number of students lowers the GDP/capita as well.
    I get the feeling that Auckland is becoming very unequal with falling social cohesion. A ‘grammar zone” elite surrounded by the favellas of the working poor; not a future many would want to see.

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    • Thanks for your thoughts. But those people doing very little at work are counted in that ~40% figure.

      Which leaves the non-employed in AKL – counted in GDP per capita but not (indirectly) in Mare’s data. I am not certain but I expect the employment to working-age population ratio in AKL to be higher – both people in the conventional household must work to buy a house in AKL.

      A possible explanation is that Mare focuses on the firm as the unit of observation. If firms in AKL are (much?) larger on average than elsewhere, this could explain high firm level VA but low VA per worker in AKL.

      If there are more non-working students in AKL, then GDP per worker (or hour) may be a better metric for Michael’s purposes.

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    • I agree: haves and have-nots. However it is the way we are going not where we are now. Nothing like the contrasts between say Brixton and Highgate in London.
      There must have been wealth and poverty in the past but NZ had a Scottish Presbyterian tradition (that can still be found in the Highlands of Scotland) where everyone was considered equal in the eyes of God.
      Even if TOP succeeds in redistributing our wealth there are still factors working against social cohesian: reduced church attendance, reduced interest in the Scouts etc, school zones relationship with property values, work allocated by ethnicity, widening range of sports. I have been very impressed by how my sons rugby has him rubbing shoulders with all sorts: medical students and builders, rich and poor. Improving transport makes it easier for the middle class (teachers, lawyers, doctors, dentists) to live outside the communities they work in. And maybe the biggest factor is social media – my daughter is living with us happily but the majority of her conversation is with her partner who is assisting in the PNG election in the villages around Wewak (the absolute back of beyond).

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    • Thanks Michael. This indicates that it is not more non-employed in Auckland that explains the discrepancy between VA per capita and VA per firm.

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  8. I am reminded of this comment by one of your readers some time ago
    Michael Reddell, a relentlessly reasonable and unexcitable …….

    As a born and bred Aucklander were I to ruminate on Auckland as it is today, it would be much more ascerbic

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  9. Maybe not as worthy as a French banker but an hour ago I was chatting to the father of a little boy who was playing with my grandson in the swimming pool. Predictably our conversation led to the quality of local schools and he said things are different in Russia with little kids carrying up to 20kg of homework. I mentioned Finland and its lack of homework but then felt it polite to praise the reputation of Russian tertiary education with its world leading maths and science. His response was: yes Russia does have special colleges for maths, science and engineering that are harder to get into than university but he added “you don’t need scientists or engineers in New Zealand – there is no industry here, just farming and service businesses”.

    Sometimes an outsider sees things more clearly and I wonder if he is right and if it might relate to our comparative economic decline.

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      • Had a Russian view of the Ukraine – as I think you have said he believes the Ukraine is potentially an agricultural powerhouse with fantastic black soil and it has only been held back by their government doing everything wrong since the Russians lost control.

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    • We do have a Space Centre, Rocket Labs in Gisborne and it has a $27 million contract to launch mining equipment to the moon. We do need rocket scientists and rocket engineers. But until it becomes a $15 billion dollar industry like Tourism and International students, expect the top near future jobs in NZ to be chefs, waiters, sales, baggage handlers and bus drivers. It would be dumb to think otherwise.

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  10. Perhaps the lack of an agglomeration effect for Auckland simply reflects the fact that the rest of NZ does substantially better than equivalent regions in other countries compared to their major cities. Surely, depends on your perspective on these matters ie a glass half full or half empty?

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    • Possible, but I’d find the story more compelling if NZ as a whole had not been doing so poorly over so many decades. In some ways, it is a better story in Australia, with rapid growth in mineral exports from the non-metropolitan regions, making up to some extent for a poor performance in Sydney and Melbourne.

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    • With 10 million cows generating a meagre $13 billion in Milk and meat exports. The rest of NZ only does better because of the subsidies being paid for by Auckland. The Paris Agreement excludes Agriculture from paying their fair share which will emit 50% of the green house gasses. These costs will be passed onto the NZ taxpayer and the rest of NZ industry fully subsidising the agricultural industry.

      Auckland generates a GDP of $75 billion from 1.5 million people compared to the 10 million cows that generate a meagre $13 billion in GDP.

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      • That $13billion is foreign cash that someone can spend. How much of Auckland’s $75 billion is exports – maybe some of it is just Peter paying Paul for a service and vice versa.

        1 cow = $1300, 1 Aucklander = $50,000.

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      • Only 30% of that $13 billion is spent in the local communities. The rest goes overseas into paying for Palm oil kernels as a supplement feed, tons of chemical wash for lice, interest on the $60 billion farm debt.

        So you are saying that a cow that eats and shits all day and does nothing else is more productive than 1 human being that has a brain that makes things? There is definitely something wrong with that analogy.

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  11. Sitting here for a week already in the Goldcoast and with the NZ dollar at a 92c exchange rate difference retail rate this Goldcoast holiday is very cost competitive. Lots of hotel rooms being offered at $90 a night.Whilst NZ has been in the middle of storms and flooding it is warm sunny out here. The city is well stretched along the entire coastline with massive tower blocks with the tallest more than 60 levels.The city is humming with only 500k permanent population driven by the tourist industry. It is transient population driving the developments here and they are massive. Movieworld has just completed their newest roller coaster ride called the Joker. It is a very long track with massive loops and super fast. You can also ride it backwards.

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    • Griffith University in the Goldcoast has its own railway station and rail tracks that connects the University around 20 km outside of the city.

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    • Went to Paradise Country. I was amazed with the commercialisation of Koala bears there were around 50 koalas bred in captivity whose prime purpose was for photography. The queues of tourists were quickly rushed through with 10 seconds holding the koala for $25 a photo. Our Greenies and NZ public will be up in arms if any commercialisation of the kiwi was attempted to the scale that these Australians run their theme parks. Selling fresh air and beautiful scenery for free just does not cut it.

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  12. The statistical decline of New Zealand’s cities relative to other world cities seems to be picked upon by anyone who wants to criticize our economic performance. But can’t you put down a large portion of this to the rest of the world playing catch-up, rather than immigration-driven stagnation in Auckland?

    Europe has benefitted from now being run democratically and mostly without internal wars for the last 60 years or so, which was not true in Europe anytime before 1945. So you can expect European cities previously underperforming to move forward relative to New Zealand. For the United States and Australia, they have certainly advanced, too. The US over the last 30 years has also had fairly high migration rates (much of it low-skilled illegal migration). What if their real advantage over us is simply economy of scale?

    So when you look to external factors, I wonder if *anyone* comparing NZ’s *relative* decline in living standards over 100 years has missed the point. Perhaps it’s not that we’ve gotten worse; it’s that we had some early advantages others caught up on (a peaceful and democratic society), but we have been unable to leverage the economy of scale that exists elsewhere. Even Singapore and Hong Kong, ostensibly the same size as New Zealand, have huge neighboring economies, low-waged on the doorstep, and they have been able to fill the high-value, high-educated niche in Asia.

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    • Interesting angles. I’m not persuaded, on various counts. First (and trivially here) US immigration over the last 30 years has been far lower, as a share of population, than that to NZ. I’ve argued to reduce our numbers to something that would (as it happens) be in line with US numbers.

      On Europe, recall that the Industrial Revolution started there. And the 100 years to WW1 (I often use 1913 numbers as a basis for comparison to avoid the effects of WW1 and WW2) were pretty peaceful in Europe: Crimea aside, the UK had no European/Russian wars for 100 years. And the settlement of NZ certainly wasn’t peaceful – our very costly and disruptive land wars ended around the same time the Franco-Prussian war did, and just a few years after the end of the US Civil War. The subsequent 40 years was a remarkable era of peace for Europe – and for most of the colonies of settlement.

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      • Fair points, but when comparing US immigration to NZ immigration, did you consider (1) NZ’s outward migration, and (2) illegal migration to the US? There are currently about 10-12 million illegal immigrants in the US IIRC – add that to the legal migration rate of 1m/year, depending on how many years of immigration you think that represents, and then subtract emigration from the NZ figure to so that we’re comparing total net migration. I suspect the figure might not be so different.

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  13. When I’m talking about immigration, I’m almost always talking about movements of non-citizens. But as it happens in recent decades our population growth rate has still been typically faster than that in the US. My specific comment didn’t include illegals, but for the last decade or so the best estimates had been that there was a net outflow of illegals,

    I’ve always argued that the large outflow of NZers is a strong prima facie case against having anything like the level of non-citizen immigration we have. People who know the place best have judged that oppportunities are better in other advanced countries.

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