Auckland city business and economy report 2007
Executive summary |
Relative economic performance |
Economic structure |
Affordable housing |
Population |
Labour market |
Retail trade and tourism |
Building and property |
Inflation, interest rates and the exchange rate |
Potential economic impacts of climate change |
Economic outlook
Executive summary
Auckland city's economy grew by 4.8 per cent in the year
ended March 2006, significantly above the national growth rate of 2 per cent.
Almost half of the city's Gross Domestic Product (GDP) growth came from the
finance and insurance, property and business services sectors. A further quarter
of the growth resulted from transport, storage and communications business. The
most notable fall in activity occurred in other (non-food) manufacturing.
Auckland city's high growth rate was the result of
unusually strong job growth during the same period. Growth focused in high
labour productivity (value added per person employed) sectors such as finance,
property and business services. The city's growth was accentuated, by the slow
growth in the regional and national economies.
In spite of the growth in real GDP and strong job growth in
2006, it is estimated that the city's economy fell by 0.2 per cent in the year
to March 2007. This compares with national growth of 1.4 per cent and suggests a
slight reversal in the high growth of the previous year.1 This soft landing of
the economy from previous years of high growth is the result of high interest
rates and the strength of the New Zealand dollar, combined with the delayed
impact of slowing migration on house construction.
Real economic growth
Annual average growth, March years |
 |
Source: New Zealand Institute of Economic Research, Statistics New
Zealand
|
The forecast for the year to March 2008 suggests that
economic growth will resume in the city (2.1 per cent) and nationwide (1.9 per
cent).
Looking out to March 2009 the city's GDP is forecast to grow at 3.6 per cent.
This is in line with a strengthening national economy on the back of lower
interest rates (early 2008), a depreciating exchange rate and increasing
exports. However, over this forecast period the following short-term factors may
influence growth:
- Net migration has been weak in Auckland city and is
expected to be only marginally positive by 2009.
- The labour market, while still relatively tight in
historical terms, is slowing
with employment falling or static, and wage growth slowing.
- Household spending will continue to grow, albeit at
modest levels, as higher interest rates and slower wage growth cut into
household budgets.
- Residential construction activity will continue to fall
until the middle of 2009
in response to the decline in migration.
- Most forms of non-residential investment, other than
infrastructure, will fall
further over the next year, before returning to positive levels in preparation
for the 2011 Rugby World Cup.
- Reasonable levels of growth being experienced by our key
trading partners, combined with high world commodity prices, will assist primary
exporters and make the international economy favourable to New Zealand.
- Interest rates are expected to remain at current levels
until early 2008, reinforcing the value of the dollar and posing some risk of a
delay in the recovery.
Over the longer term, Auckland city can expect to enjoy
higher future growth than the New Zealand economy as a whole. This is largely
because the nation's higher value added business services, including financial
services, information communication technology (ICT) and creative sectors are
concentrated within the city.
Table 1: Summary of Auckland city's economic forecasts
| March year |
Actual1 |
Forecast |
|
| |
2006 |
2007 |
2008 |
2009 |
|
| Real GDP growth2 |
4.8% |
-0.2% |
2.1% |
3.6% |
| Unemployment rate |
3.1% |
3.8% |
3.9% |
4.6% |
| Inflation3 |
3.3% |
2.5% |
2.3% |
2.7% |
|
Sources: Statistics New Zealand, New
Zealand Institute of Economic Research
1 March 2007 GDP
statistics are NZIER estimates, in advance of publication of March 2007 GDP
data
2 Annual average percentage change
3 Increase in the
Consumer Price Index for New Zealand
|
| 1Note that the 2007 GDP figure is based on trend estimates of employment, rather than actual employment as applied in 2006.
|
Published June 2007
