Auckland city business and economy report 2009

Executive summary | Download the report

Executive summary

Auckland city's economy moved into a recession in the year to March 2009, along with the rest of the country and much of the world. This has hit Auckland hard with the city's economic output declining by 2.4 per cent over this period.

The global economy remains weak with most developed nations still deep in recession. Although there are signs of it bottoming out, it is unlikely that world production will return to its 2008 level before mid 2011.

A fall in retail and wholesale trade was the largest contributor to the city's poor performance in the year to March 2009. The trade sector has been hit hard by falling consumer confidence, rapidly rising unemployment, lower imports and exports and a weak property market. Annual retail sales declined by 1.6 per cent in the year to March 2009, the first annual decline in a decade.

Output in the city's manufacturing sector also declined sharply as a consequence of falling international and domestic demand. A downturn in two of the city's traditional growth leaders, property and business services, and finance and insurance, was also a major contributor to the city's poor performance.

House prices in Auckland city fell by 3.4 per cent in the year to March 2009, while the number of sales in this period, declined by a third. The weak housing market has undermined the city's economy as declining household wealth (on the back of falling housing prices) deters consumers from spending.

About 5000 jobs were lost in Auckland city over the year to March 2009. Job losses were widespread and employment declined in most industries. Consequently, the city's annual average unemployment rate rose to 5.6 per cent, which was higher than in the Auckland region (5.1 per cent) and New Zealand (4.5 per cent). Finding skilled and unskilled labour was easier than at any time since 1992.

The Auckland region's economy has underperformed relative to the economies of many of its international comparator cities over the past decade. From 1998 to 2008, the Auckland region's GDP growth rate was well below the average of the nine comparator cities¹. Measured on a GDP per capita basis, Auckland's performance was only slightly better than the worst performing city, Vancouver.

However, Auckland consistently performs well in international quality of life surveys. It was ranked fourth equal out of 215 cities in the Mercer 2009 Quality of Living Survey.

In the year to June 2008, Auckland city had an estimated population of 438,100 people. This was up 1.1 per cent on the previous year. Annual net migration in the year ended March 2009 was 7200, up 10 per cent on the previous year.

Looking forward, New Zealand (and with it Auckland) is better placed than many countries to pull itself out of the recession. Factors in its favour include the better than expected shape of some of our major trading partners (Australia and Asia excluding Japan), and the robust state of our banking sector which will enable lending to pick up earlier than much of the developed world. Additionally, comparatively higher interest rates at the start of the crisis mean there is greater headroom for monetary stimulation through further interest rate cuts than in other countries.

Despite these positive factors, the year to March 2010 will remain weak. The retail and accommodation sectors will again decline along with the cafe and restaurant sector as consumer discretionary expenditure continues to fall. The residential construction sector is in for another tough year following sharp falls in residential consents. However, a weak residential sector will be countered by strong non-residential construction which has shown a 67 per cent increase in the annual value of consents. A slight increase in export volumes is expected over the next 12 months in response to the weaker New Zealand dollar, which despite recent gains is well down from its peak in 2007. A lower dollar will provide some respite for the manufacturing and wholesale trade industries.

1 The eight other comparator cities are Sydney, Perth, Brisbane, Melbourne, Vancouver, Singapore, Portland and Seattle.

Published August 2009