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Perspectives

Auckland City Council and economic development

Auckland is treading water

By Councillor Aaron Bhatnagar, chairperson, City Development Committee

Councillor Aaron Bhatnagar.
Councillor
Aaron Bhatnagar.

The economists in Auckland City Council's economic development team recently painted a picture of the city's economy to March 31, 2009. It showed the economy is unlikely to turn up consistently till the year ending March 2011.

October-November 2008 was a scary time to be in business. Companies had no idea what was coming around the corner. Many businesses are still suffering the consequences of the financial crisis. However, by April 2009, many organisations had the sense things were not nearly as bad as initially expected. Indeed, these organisations are now saying the worst is over.

Looking at one of our key sectors - property - developers are finding building very hard to finance. Those with low gearing and who are risk averse are more optimistic. A cautious approach in 2006 and 2007 by these companies has meant that they are now acquiring. However, the speculative development that characterised the past few years has evaporated, probably for some time.

There's a mixed picture on consent activity too. Late last year, there were big drop offs in new residential consents. Homeowners are taking up some of the slack now by committing to renovation, which is keeping many tradespeople in business.

In banking and insurance, a large number of corporates have been able to withstand the effects of recession. They are cautiously planning for the future, and making decisions to expand and grow in the next few years.

There is one area in which I have healthy confidence - tourism. The recent report by the economic development team noted a slower rate of decline in tourism in Auckland than other areas. Since that reporting period there has been a very significant change in the way Tourism Auckland operates. For the first time, we have a much more coherent, cohesive and focused tourism body, boosted by high levels of participation from stakeholders. The Big Little City marketing campaign run in tandem with Tourism Auckland and the Heart of the City Business Association has been evidence of this. This is not just a flash in the pan. There's a real focus on promotion of Auckland as vibrant and interesting, and events and shows are already benefiting. This will be a sustained, concerted effort leading up to and beyond the Rugby World Cup.

Despite these positives, there are still negatives on the horizon. Over the next six to nine months, business is still forecasting job retrenchment. Unemployment will worsen with those businesses that are significantly geared at greatest risk of creating redundancies.

The dollar is also not helping Auckland at the moment. Without the dollar dropping, manufacturing will continue to struggle as will businesses that rely on commodity prices.

Within this multi-layered image of Auckland business, I am proud that Auckland City Council has stepped on the accelerator. At the same time as holding rates rises to council's rate of inflation, we are continuing with significant construction projects. The development of the Marine Events Centre will commence as soon as consents are granted, the Queen's Wharf development is imminent and beach beautification projects are scheduled before summer. The redevelopment of Aotea Square and the restoration and expansion of the Auckland Art Gallery also continue.

There is no doubt that these projects will help generate jobs and dollars for the economy, at the same time delivering much needed assets for Aucklanders to enjoy.

Planning for productivity

Productivity has become the buzzword for the direction of economic policy in New Zealand. It is a well-founded focal point. An hour worked in New Zealand generates approximately 30 per cent less output on average than an hour in Australia (Treasury, 2008).

Furthermore, New Zealand is ranked 22nd out of 30 OECD countries for both GDP per person and GDP per hour worked (OECD, 2008). The government has wasted little time in acting on these facts by announcing productivity as one of its key economic objectives.

A productivity taskforce has since been created, with the goal of catching up to Australian levels of productivity and income by 2025. Treasury has fed into the discussion by releasing a number of reports on the subject.

In July, the Prime Minister gave a speech to a business forum outlining a framework of six policy themes aimed at tackling New Zealand's poor productivity performance. The six themes were:

  1. regulatory reform
  2. investment in infrastructure
  3. improving public services
  4. investment in education and skills
  5. innovation and business assistance
  6. a more efficient and effective tax system.

This is a useful framework for contextualising the array of governmental initiatives currently on the table and is outlined in further detail below.

  1. Regulatory reform (Writing the rules)

According to the Prime Minister, the cost of poor regulatory reform is "investment that never takes place, jobs that are never created and income that is never earned." Effective regulation is important for productivity. Initiatives announced to date targeted at a better regulatory system include:

  • The 90-day employment probationary period
  • Simplifying the Resource Management Act
  • Simplifying investment regulations
  • Emissions trading legislation.

  1. Investment in infrastructure (The building blocks of a strong economy)

 In 2008, a new ministerial position for infrastructure was created (currently held by Bill English), illustrating the high importance place on infrastructure by the current administration. The government plans to invest $7.5 billion in infrastructure over the next five years to build and upgrade schools, roads, housing, hospitals and telecommunications. Projects announced to date include:

  • Victoria Park motorway project
  • Kopu bridge work
  • Waterview connection in Auckland
  • Upgrading state houses
  • Home insulation and clean heating programme
  • $1.5billion broadband plan.

In March 2009, the government set up two bodies to address infrastructural concerns. The National Infrastructure Unit is designed to co-ordinate the government's infrastructure initiatives, while the Infrastructure Advisory Board will provide independent advice on investment priorities for New Zealand. The board will be made up of representatives from the private sector and local government.

  1. Improving public services (Getting your own house in order)

The public sector accounts for approximately one quarter of New Zealand's economic activity. Needless to say, the measurement of public sector productivity is notoriously difficult.

The government has said it will cap the number of core governmental staff, while also moving a greater proportion of staff to front line services.

The redesign of Auckland's governance structure to a single Auckland Council is another example of public service reform, which is forecast to provide a range of benefits including improved productivity in both the private and public sectors.

  1. Investment in education and skills (Up-skilling the future workforce)

According to Treasury reports, investment in skills is an important driver of productivity growth.

Government investment in this area is important because if the provision of education was left solely up to the market, it is likely that there would be under-provision due to the long timeframes on returns. The government is rolling out three projects to address education and skills.

Firstly, the National Standards programme is designed to ensure high literary and numeracy standards for students between years one and eight.

Secondly, the Youth Guarantee aims to provide secondary students with the option to study for school qualifications outside the school environment (for instance at polytechs, wananga etc).

Lastly, a number of trade academies will be created to provide hands-on vocational skills training in schools.

  1. Innovation and business assistance (Technology-driven growth)

 This policy driver is focused squarely on New Zealand's export sector, which has "effectively been in recession for the last five years" (John Key, 2009). There are two goals under this driver.

The first is to help firms connect with overseas markets, businesses and consumers. This primarily relates to the creation of free trade agreements both bilaterally and multilaterally with a particular focus on the Asian continent. There is also a focus on becoming more compatible with Australia. Initiatives already unveiled are the streamlining of travel between the two countries and the ability to transfer Australian superannuation funds to KiwiSaver accounts.

The second goal is to help firms access or develop new ideas to create new and higher value products and services. Initiatives to flow from this goal include the promotion of stronger ties between business and publically funded research institutions, and the establishment of a Primary Growth Partnership. This partnership between government and primary industry will see the government investing significant amounts into research and innovation in the primary sector (matched dollar for dollar by the sector).

  1. A more efficient and effective tax system

The government is revisiting the New Zealand tax system, looking at issues of tax efficiency and equity.

Currently more than 40 per cent of income tax comes from the top 10 per cent of taxpayers ranked by income, suggesting a very narrow base.

The tax-working group will report on the overall fiscal framework in New Zealand with an emphasis on income tax, GST, and corporate tax. The group will also report on alternative revenue raising options for New Zealand.

The government has also singled out a tax assistance package for small and medium enterprises, making it easier and cheaper for them to pay tax.

Auckland City Council's alignment with the economic development plan

Auckland City Council is currently working on a wide range of projects that fall within the scope of the government's framework. These include:

  • a range of infrastructure projects including a convention centre feasibility study, the waterfront development (including Queens wharf and the Marine Events centre) and redevelopment of Aotea Square and the Art Gallery
  • a focus on improving public services including an overhaul of systems related to the issuing of building and resource consents and an internal customer first programme
  • working with education providers, including University of Auckland, AUT University to improve education and skills in Auckland city
  • investing in innovation and business assistance through our Mainstreets programme and planning for other business improvement districts, an investment, attraction and retention programme, and investment in assisting key high value sectors.

Further details of these projects and others are included in the council's Economic Development Strategy.

Science parks resilient in recession

an interview with Jane Davies, CEO of Manchester Science Park

Jane Davies.
Jane Davies.

What's good about a recession?

It isn't just a matter of thinking on the bright side.

There are tangible benefits to a recession, says Jane Davies.

It is:

  • easier to get good news stories into the press (media want to hear about the positive and this is good marketing)
  • a good time to recruit (good people are available at more reasonable costs)
  • a good time to acquire businesses (but hard to value them)
  • a good time to consider development - whether it be product or construction (the return on investment fundamentals remain the same)
  • a great time to start a business (costs are low and redundancy packages may provide start-up capital).

"Purpose-created science and technology parks are enduring tough economic conditions in Europe better than many unspecialised commercial business areas."

So says Jane Davies, the chief executive of Manchester Science Park Limited. Jane visited Auckland on 18 and 19 May and met with Auckland City Council to offer insights on the Tamaki Innovation Centre and the proposed adjacent precinct.

"Everyone has seen the effects of the current recession but there have been no dramatic collapses in science parks. In fact in Manchester, we have experienced slightly higher occupancy in the last quarter," commented Jane. She added that, anecdotally, most science parks she knows have also experienced similar resilience.

The 2008 financial figures for Manchester Science Park show that 59 per cent of its 95 tenant companies expanded their turnover, and 36 per cent employed more people than in 2007. The 2009 figures, while expected to show a greater impact from the economic climate, are still proving robust.

"Some companies on our park are actually continuing to grow," said Jane. "We recently signed up a new tenant coming from a bio-incubator in a university. Demand for their product is increasing. It's an intervention that helps select potential drugs for treating cancer. Another company that's doing very well is in software. It has a product that monitors energy use in a building and the business is being driven by legislative requirements from landlords. Other companies – especially in the software application and web design area - are also doing very well. There is still customer demand for software and 'cloud computing', applications which save businesses money or help generate revenue such as search engine optimisation (SEO) or web-based promotion."

Jane credits the resilience of science parks to some interesting factors.

"At Manchester Science Park, our tenant companies are often smaller," she explained. "Size has a bearing on survival and, as smaller enterprises with usually fewer than 10 people, these companies can be flexible. They haven't built up the overhead of corporate headquarters or large numbers of staff. Their customers are also likely to be small. This means our tenants can be very flexible about the products and services they provide."

Manchester Science Park has also been flexible in response to its tenants. They do not insist on long leases and allow companies to expand or contract without penalty. The park also offers free value-added services and advice in response to the economic conditions.

"Our objective is to build a strong community of innovative, knowledge based businesses with linkages into universities. We take a long-horizon view," said Jane.

An added benefit for tenant companies of being part of a scientific business community is that it trades internally. Fifteen tenants reported additional sales or business as a direct result of Manchester Science Park's networking, introductions or information in 2008. Furthermore, 32 companies reported they had formal relationships with other tenants.

"Above all else, it's very important to remember that once the recession eases, a science park's tenants will exemplify the kind of innovative businesses that a modern economy is relying upon to drive the engine again," said Jane. "We may not know the shape of a future financial landscape but we know that new ideas to create value will still be shaping successful companies and economies."

Light at the end of the tunnel?

By Councillor Aaron Bhatnagar, chairperson, City Development Committee

Councillor Aaron Bhatnagar.
Councillor
Aaron Bhatnagar.

There is no doubt a global economic situation is having a major effect on Auckland business. But are there glimmers of light at the end of the recessionary tunnel?

I think so. It's not yet a strong beam, but it's there.

Though many businesses are suffering, Auckland is well poised to take advantage of any economic upturn when it happens.

Auckland City Council is taking three considered actions to assist a future economic upturn:

  1. Holding rates increases to below the council's rate of inflation - from a proposed 13 per cent increase, to around 2 per cent. To do this, we're restraining spending, including no additional budget for staff salary increases in the next financial year. Our careful budgeting means we are still projecting a record yearly investment of $516 million next year in existing and future Auckland city assets.
  2. We are moving to reduce 'red tape' for business. Ultimately, this will free up organisations, allowing them to grow. For example, we are remodelling and restructuring the resource consent process at the council to ensure a smoother flow.
  3. Where there are key business clusters (such as in biotech, marine, tourism and creative) Auckland City Council is looking to assist these groups so that they are well placed to capitalise on an economic upturn.

We are also continuing to invest in major projects, including those in infrastructure, which helps everyone.

Auckland City Council's aim is to try and make it easier to move around Auckland, with projects like the Central Connector, encouragement of passenger transport, and continued investment in the re-vamped Auckland Manukau Eastern Transit Initiative.

Over the next few years, continuing work to open up the waterfront as the front door of Auckland will be a huge catalyst to our economy. We are proposing to bring forward the building of the marine events centre - crucial to helping bring in tourist dollars - to 2009-2011. This will, like the Auckland Boat Show in March, showcase New Zealand's marine industry and help promote the America's Cup and other regattas.

In addition, the council has supported Aucklanders with sponsorship of events (such as the Lantern Festival, Pasifika Festival, Diwali, Starlight Symphony and Christmas in the Park). While stimulating interest in Auckland and having flow on effects for business, these events also help boost morale in the city and entry is free for most events.

So, is there light in 2009? I think the answer is yes, and the council is trying to widen the light beam while remaining determinedly prudent and focused in its spending.

The power of 10

An interview with Ethan Kent, vice-president of Project for Public Places, USA

Ethan Kent.
Ethan Kent.

If you had to list your 10 favourite places in Auckland - 10 great destinations each with 10 things to do in them that you love doing - could you do it?

Ethan Kent, vice-president of Project for Public Places (USA), poses this question to uncover how well a city is performing. There should be at least 10 compelling places in Auckland that spring easily to mind, are accessible, and inviting.

Ethan was here in February for his third visit to New Zealand and ran an oversubscribed masterclass in 'placemaking' - the art of making great places - for business and public bodies. The masterclass was hosted by Auckland City Council. He calls PPS's simple test of great places 'the power of 10'. He cites Auckland's waterfront as an opportunity for these principles to be applied.

"The best waterfronts are defined around active destinations," he says. "There's not just one dimensional commercial, residential or passive park usage, but these active destinations draw together a range of otherwise competing uses and user groups. There are 10 reasons to be there, and a grouping of uses within each place. Communities themselves can come up with many of the uses."

"Placemaking" is an approach to revitalizing cities that gives responsibility to communities to define their public places. Ethan Kent is regarded as a global expert in this and has led hundreds of placemaking efforts in cities around the world but cites a particular openness to and aptitude for placemaking in Australia and New Zealand.

In New Zealand, he points to the Christchurch Arts Centre as a superb example of placemaking in public spaces. "Although it has commercial entities in it, it's managed first and foremost as a public space," he says. This, he argues, ensures that the area serves people first, and commercial goals second, which makes it successful. "Overall, people and commerce adapt to a shared culture and shared community goals."

Attending his lecture in Auckland were representatives of the 15 Mainstreets in Auckland, and two Business Improvement Districts. These are geographic business areas which, in partnership with Auckland City Council, benefit from local 'targeted rates'. The business organisations are able to use the rates to promote business in their areas. The Mainstreets and business representatives were involved during the workshop in thinking about how public engagement might assist goals to improve public places in their areas.

"This was a truly inspiring masterclass," says Barbara Holloway, precinct manager for K Road Business Association. "It was an affirmation of what we are doing, and a refresher on what we still can do. Ethan gave us new ideas from international cities and he inspired us to keep going in the direction we're going in. He showed examples where businesses have directly benefited financially from the investment they've made in creating great public places. Far from costing, it's lifted their bottom lines."

Interestingly, Ethan is unrelentingly positive about the recession. He says it's a great opportunity to change the way we do things and build communities around our existing assets.

"We can start looking at ourselves. We can look at the destination ahead and reinvent ourselves, making a shift to figure out what we want in our cities in future. And for once we have the time to do it. It's not planning under pressure," he says. "Let's take this time to develop a more creative relationship between communities and local government, and draw out leadership on all levels to create and build strong local economies and communities around great public spaces. Australia and New Zealand are in the best position to do this globally. They're not as culturally constrained by old ways of doing things."

The power of 10 in a nutshell

Cities define themselves in their public spaces - so how can we further showcase and reinvent Auckland through placemaking?

  • Are there 10 great destinations we love in Auckland?
  • What are the 10 most desired things to do in those destinations?
  • What are 10 places we could improve and make a large impact?
  • What are our 10 weakest places or obstacle areas?

Warm winds blow on Auckland, with new government

By Councillor Aaron Bhatnagar, chairperson, City Development Committee

As the only city of global scale in New Zealand, Auckland is now the home to a throng of ministers in the new government. Prime Minister Key himself has brought tourism to the fore as New Zealand's number one earner of export dollars by stepping into that portfolio himself.

The government has promised an ambitious plan for infrastructural change that will help shape the future of Auckland business and our economy. Prime Minister Key's tourism portfolio is a shrewd move. Having the Prime Minister dedicated to this area during the time when the Rugby World Cup is held will ensure the city and country can capitalise on it.

Let's assume the economy is righting itself in 18-24 months. What better way for Auckland to get enthusiastic than with a sporting tournament of this size? Central government will undoubtedly pump resources into making it a huge success.

The government is also looking to catalyse broadband for the city. The government has said that within the next six months, a national framework for new broadband will be rolled out. Undoubtedly, Auckland's broadband will be dramatically accelerated, bringing us up to play with New York and London. The first likely to be implemented will be "MUSH" entities - municipalities, utilities, schools and hospitals. Open access fibre is expected to be brought first to these entities, hopefully allowing businesses in their vicinity to clip on.

Auckland governance issues take on a new flavour with the appointment of Rodney Hide as Minister for Local Government (outside cabinet). Mr Hide is on record as supporting a supercity for Auckland's governance. The Royal Commission reports back in March. Mr Hide is a reformist by nature and he will have a unique and interesting perspective on the commission's recommendations.

Mr Hide is also Minister for Regulatory Reform. The new government has already signalled its intention to reform the Resource Management Act, and Hide will want involvement.

Auckland also benefits when immigration flows. Auckland is already a cosmopolitan city, increasingly influenced through its Asian and Pacific Island communities. Now Eastern European and southern African communities are making a showing. The government sees it as its job to help Auckland become more compelling as a global city - part of a greater land of opportunity.

So what will Auckland be like in three years time? Will this government be able to successfully grapple with the massive financial issues besetting the globe?

While business is bracing itself for economic downturn - or is in the midst of it right now - there are aspects of the city emerging that present opportunity. In three years, Auckland should be a lot more optimistic, and poised to take its place on the world stage.

Draft council plan balances progress with fiscal prudence

By Karen Lyons, group manager, strategy office, Auckland City Council

Karen Lyons.
Karen Lyons.

Affordable progress. This is the principle that sits behind Auckland City Council's revision of its Long Term Council Community Plan. The revision comes in the face of global recession, and reflects the views and opinions of the elected council members.

Auckland City Council is currently putting together its Draft 10-year plan. This is a plan for the 2009-2019 period detailing direction, projects and budgets. It is a requirement of the Local Government Act 2002 and ensures councils are transparent and accountable to ratepayers and residents.

The current council is committed to a balance between keeping rates affordable for the people of Auckland and progressing the city towards increasing global competitiveness and a good quality of life. This principle has been coined "affordable progress" and budgets have been set such that the overall increase in the rate take will not exceed the rate of inflation council faces on its costs. This rate of inflation for 2009/2010 is estimated at 5 per cent.

Our current LTCCP (2006-2016) includes significant investment and projects rate increases above council's rate of inflation over the 10 years. These capital projects have related, ongoing costs on top of the main project cost (including interest, depreciation and operating costs).

This means that in order to adhere to the principle of affordable progress, council has reviewed its capital expenditure as the main driver of rate increases. Operating expenditure has also been reviewed and in addition, the organisation has committed to making efficiency savings on an ongoing basis.

Some initiatives have been deferred while others have been scaled back. Still, the council's proposed budget represents the highest ever spend on capital works programme. In 2009/2010 this totals $507 million. The council will also continue to deliver its essential services across the city. The organisation's stimulatory economic development programme remains strong, although it is proposed to scale back capital expenditure in the areas of broadband and the convention centre initiative.

The current global financial crisis and deepening recession here has made the council even more mindful of keeping rates affordable. Of course there is the argument that public sector spending should be used to stimulate the economy at times like this. Indeed, we are seeing the National Government develop a package to do just that and governments around the world are using fiscal means (taxes and government spending) to help alleviate the impact of recession.

Local government has limited tools when it comes to pump priming the economy, given our major funding source is rates. While Auckland City Council does debt fund new capital projects, the council's treasury management policy sets out the specific circumstances for borrowing. The aim of this policy ensures a good balance is struck between intergenerational equity (each generation contributes a fair share towards the assets that they use) and financial prudence.

Footnote: Gareth Kiernan, economist from Infometrics comments on whether the council should borrow and spend: "My thoughts are that any decisions still need to be made in the broader context of costs and benefits over the medium term. Local government's ability to increase taxes in future to repay current borrowing is much more limited than that of central government. As such, active stimulus roles are probably best left to central government.

"There has been a lot of talk about the rate of growth in the size of local government over the last decade and the seeming lack of discipline around spending decisions. Reducing spending is never easy. But the tighter approach to spending that has now emanated from the council means that more attention may now be paid to the effectiveness of spending that is occurring - not all spending is created equal when it comes to stimulating or boosting overall economic activity."

Five Predictions for Auckland in 2009

We asked two economists to give us five predictions for the Auckland economy in 2009. Here's what Gareth Kiernan, managing director of Infometrics and Donna Purdue, senior economist of Westpac had to say.

From Gareth Kiernan, managing director, Infometrics

  1. Housing in Auckland is set to reach its most affordable level in at least five years. Further price falls combined with rapidly declining mortgage rates will mean conditions are more favourable for first-home buyers, although tougher deposit requirements from the banks will still constrain demand for property from this subsection of the population.
  2. Manufacturers will struggle over the first half of the year given soft global demand conditions. However, the outlook is likely to brighten in the second half of the year, with competitiveness aided by the substantial drop in the exchange rate that has occurred.
  3. Auckland will benefit from the National government's infrastructure push, and the wider range of options being considered for financing that work. The acceleration of roading projects could be a highly visible outcome of central government's attempts to stimulate the economy.
  4. Weaker employment and spending growth could see property price falls spreading beyond the residential sector into industrial and commercial property. One of the side-effects of the weaker commercial market could be a mounting oversupply of lower-grade buildings, leading to the potential for a renewed round of apartment conversions (although that process is unlikely to kick in within the next year).
  5. Despite a relatively weak economic performance for both New Zealand and Auckland, immigration will continue to be a major component of Auckland's population growth. There will continue to be growing demand from migrants from developing Asian economies to come to New Zealand to seek out a "better life". Although the population inflows will by no means be confined to Auckland, evidence shows that the city is the first place of settlement for a large proportion of migrants.

From Donna Purdue, senior economist, Westpac

  1. Big spending on infrastructure will be a key theme over the next few years as the government aims to stimulate the economy. Auckland will be a key beneficiary of that infrastructure spending. The associated increase in activity in the non-residential construction sector should help to provide some offset to the struggling residential sector.
  2. Housing market to remain weak - despite lower interest rates and a modest pick up in migration, house prices have further to fall. High debt levels, a lowering of the top tax rate, rising unemployment and tighter credit conditions will see downward pressure on prices remain for a while yet.
  3. Domestic tourism in vogue - the international tourist market will dry up as the global downturn discourages foreigners from travelling. This means businesses will need to focus more heavily on the domestic tourism market.
  4. Rising unemployment - our pick is for the nationwide unemployment rate to reach 5.6 per cent by the end of 2009. To date, much of the increase in unemployment has been concentrated in the Auckland region and we expect this trend to continue into 2009.
  5. Increase in businesses exiting market. With economic activity expected to slow to a crawl, there will be a sizeable increase in the number of small to medium sized businesses closing up shop, particularly those exposed to big ticket items such as cars and housing-related goods.

Councillor Lotu-Iiga - Now MP

Councillor Peseta Sam Lotu-Iiga was elected National MP for the Auckland seat of Maungakiekie in the national elections in October, with a majority of 1,942.

He stepped down from the chairmanship of the City Development Committee (to which the Economic Development group of Auckland City Council reports) prior to this.

Mr Lotu-Iiga will continue as an Auckland City Council councillor during his tenure as MP, and will donate his council salary (about $55,000) to charity.

He will split his time between Wellington (around two nights a week for about 30 weeks a year) and Auckland - as MP for Maungakiekie and councillor for Tamaki-Maungakiekie.

Sam was born in Apia (Samoa) and was educated at Auckland Grammar School, the University of Auckland (BCom/LLB and MCom(Hons)) and holds an MBA from the University of Cambridge (Queens College).

"It'll be busy - but I'm ready for it," he says.

Previous and current councillors who have served as MPs include Richard Northey, Hon. Michael Bassett, Grahame Thorne and Mayor Christine Fletcher.

Launching an economic strategy for Auckland

By Karen Lyons, group manager, Economic Development

Auckland City Council has identified seven key strategies for working towards its vision of Auckland as First City of the Pacific.

One of these (for which my group is largely responsible) is the Economic Development Strategy. This strategy was presented in its final form in September to the City Development committee.

The council's Economic Development Strategy links different functional areas in the organisation to achieve improvement of Auckland's infrastructure, enhancement of human skills, increased business innovation and a strengthening of exports. The strategy aims to help raise productivity in Auckland and our international competitiveness.

Greg Clark, Chair of the OECD LEED Forum of Cities and Regions, peer reviewed the strategy and commented that it has an excellent conceptual foundation and an attractive directness and brevity. He went on to say that "success doesn't come by accident usually, and effective local economic strategy is essential to set the direction and the path to the future, build a common agenda amongst multiple players, identify priorities and agree responsibilities, and mobilise otherwise separate resources and efforts together for optimum impact."

The council is able to influence, regulate and invest. That is what we are doing in specific areas to action these strategies.

In our group, we contribute through initiatives such as business precinct plans. These plans help promote economic growth in key business areas. Grown from the businesses on the ground up in collaboration with council, the plans integrate all factors (transport, land use and infrastructure) to ensure future development in the area is optimised, strategic and considered. The council has implemented a plan for Rosebank, in close conjunction with business in the area. The next priority areas are Tamaki and Penrose.

Another way we are actioning the strategies is through the development of the Learning Quarter. This is a partnership between AUT, the University of Auckland and Auckland City Council. It is map to guide the future social, economic, cultural and physical development of the CBD around these universities. The centre of tertiary education in Auckland's heart provides unique economic benefits to the city. It is important that these are nurtured and grown for further generations.

Yet an additional example of Economic Development's direct fostering of business growth is in the proposed science and technology park at Tamaki. A multi-partnered syndicate of government, industry, universities, research institutions and ourselves is seeking to establish an internationally recognised science and technology park in the area adjacent to the University of Auckland's Tamaki campus. Once underway, this initiative will aim to catalyse the business area around the campus.

The strategy is long term. Progress will be monitored and evaluated as we go including through employment growth in key sectors and specific business areas.

Science parks: special places that buck the trend - says expert

The turmoil in international property markets is throwing up an interesting phenomenon, says Jane Davies CEO of Manchester Science Parks (msp) in the UK. 

Jane believes that where commercial property is under pressure in some parts of the UK and Europe, with vacancies climbing, science parks are bucking the trend.

"Science parks are one form of property development that appear to be resisting the downturn," said Jane. "That's because they spread their risk over a lot of tenants, plus many companies within science park developments are start-ups, using venture capital to get going.  As a result science parks don't have to worry so much about what the market is doing.  For that reason, a number of commercial property developers are now looking at science parks with interest."

Visiting New Zealand to support husband Wyn Davies (Director of Music for NBR New Zealand Opera) and to advise partners working on the development of an innovation precinct adjacent to the University of Auckland's Tamaki campus, Jane provided insights, at an open lecture on 23 September, into Manchester's successful science park.

Jane advised Auckland to focus on identifying what was missing in the local innovation scene, before committing to a science park.

"The British government announced an initiative nominating 'science cities', and greater Manchester responded with a strategy called 'Manchester Knowledge Capital'," Jane explained.  "In reality this was an umbrella initiative that looked at Manchester as a whole, and tried to identify which elements might be missing in the local innovation system, that might constrain science parks and the knowledge economy from taking off.  The initiative wasn't just focused on the science parks."

Jane said local government and organisations asked themselves: did they have the funding, networks, people and skills necessary for innovation to make a significant difference to the economy? The science park could only contribute part of this mix. "What was important was that the whole innovation system needed to be locally present to make innovation take off in Manchester," she commented.

After looking strategically at these issues, the organisations involved then tried to augment what was missing.

Jane believes a key for Auckland, which she has visited several times, will be to identify a sense of place for the science park, and give it a special identity. 

"The special nature of a particular city and its location help people - including innovators - want to be there," she continued. "Turning science parks into copies of an American city development is not the answer.  New Zealand has such advantages with its native culture, environment and position, it should be exploiting these unique benefits in its science parks."

She also advised that Auckland should look to New Zealand's competitive advantages, and its current research and technology strengths, before deciding the sector focus of the science park.

"The Danes focus on pigs in research and industry. There's a long history of the bacon industry there, so they have developed innovative technology related to pig diseases and animal husbandry," she says. "In Iceland, they exploit technology developed from the bugs that live in hot springs. So what is special about New Zealand, and how can you add value to that through a science park?  Build on natural and historical advantages rather than trying to start a cluster from scratch."

Jane's presentation on 23 September attracted more than 50 people from a diversity of interests throughout Auckland.

Economy turns negative - hold on tight

By Karen Lyons

Weakness in Auckland city's housing market has spread to retail spending, employment, business and consumer confidence (read more in my last article). Add tight credit and the signs indicate tough times ahead for business.

Here's what Donna Purdue, Senior Economist, Westpac says:

"An ugly run of data in the past few months suggests the economy has experienced a serious crunch so far this year. In particular, housing data suggest the market is in a pronounced downturn, with the Auckland region under immense pressure as house sales slump 60 per cent relative to year ago levels. Moreover, labour market data revealed a sharp decline in employment in the March 2008 quarter, suggesting that one of the key pillars of consumer spending in recent years - job security - is perhaps not 100 per cent bullet proof after all. High and rising oil prices are only adding to the pain with petrol pump prices surpassing $2/litre in New Zealand for the first time in late May."

According to Connal Townsend, CEO of Property Council New Zealand:

"The fundamental demand that underscores commercial property continued pretty strongly up to and including March 2008. Latest figures available for the year ending March, however, still show excellent returns for commercial property of 18.3 per cent, down a little from 19.7 per cent in the previous year - but still well ahead of bonds. Continued demand from tenants and low vacancy numbers, particularly in the high performing CBD office sector, characterised the market. However New Zealand has been feeling the effects of a global credit crunch, and these robust 2007 - early 2008 data will almost certainly have dropped off in the last quarter. Capital returns will reduce, and demand is likely to ease - meaning vacancies will increase."

While right now there may seem little cause for optimism, businesses cycles do come and go. There are positives on the horizon.

Food is in demand at higher prices as never before, and New Zealand knows how to produce it.

Tax cuts are coming in October and infrastructure spending is in catch up. Our transport colleagues tell us there is more infrastructure in planning or underway in Auckland than for years - including the proposed electrification of rail, the Mt Roskill project, the Newmarket Viaduct and Eden Park for example.

A slowing economy will ultimately mean lower interest rates and the Reserve Bank has signalled that it is likely to be in a position to lower official interest rates later this year. In turn the currency can be expected to weaken, improving our export competitiveness, and in fact the NZ dollar has already fallen against the Australian dollar, a key cross rate for Auckland manufacturers.

Bruce Goldsworthy, of the Employers and Manufacturers Association, had this to say:

"The manufacturing sector has spent the last three months very subdued or contracting, as measured by the EMA's performance of manufacturing index. Notwithstanding the challenges, there are also windows of opportunity. Although the Australian economy is beginning to wobble, our dollar is falling in relation to our Trans Tasman neighbours. These exchange rate advantages should translate into a competitive edge for New Zealand exporters in the Australian market. Overall, manufacturers have reported a very quiet New Zealand market and forward orders globally are beginning cool."

Auckland City Council's job is to monitor economic changes in Auckland, and respond to them. We also stimulate positive economic growth over the long term by capitalising on what Auckland does well. This is not a 'quick fix'. However, our city is now of such a size that long term thinking is critical in ensuring we weather economic storms. The recent visit of Professor John Allen, who was sharing his experience on the development of 'science parks', which cluster science based businesses, was a case in point. He said "....the entrepreneurial lifestyle of the population, a city council that is prepared to be innovative, the need for New Zealand to be seen as a world player in the knowledge economy and the presence of a fine and willing university suggests that a science park should be very seriously and urgently pursued."

Attitude is the foundation of business character

Councillor Peseta Sam Lotu-Iiga.By Councillor Peseta Sam Lotu-Iiga

It's during times like these that attitudes which shaped New Zealand's character serve to strengthen our businesses, helping our economic resilience.

There is no doubt it's tough out there at the moment. A peculiar economic cocktail is being shaken worldwide. New Zealand is sampling it thus:

Globally, there is rising inflation; increasing interest rates (in New Zealand they're high); a tightening availability of credit; falling housing prices (which are the foundation of investments for many kiwi families); rising commodity prices - including fuel (which is a negative for isolated New Zealand) but also including rising food prices (which has a positive effect on the New Zealand economy, especially through the dairy industry); in some economies (including New Zealand) unemployment is rising.

More unique to New Zealand perhaps we have the first signs of softening in demand for commodities (including food) worldwide; tourism is softening; immigration has fallen off while migration to Australia is (apparently) booming; consumer confidence has plunged (which affects retailing); but countering this, the New Zealand dollar is dropping - meaning our exports are worth more.

What has this to do with business attitude and national character?

I believe success in business is driven by one's attitude. As attitude is entrenched, it becomes character - as Albert Einstein once famously noted. It is character that ultimately determines how competitive, and how robust we are in business.

New Zealand's business attitude is forged on strong kiwi values: rugged determination; number 8 wire mentality and inventiveness; a strong work ethic and a true sense of fair play. We are competitive and flexible; small enough to take knocks, and still get up again. We've done it for two centuries of economic cycles.

When times are tough we fight from the trenches. New Zealanders never give up. We look to our sports stars for a strong winning attitude as the driver of success; let's look to our business directors and leaders for the same. Attitude is the key to winning when times are tough, and rebounding as fast as possible out of any recession.

I urge Auckland business to hold to these values when times are tough. For every downturn, there is an upturn. But don't just wait. Get out there and push the economic wheel one cog further around.

Economic slowdown - but longer term resilience focus important

By Karen Lyons

In this edition we have updated a summary of Auckland city's economic facts. However, this is a retrospective analysis looking at the last quarter of 2007 and therefore omits any effects of rapid changes that occurred during the first three months of 2008.

Overall the economic picture mirrors national trends with a slowing housing market, strong labour market and growing uncertainty over the impact of higher credit costs internationally.

The market disposition has undoubtedly worsened, although the facts for the first quarter of 2008 are yet to be published.

Economist Donna Purdue of Westpac has been widely quoted recently on the economic conditions. We asked her to summarise: "At the end of the first quarter, it seems clear that growth will be much weaker than Westpac first anticipated. Consumer confidence, as measured by Westpac McDermott Miller, has slumped to a decade low, courtesy of the rising cost of living and higher interest rates, and business confidence has plummeted as the global credit crunch has intensified. Add to that much weaker population growth and falling house prices and the economic outlook appears fairly grim.

Unfortunately, Auckland is likely to bear a reasonable proportion of the pain. It is the region with the most exposure to falling net immigration (via its link with house prices and consumption), and will not directly benefit from the cash windfall coming to the dairy sector."

Members of the Economic Development group of Auckland City Council were privileged to recently attend an address by 2001 Nobel Prize winner in economics, Joseph Stiglitz, at University of Auckland School of Business, with media headlines the next day saying "It's going to get worse." While commenting essentially on the US financial markets, the takeout was that New Zealand is not, and will not be, immune.

While the economic outlook for the upcoming year is uncertain, Auckland City Council is keeping focused on initiatives that aim to provide a better environment for long-term economic growth. Ultimately these build greater resilience, enabling Auckland's economy to better withstand the types of downturns that we are currently experiencing.

Councillor Peseta Sam Lotu-Iiga, Chair of the City Development Committee comments on some of these projects in this edition as well as highlighting his views on future direction.

Auckland City - Playing our part in Auckland's growth

By Councillor Peseta Sam Lotu-Iiga

There's no doubt that Auckland City Council can and does play a significant role in shaping the economic environment in the city.

Some very effective initiatives undertaken by the city are underway. For instance the idea of developing an innovation precinct in Tamaki is visionary. These types of precincts can work extremely well. I experienced one in Cambridge (UK) and it created a highly productive cross-pollination between research development and the business sector.

Relationships in the biotech sector are critical for Auckland city. That's why we sponsor NZ Bio's Auckland branch. Biotechnology is an area in which New Zealand has shown aptitude, and Auckland is the hub of the industry. Research conducted in biotechnology can provide the high yielding industries of the future, and we need lots more of them.

Auckland City Council's initiatives to bring open space Wifi into the CBD and fringes are also laudable. Frankly, the council's undertaking closes a gap in the market that should have been filled before now by a provider. Where we can, it's appropriate the council acts.

Relationships with the education sector are recognised as critical. Again, Auckland City Council does these well. The creation of a Learning Quarter which defines a geographic area in the city, and is a partnership between Auckland City Council, AUT and the University of Auckland - should produce superb outcomes. The area will be enhanced and this unique core of the CBD which attracts 55,000 students and 10,000 staff today, will grow and develop for tomorrow's tertiary study and supporting businesses. The Covec study of our international relations including our sister city relationships showed we were truly harnessing international connections by supporting educational initiatives for foreign students.

So what more could we be doing?

Well - I see a future for council-led economic development where we engage more thoroughly with business leaders - small, medium and large - and ask them how we can make what they are doing already even more effective. By talking to business and truly understanding it, council can work to make Auckland City appropriately zoned, effectively developed, roaded, transported, fairly rated and accessible. We can also hold the government's feet to the fire when they are not shouldering their load, particularly on strategic infrastructure in transport.

Further, Auckland City Council has a role in helping attract new business (especially from offshore) so that there's a net gain for the country through Auckland. On my watch, you can be assured these areas will be the City Development Committee's focus. 

Auckland City Council and economic development in 2008

By Karen Lyons

In the Chinese calendar, 2008 is the year of the rat symbolising hard work, resourcefulness and energy. Auckland City Council's Economic Development group is taking these messages to heart with a full year of work ahead to move Auckland on its way to being a truly internationally competitive city.

In 2008, we're advancing with projects that will help catalyse economic growth in Auckland city. We will help to finally introduce an an 'open access' WiFi network in the CBD, finalise a plan to further develop the Learning Quarter (Auckland CBD's most important education precinct) in conjunction with the University of Auckland and AUT. We are also moving ahead with initiatives to support and foster growth in ICT, biotechnology and creative industries, and strengthening economic links through our international relations programme (a formal programme which proactively fosters business links with European, Asian and Pacific nations). The Mainstreets Associations, which function as local business associations fostering growth in their areas, will continue to grow and develop.

Auckland city's new council has begun to set their direction. Councillor Peseta Sam Lotu-Iiga is the Chairperson of the City Development Committee which makes decisions around the city's economic development work. This committee is an important democratic interface connecting us with the people of Auckland. Councillor Lotu-Iiga brings a wealth of commercial experience to this role, including positions at Macquarie Bank (Sydney), Bankers Trust (London) and Russell McVeagh (Auckland).

As always, we continue to value our working partnerships across Auckland businesses, community organisations and government agencies. We would like to thank you for your ongoing support and offer you our best wishes for 2008.

An Economic Catalyst

By Karen Lyons

A thriving, internationally competitive economy in Auckland will make our great city even better for everyone.

That's why Auckland City Council is focused on the city's long-term economic growth. We take the lead on economic development activities and projects that target and support our city's international competitiveness and productivity.

One example is the council's push to kickstart the construction of open access WiFi and Broadband because Auckland lags behind other international cities in this important infrastructure.

Auckland city's Mainstreets programme, initiated by the council years ago, provides for a special rate to be levied and then delivered back to key local business associations. In the past few years, these associations have used this money to improve safety and security, clean up graffiti, and develop destination marketing. Mainstreet Associations have flourished since their founding and we applaud their successes.

Auckland City Council supports high value economic sectors through our creative industries action plan and our support for NZBio, Connect New Zealand, Film Auckland, Study Auckland, Tourism Aucklandand The ICEhouse.

This is just a slice of the action. We recognise that transport infrastructure projects, events and regulatory processes have a huge impact on the city's businesses and economy. To ensure we are doing the right things to support the economy we conduct research and have a large repository of vital business information.

The goalposts

Our economic development programme aims to help Auckland

  • become globally and nationally connected
  • have a skilled adaptable, educated workforce
  • create productive dedicated business areas, linked to a strong CBD.

Updated September 2009
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