By Gareth Vaughan
Four key factors are behind New Zealand towns and cities with the fastest growing populations being land-use capability, human capital, sunshine hours and proximity to Auckland, according to a study by economic and public policy research institute Motu.
Motu also suggests public policy should not overly constrain the size of Auckland - New Zealand’s most productive city - because if it does the risk is growth will be lost to Australia’s four largest cities.
The Motu study comes via a working paper entitled Infrastructure's long lived impact on urban development: Theory and empirics. It's authored by ex-Reserve Bank chairman Arthur Grimes, Eyal Apatov, Larissa Lutchman and Anna Robinson.
The four analyse impacts infrastructure provision and other factors have on long-term urban growth using data covering 1926 to 2006 across 56 New Zealand towns. They ask what effects infrastructure investments and other factors have on long-term urban development.
"Our analysis shows that four dominant factors have impacted positively on urban growth, especially since 1966: nearby land-use capability, human capital, sunshine hours and proximity to the country’s dominant city, Auckland," Motu says.
'Preferred attributes'
They say growing cities and towns are shown to have preferred attributes such as wages and amenities relative to other cities. Social infrastructure such as higher educational institutions and hospitals and transport infrastructure can also have productive and amenity value.
"Thus increased provision of such infrastructure within a city may enhance a city’s attractiveness provided that the benefits of the new infrastructure exceed local costs of provision. Agglomeration benefits may magnify the benefits of infrastructure investments, especially in larger cities. Poor infrastructure provision linking an urban area to major cities and other amenities may, conversely, reduce the attractiveness of that urban area, curtailing its long run population growth," Motu says.
People favour living close to amenities, and earn higher wages when they are located in or near a major city or town area, they add.
"Enjoyment of amenities declines as distance to those amenities increases, and wages decline as distance from the major agglomeration increases. Transport costs increase as distance to these assets increases. Each of these factors influences urban population growth," says Motu.
In terms of population growth, the working paper says the two regions that fare best in comparison to Auckland are what they describe as “Greater Auckland”, including towns between 200 and 320 kilometres from Auckland, and “Christchurch”, which includes the South Island’s largest city and its near neighbours.
"The only sizeable and significant region effect in the 1926-1966 sub-sample is that for Greater Auckland, which we expect reflects the exceptional growth of Tauranga and Rotorua over 1956-1966. Taken together, these results suggest that proximity to the major population centre of each island, and especially Auckland, has been a driver of urban growth in recent decades, but was not important in the first half of the 20th century."
"Turning to our (non-infrastructure) productivity and amenity variables, we see that land-use capability – our proxy for agricultural productivity – has a positive and significant effect that is consistent across all three time periods and all different specifications. Climate, as measured by annual sunshine hours, is another factor with a positive impact on population growth over the whole time period, in line with findings from other countries," Motu says.
The authors conclude that New Zealand urban areas grow if they have a desirable combination of amenities and real earning opportunities relative to alternative locations. A range of factors can contribute to earnings opportunities and/or amenities such as transport links, social infrastructure, benefits of location in a large population area, and natural amenities.
'Potential sources of policy intervention'
Of the four dominant factors they believe have impacted positively on urban growth, especially since 1966, they say human capital and proximity to major population centres especially Auckland, are both "potential sources of policy intervention."
"First, human capital can be raised through a generalised increase in the national standard of human capital and, at the local level, can be raised by developing and attracting high human capital to the area. The presence of universities, and possibly other higher education institutions, is correlated with an urban area having high relative human capital, although the causality in this relationship is difficult to establish."
"Second, proximity to Auckland can be improved through the upgrading of transport links that make it easier for firms and people to locate near to, but outside of, Auckland while still accessing some of the amenity and productivity benefits offered by the city," says Motu.
And, they say, the importance of being near major urban areas can be interpreted in an international context.
"Auckland, New Zealand’s largest and most productive city, is small by international comparisons and is only the fifth largest urban area in Australasia."
"To the extent that urban growth across Australasia is determined by similar factors to urban growth within New Zealand, there is a case that policy should at least facilitate, and certainly not overly constrain, the size of New Zealand’s most productive city; otherwise the risk is that growth will increasingly be located in Australia’s four largest cities rather than in Auckland and its surrounding region," Motu says.
*The paper was prepared with funding from the Ministry of Business Innovation and Employment (MBIE) for the Resilient Urban Futures programme.
51 Comments
Yes , Auckland must be allowed to grow , and in the process full -on satelite city centres should be allowed to develop such as Silverdale City CBD , Albany City CBD , Westgate City CBD , Botany City CBD etc, etc with office parks , retail , services , etc.
This nonsense of everyone trying to get into the Auckland CBD to work is just that ...... nonsense
And low-rise apartment buildings should be developed as Greenfiled developments around thse satelites .
Auckland was originally a nasty expanse of swamp land.
The dominant cities have been Wellington, Christchurch, Dunedin.
Land use prominance is Christchurch.
Sunshine hours in Blenhim/Nelson both which are far prettier than Auckland.
Human capital is Christchurch, Dunedin and NewPlymouth/Napier and Kapiti Coast.
Looks like some experts are fitting their data to their theories again.
Napier was better, so is Omauru, so is Lyttleton, so was Dunedin.
Frazz, I'm just refuting the statements that were claimed above the "faster growing towns and cities" were caused by those factors.
Auckland, during it's growth, fitted none of those criteria.
What it did have - shorter distance to trade routes.
and ......?
corporate head offices before and during the Depression and World Wars. So that's where the large salaries were.
Christchurch-Dunedin were owned by huge farm owners, massive tracts of land. Or in dispute with existing locals.
Wellington had a landlock problem (tip of island, hilly and deep swamp terrain), no deep water port, poor local support.
Dunedin was very cold and far away from continental trade - no reason for importers to set up there.
Christchurch was better but the rural nature of the SI and inhospitable central plaeau/West Coast made much of the area low land use value (great for the sheep boom, bad for everything else). So it grew when sheep were good...and has been coasting off that initial growth ever since. If it had competition for corporate home in the SI it would have lost out to higher value trade (Blenhim) and the ferry would be docking in Blenhim now.
Claiming growth is because of being near a dominant town, is like claiming a place is popular because people like to go there. The real question is, what makes such an area dominant, After all Northland/Whangarei are hardly booming and neither are the townships between Whangarei and Auckland. Taurangi is getting a bit of Auckland overflow but why hasn't Hamilton boomed, despite being the Telecom central for so long? And if the effect is local, Why is Rotovegas kind of stagnant and Whakatane doing ok?
People are heading to auckland frazz, because that's where the big wages are and the capital gain. and thanks to government and RBNZ incompetence they're beeding out the rest of the country while they're doing it. Question is, if Auckland's so great, what does it produce?
Auckland appears to predominately revolve around clipping the ticket off everything south of the Bombays!!..........The more Auckland expands the more south of the Bombays has to perform.......
The populations in places south of the Bombays will have to increase and become even more productive to keep Aucklanders in the lifestyle they have become accustomed too......
I would like to know how Motu measured productive!!!
Cowboy, firstly I enjoy your posts, your knowledge on farming and rural business is far superior to mine. I have just returned from another rum race on Auckland harbour, 15-20 knots from WNW and 19 degrees. Drive home via Ponsonby road which is very busy and now resembles parts of Melbourne, 5- 10mins to Mt Eden.. What does Auckland produce..?, dont know were to start really?
I luckly work with a variety of business, some just off shoots of council but others pure entrepreneurs and successfull. South Auckland/Manukau is booming, good staff in short supply, manufacturing base of Auckland. West is still films and tourist town with service and horticultre + (wine)l and North Shore, well North Shore...hmm beaches and bad bars.. One thing I do like about Aucklanders we love to travel NZ wide, and the world .
I would have worded it somewhat differently than that Frazz........something along the lines of Auckland is a parasite hub while the rest of NZ is the producer.......and at some stage the parasite will get to large for the host to bare the load........and then what will happen to all that over-priced real-estate and debt that goes with it?????
If I do a SWOT analysis on the affects of Auckland on the rest of the economy it doesn't look pretty..........then there are Aucklands debts..........Auckland is living in a dream bubble.......hoping like hell that inflation will do its job........and hoping like hell that the rest of the economy can produce enough to pull the ship through........
If everyone living South of the Bombays left and none replaced......how long would Auckland be able to continue in its current capacity???
Now what would happen if everywhere south of the Bombays chopped off Auckland?
I'm hoping to keep away from that conclusion. Although it does concern me that decisions based on popularity, concensus, "greater good", or just straight demographics, are going to put more money and power -into- Auckland and support Auckland-centric thinking and reasoning. (eg perfect water quality makes perfect sense -if- you're in a city that has to re-pipe and has 1 million ratepayers to subsidise it... not so much sense in other places, or where 1 to 10 people have to personally foot the refit bills.
And I 'm not talking personal interest here, I've personally got bets hedged several different ways.
What concerns me is that if Auckland is consumptive and isn't productive, and that is its "success", then continued operation in that manner isn't sustainable. It's like the boss of a company, if they keep supporting the business choices from their own pocket, or covering up for bad debts and bad choices... it's all going to go SCF-like. And since they clearly don't know how to build a sustainable town, and the majority of the population are there, and the financial notes rely on the inflated property values from that demand.... thing if things continue to make decisions that are "non-Auckland" poor , and if Auckland isn't productive... then we are going to be in ***really*** bad space.
Which comes first the chicken or the egg nzcoolie.......down below you also state that "no consumption - no production"......and while that could be deemed as a reasonably logical analysis........you also cannot consume more than you produce.......hence my comments on parasites........Is Auckland sucking the wealth out of the rest of productive NZ?......Auckland reminds me of a snowball rolling down a hill getting bigger and bigger......a lot of energy and resources are going into that snowball....but it is not from real snow......it is artificial !! Cowboy says it well...when he asks is it sustainable!!!.......
The only reason we have all the consumer protection and fair trading laws is to add value to goods and services which could have been produced more cheaply.....adding the costs of compliance to any product or service that has not changed from its original form increases the total cost of the goods or service by way of adding value to the price tag without enhancing the goods or service in any way..........And all these added costs have an affect on GDP....the magic measure used by Governments and bureaucrats......
If the cost of goods could be sold to the consumer for e.g. $5.00 but with all the compliance and regulatory hoops that product now has to sell at e.g. $10.00.....the laugh is on the consumer for the very legislation that was designed to protect them has had the opposite effect....you got to love State inflicted inflation.......Auckland might enjoy its cheap imports/low production lifestyle but can our NZ producers keep sustaining it?
Regulations always favour the big existing players and make it well nigh impossible for new entrants.
I think, however Auckland being the financial centre is the key here: this is where the new money is created (as new debt) and the first to spend it get full value before the inflation it causes has run its' course. Ponzi central, if you like.
But... if my observations are accurate, and I hope others can think about it too, the alternative perspective would be required.
Auckland IS big for the reasons Frazz identified. It has velocity of money BECAUSE it holds expensive races and things to do, has nice cars, money is churned over in creating good views. That means more employment and better wages, means more personal income and therefore more eventual spending. more spending equals more jobs. more jobs more paychecks... more paychecks = more disposable income.
In smaller areas, the compliance costs and taxes take a large chunk of the wealth. We just can't afford to hold so many events or have the nice cars.
And Auckland/Wellington, has the "passive income streams". It has the head offices, the government officals, the customs and communications agents who TAKE money from their overseas clients at 100% profit (vs negotiate trade terms). These "nets" of revenue suck up from the branch offices, and individuals around the country, and those just passing through; and trap it in the area. the provinces get whats left. How many farmers or farmer workers (excluding rents) get paid what Fonterra employees get paid? Yet the primary end of that is spread all over the countryside - yet they must be highly productive - to sell to the cities to make money, to create tradeables, more importantly to pay for the administrative and professional and tax they must front up with....fees which don't get spend back into their communities. the small communities must survive on the sales margin of their production.
Yet all that money, and those big Fonterra wages (just to pick obvious example of large national company) they all tend to end up in dense areas. A few in moderate town, but most around the well populated offices and factories (and a few labs). That draws a large amount of resources from the trade, and dumps it into those areas. But how much of that is all add ons?
Like Key's f-ing deal with China for labelling. What does it add to the product? What will it make us in extra revenue??? NOTHING!! But remember few months ago a Chinese investor was talking how he had a system that he was putting in place for such tracking....so guess who benefits? Not farmers, no end users...the guy with a tracking system that he needs to sell - and all he needs to do is convince some Chinese Politician that additional food tracking information is good for the Chinese People, and he'll sell lots of units, and administrative staff will get more money, and the people won't want to pay any more....so even more produce value comes out of the provinces, but money does not flow back in.
Yet the government will think this is good because it can tax more administrative employees, and the "value" of the produce (which is the same produce as before) is now higher. (ie it just devalued, as less profit velocity so less jobs as tighter margins. and the only jobs will be in consumptive centers
What are you producing to pay for the ability to consume so much?
If "we" need to consume what we produce then why is it not being shared out more evenly, especially places where the production is much higher than the consumption?
But, tracking back to original point, if Auckland is so big and popular how did it get to be so if it is a consumer hub??
After all, if all you need to do is consume, then we just need to duplicate that across the rest of the country and we can afford to pay Auckland style wages
Well put Cowboy, perhaps the answer to the question is simple? Just look around the world...how did Sydney become so large, Tokyo, LA...?
Auckland started off as port city and trading hub and was once the Capital of NZ, however that then shifted to WELLINGTON (thank god). The Port is important (as takes up most of the waterfront still) as well as the Auckland International Airport were most vistors land/depart into NZ. Were does a huge amount of our exports/imports to take please, Auckland and Tauranga, whose volumes are fast catching up to Aucklands, with more people moving there We can get some very large container vessels in and out quickly and bigger ships are planned. Whangaeri is looking to expand their port for deeper vessels as well. With that Head Offices have and are moving to Auckland....new office space, large labour pool, and pleasent city to live in (although expensive).
The comments from the Anti Jafa brigrade make me laugh...Auckland is just like any city in NZ but with a bank fueled house ponzi scheme underway. Remember Auckland was underfunded for years thanks to the suits in Wellington. Playing catch up is costing a fortune which the poor Auckland rate payer will have to fork up. Stop the regional bagging and look at NZ as one city rather then the blinkered views from some who I suggest dont travel much.
Do people really stop spending in this deflationary cycle. Pop into any Harvey Norman or Noel Leemings today (if you dare. ) All the products they sell have been in a steep deflationary trajectory for years. It will be like a feeding frenzy in there.
Fuel prices are currently entering what will be a prolonged deflationary period. Will people buy less fuel because its cheaper.
Not gonna eat this week, food will be cheaper next week eh?
Turn off the heater, electricity prices are coming down? Methinks the effect of deflation on consumption is a dragon easily slain by actual observation of peoples actual, on the ground behaviour. Not gonna book that flight, no way, falling oil prices will make it cheaper next month.
http://www.interest.co.nz/charts/credit/housing-credit and click on the Amount tab.
There is a lot of money being created in Auckland by people bidding up the prices of existing houses and borrowing more to do so. This where the money comes from to visit Harvey Norman.
I hear you Roger but my proposition was that the downward spiral effect from delay of purchase in anticipation of lower prices is somewhat exaggerated. And the credit increase from property value increases is surely mostly a zero-sum game where one parties' capital gain windfall is usually anothers' crippling debt burden.
Many of the things you point to are consumables however and not really assets. Some are also essentials like food and hence not delayed.
Lets take petrol, what I do is if prices are rising I fill the tank and keep it +1/2full. If prices are dropping I run it down to 1/4 and dont fill much past 1/2 unless I need to go some way over the weekend.
Will people buy less fuel? well if you have just lost your job as deflation tends to indicate a recession, then yes you will be buying less, maybe even none. Whiteware? yes ditto.
Thats behaviour you can see IMHO.
If house prices are dropping and projected to keep dropping, will ppl buy or continue to rent?
If you have cash in your pocket do you walk into Noel Lemon and ask "whats your best cash price?" I do.
Im looking at local shops closing around me, others have a lot less stock, permanent sales at Briscoes? kind of suggests ppl are not buying to me.
regards
I live on a yacht mostly mooching around the Hauraki Gulf Raegun. What you said is just not true. Holiday periods aside, there is hardly anyone out there. Well there is, but they are so spread out between thousands of great anchorages that most the time you feel like you have the place all to yourself. I've spent days at a time in spectacular harbours like Te Kouma and had 1 or zero boats visit.
There has been no noticeable deterioration in the 30 years I have been intimately associated with the Gulf.
But I suppose you "read it somewhere" or "heard it on the wireless", so it must be true.
Yes I have read reports and I do accept there is validity in them, maybe you don't get to see what they do, the Mediterranean probably still looks pretty nice too.
And do you think another another million people will NOT affect anything.
Population growth is a ponzi scheme and one that this government is flat out selling to us
Edit. And you don't notice so much things happening incrementally, it's been many years since I have been out of the water in Auckland I wonder if I would notice something.
The other thing that makes me think that things have deteriorated was remembering how relatively easy it was to catch decent fish from the shore when I was a kid and how it isn't now
uh huh
do you reckon the current generations of aucklanders are so nautically inclined
do you reckon the influx of migrants who have arrived over the past 14 years share the same predilictions as you
Perhaps you are a dying breed
There are a lot of majestic yachts lying idle in nz with for "sale signs" and not selling
Definitely less people cruising around and living aboard. Maybe more folk in fizz boats fishing and day tripping. Most likely cheaper overseas holidays and the motorhome thing has more appeal for retiring boomers. You sure are right about it being a buyers market for boats, especially if they are over 20 years old. In most cases the asking price is over twice what they would get if they had to bite the bullet and sell.
I remember travelling to Piha, out along the West Coast Road, narrow, unsealed, single lane, gravel, many, many switchbacks, about 1½ hours to get there, worth the trip
Now straightened out, sweeping road, sealed, two lanes, nice
Couple of years ago while showing some visitors around Auckland tried to do the "must see" Piha trip. Left the CBD at 1:30 pm, got as far as Glen Eden at 4:00 pm, stuck in traffic, hardly moving, gave up.
yet costs have gone up, not down. with less labour and machinery doing repairs, less fuel and damage to cars, less transit time for labour and vehicle hours, more carrying capacity in speed and size of vehicles...... and yet it is now more expensive to live far away...not cheaper.... When do you personally, start asking "what is wrong?"
"Wasn't it Motu who told us immigration doesn't affect house prices?" Quite the opposite actually - http://www.interest.co.nz/property/67250/inward-migration-shock-can-hav…-
Is this discussion really about centralisation vs decentralisation. Why not take advantage of cheaper (and more loyal) labour in the provences?
I think Auckland is at the point were further growth is at a reducing rate of return whereas smaller industrial centres provide oppurtunity for more efficient investment in growth. Eg Palmerston North (inland port coming soon) Hastings (water, land and labour in abundance), New Plymouth etc. These and other centres have existing redundant capacity and those prepared to think outside the square are making a killing by locating there.
For example as a wholesaler/manufacturer based in Palmerston North we can deliver goods at the same cost and in the same time to Aucland customers as our competitors based there and we have much lower overheads. We have people knocking on the door every day looking for work (no wage pressure) and a supportive and keen local supplie/rservice base.
Maybe sunshine hours has an impact for some areas (not PN :) ) but I tend to think high sunshine hour centres do not attract the productive demographic.
With communications now so cheap in some ways de-centralising a govn dept en-mass to boost local employment makes sense.
However the biggest thing is getting staff of the quality needed aint going to happen IMHO. I think that was tried with Wanganui and people simply wouldnt go there. Even an employer tried to get me to Invecargill and I couldnt run home fast enough after a week. Also I have a friend who as a trainee accountant was offered $45k in Invercargill v $25k in Auckalnd, he quit and went to Auckland after 6months. Now if you are born there and do not want to leave, then yes you are forced to accept a lower wage.
Given there is also a set structure for pay scales I doubt labour would be cheaper. I also dont see why they would be any more loyal, indeed loyal to whom? If they are desperate to keep their jobs then they may not object as much to anything they are told to do by a Head Govn lacky.
regards
Yes they are talking about that sort of thing in Nelson. They have discovered that Nelson earns more from export and less from government than any other region. They have also discovered the Cawthron Institute is an international centre of excellence. My fear is that if they move a government department here they will fill the town with drones who only know how to work for government departments. Worse, they are talking about funding the Cawthron Institute and will in so doing destroy it's unique characteristics. These things have many sides.
Indeed so also consider that those "drones" then spend into the local economy, greatly boosting it. You also then see spin offs like say IT support being privately outsourced creating jobs. Buildings being rented off private owners etc. Reality though is there isnt the local capability of people to staff whole departments so isnt going to happen.
regards
Yes, well I was laying it on a bit too thick there. The tongue in cheek doesn't translate to the written. "Drones" is completely out of order really, and quite over the top. Lots of good people work for government and do an excellent job. The private sector is also usually better and far worse at whatever than the government sector. There is a point buried somewhere in there though.
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