Jan 30, 2014
Auckland’s economic prospects look the best in seven years, based on labour, housing construction and manufacturing activity.
Geoff Cooper, Auckland Council’s chief economist, released his latest economic quarterly update today showing that the city’s growth projections were the best since before the global financial crisis in 2008.
The quarterly, headlined High Hopes for 2014, outlined how many different aspects of Auckland had been strong performers lately and the NZIER’s Quarterly Survey of Business Opinion showed rising optimism.
“The Auckland economy continues to gain momentum through the final quarter of 2013 and enters 2014 on a solid footing,” Cooper said.
Auckland’s annual GDP growth of 2.4 per cent last year was strong.
“This is a measure of transactions happening in the Auckland economy and it shows that people are starting to see opportunities, particularly in the house building area,” Cooper said.
“We’re starting to see more development and the GDP figure signals improving employment conditions around the corner.”
Strong building activity was another indicator of the city’s big economic recovery. Last year, consents were granted for 5647 new residences in Auckland, a big share of the 14,138 consents granted nationally.
“Residential building activity was 29 per cent higher in the September quarter of 2013 compared to the same quarter of 2012. November is a standout month for dwelling consent approvals – 779 new dwelling consents were approved, the highest monthly figure since 2006. Consents in the three months to November were 11.5 per cent higher than the three months to August, while annual consents surpassed 6000 for the first time since 2008,” Cooper said.
Building activity volumes were gaining momentum, up 24.4 per cent year-on-year in the September quarter in real terms.
Consenting activity typically leads a big building upturn by about six months so the strong run of consents being issued during the last two quarters of last year would lift building activity volumes further throughout the first half of this year, Cooper said.
“While such housing activity is welcomed, significantly more is needed to make a dent in Auckland’s housing affordability.”
Aucklanders were also optimistic that the good times would continue, Cooper said.
“Business confidence is currently riding high on the back of the pick-up in domestic demand, with investment and employment intentions both firming in the December quarter,” he said.
This sense of cautious optimism was widely held, suggesting that growth might become increasingly broad-based in the near term.
Consumer confidence rebounded in the December quarter, probably reflecting the housing market’s resilience, he said.
Aucklanders’ pre-Christmas shopping splurge boosted the retail sector and business surveys show retailers were increasingly optimistic about the outlook for trading conditions.
Employment prospects look good.
“The unemployment rate was unchanged at 6.7 per cent in the September quarter and employment growth remains sluggish. However, forward indicators point to an improved labour market performance in the first half of 2014 and real wages growth remains solid,” Cooper said, noting how Aucklanders were earning $1135 a week real wages in the second quarter of last year rising to $1145 a week in the third quarter.
Households had remained relatively financially cautious last year, largely because of their views of the labour market, but hiring intentions had firmed.
Moody’s Investors Service said New Zealand’s economy and the Government’s books were on the mend after taking a hit from a protracted recession and the Canterbury earthquakes.
Mayor Len Brown laid down a challenge to business, council and government officials at a three-day growth forum this week, saying the city’s amalgamation delivered big opportunities. Brown cited the Wynyard Quarter innovation precinct, public private partnerships, more commercial sponsorships, an economic and investment hui to assist iwi using settlement proceeds, and the Central Rail Link as examples of such opportunities.
Justin Kean, research and consultancy director at Jones Lang LaSalle in Auckland, said the value of investment buildings sold last year was back to pre-global financial crisis levels, with sales of more than $2 billion last year and the biggest deals were in Auckland.
Housing sector
Annual residential building consents
* Auckland 5647 NZ 14,138
Annual house sales
* Auckland 31,833 NZ 48,707
Average private rent
* Auckland $448 a week
* NZ $314 a week
Source: Geoff Cooper, Auckland Council.