Economic Futures

for the Auckland Region

Part 1: Knowledge base for scenarios development

December 2008
This report was prepared by Penelope Tuatagaloa, Carole Canler and Dr Catherine Murray
in the Economic and Social Policy Team at the Auckland Regional Council, December 2008.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Contents

1 INTRODUCTION ______________________________________ 3
1.1 Purpose 3
1.2 Scope 3
1.3 Reporting 3
1.4 Methodology 4

2 THE CURRENT STATE __________________________________ 5

2.1 The regional economy: Auckland’s place in New Zealand 5
2.2 International context: Auckland’s place in an international context 8
2.3. Industry sectors in the Auckland region 11
2.4 Analysis of sectors of interest in the region 17

3 CONTEXT OF CHANGE AND FUTURE DIRECTIONS FOR AUCKLAND ___ 44

3.1 The changing nature of the Auckland region: Key economic drivers
of change 44
3.2 Future demographic changes in the Auckland region 48
3.3 Societal adaptation to changes: lessons from New Zealand history 51
3.4 The policy context 53
3.5 Stakeholder consultations 58
3.6 Future prospects: a view from Mäori, Pacific people and
Asian communities. 61

4 APPENDICES _______________________________________ 65
Appendix 1: Auckland Region Economic Futures Project Steering and
Advisory Group Members 65
Appendix 2: Concordance relating ANZSIC Codes to the
48 Input-Output Industries 66
Appendix 3: Concordance relating ANZSIC Codes to the Industry Sectors
of Interest to the Auckland region 68
Appendix 4: Interviewees for the Auckland region Economic Futures project 69
Appendix 5: Summary of interviews with key regional stakeholders
for the Auckland region’s Economic Futures Project 70

5 REFERENCES_______________________________________ 79

1
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

List of Figures
Figure 1: Purpose of Economic Futures Project 4
Figure 2: The Auckland region 6
Figure 3: Population growth, 1886 to 2006 7
Figure 4: Real Gross Domestic Product (GDP) and real Gross National
Income (GNI) per capita, 2005 9
Figure 5: Employment in industries in Auckland, 2001 and 2006 12
Figure 6: Top ranking Auckland industries in terms of percentage
contribution to national GDP, 2006 14
Figure 7: Bottom ranking Auckland industries in terms of percentage
contribution to national GDP, 2006 15
Table 4: Auckland region’s industries with comparative advantage and
significant contribution to GRP, 2006 17
Figure 8: NZ marine industry forecast sales 2005–2020
($ billion, March year ended) 38
Figure 9: Age-sex structure, Auckland region and New Zealand (shaded) (2006) 48
Figure 10: Structure of population for the Auckland region in 2006 (shaded)
and projected for 2031 (lines) 50
Figure 11: Projected age spread of Auckland regional labour force, 2006 and 2031 51
Figure 12: Regional Strategic Framework for Auckland Economic Futures 55

List of Tables
Table 1: Contributions to Gross Regional Product by Auckland region’s top 20
industries, 2006 13
Table 2: Auckland region’s top 20 employers by industry, 2006 14
Table 3: Auckland region’s ‘strong’ industries by Location Quotient and
Location Quotient results for comparable regions, 2006 16
Table 5: Locations of creative sector businesses and employees, 2006 25
Table 6: Air cargo exported year ended June 2007 31
Table 8: New Zealand bio-technology industry – key statistics 2005 34
Table 9: Largest exporters by industry sector in Auckland, 2006 47
Table 10: Ethnic groupings in Auckland region, 2006 49
Table 11: Auckland region’s population 1981 to 2031* 50
Table 12: AREDS platforms 56

2
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
1 Introduction
1.1 Purpose
Current planning in the region is mainly based on
the continuation of economic trends into the future.
However, there is no agreed set of economic futures
to guide planning and policy making. The Economic
Futures Project is intended to enhance the quality and
consistency of regional economic planning and policy
by considering the past trends and amending these to
take into account planned and expected future trends
in the form of new policies, investments and changes
in the region’s environment.
The Economic Futures Project defines the likely
trajectories that the economy of the Auckland region
will take over the twenty-five-year period, from 2006
to 2031. The intention of the project is not to predict
the future, but to assess the likely impact of a range of
plausible scenarios on the economy. A set of regional
economic futures will be produced to support regional
policy and strategy development, and to guide the
delivery of specific projects and actions.
1.2 Scope
The project focuses on economic activities. It provides
more sophisticated information than presently available
on the future economic realities that need to be taken
into account in the planning process. More specifically,
it provides four sets of employment and output data by
sectors of industry in the Auckland region, as well as
their likely impacts on land use and transport, and on
environmental aggregates.
The information produced is constrained by the
scope and range of the modelling tools available.
For example, social and behavioural aspirations and
changes associated with the scenarios cannot be
directly fed into the model. It should also be noted that
the model is not resources constrained. In other words,
it assumes that there is no limit to the availability
of skilled labour, energy or office space. These
assumptions, rather than being built into the model, are
tested exogenously as part of the work.
The project uses the Auckland region’s Economic
Futures Model which was developed by Market
Economics Limited. The model is based on a regional
economic input–output table. It measures flows
between different sectors, based on consumption
patterns between 48 different industry sectors – for
example, what is spent by agriculture on manufacturing
products, or what is bought from the fishing sector by
restaurants and bars.
1.3 Reporting
The Economic Futures Project is reported in two parts.
This report, Part 1: Knowledge base for scenarios
development, encapsulates the current information
available on the state of the Auckland economy
and its future drivers. While the knowledge base is
dynamic, this report builds the evidence that supports
the development of the economic scenarios for the
Auckland region.
The second report, Part 2: Scenarios and modelling,
will present a set of four economic scenarios for the
Auckland region, and discuss their implications in
terms of employment, output, export, occupation,
environment and land use. The current period of
economic and financial turmoil poses some added
difficulties to this scenario-building exercise. Some of
its anticipated effects will be discussed in Part 2.
The second report will be published in March 2009.
3
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
1.4 Methodology
The work to develop the economic futures was carried
out in three phases:
1. information gathering (report 1)
2. development of scenarios and modelling (report 2),
and
3. identifying impacts and further work required to
develop responses (part of Auckland Regional
Economic Development Strategy (AREDS) refresh).
For the first phase, a stocktake of relevant economic
research and information (e.g. academic articles,
industry reports, economic commentaries and
newspaper articles) and a summary of the strategy
framework guiding the region were carried out. In
addition, new research was commissioned as follows:
• The Outlook for Tourism in Auckland – undertaken
by Covec Limited
• Understanding the Business Services sector in
the Auckland city-region – undertaken by ASCARI
Partners, and
• Rural economies in the Auckland region –
undertaken by ASCARI Partners.
The first phase also involved consultation with a
number of regional stakeholders, such as government
officials, business organisations and unions, and
a number of sector-specific representatives and
businesses, through group meetings and one-on-one
interviews.
Figure 1: Purpose of Economic Futures Project
Land use
Economic scenarios
Futures
Economic
Energy
Scenarios Strategy
and
Modelling
AREDS
refresh
4
This report presents the stocktake of existing
information on the economy in the Auckland region.
It provides a better understanding of the industrial
structure of the regional economy by looking at
changes in the Auckland region in the medium to
recent past. It also identifies the economic drivers in
the region and emerging industry sectors, as well as
key international trends and influences. The results
of the information-gathering phase provide the base
information to develop the proposed scenarios.
The project was driven by a cross-agencies steering
group, providing access to information as well as
regular feedback on the project’s progress (refer
Appendix 1 for membership).
1.5 Users
.
It is envisaged that the Economic Futures Project
will feed into a number of regional projects, as
described in Figure 1, and provide a reference point for
development of regional strategy and policy as well as
guide the design and delivery of specific strategies and
interventions.
Secondary users will be external agencies such as
Economic Development Agencies and local councils
who should find the economic scenarios a useful tool
to guide development of their strategies and policies,
and to help ensure that their strategies and policies are
consistent with the direction of the Auckland region.
The Economic Futures Project has been developed
alongside the ARC Growth Targets study and the
Review of the Regional Land Transport Strategy (RLTS).
These three projects are closely aligned and ultimately
will inform the review of the Regional Policy Statement
(RPS) in 2009.
RLTS RPS
Industry
sector
priorities
Employment and Skills
projections
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

2 The Current State

The Auckland region contributes:

This section paints a picture
of the economic activities
currently taking place in
the Auckland region, with
a strong focus on industry
sectors. Note that for the
purpose of this analysis,
economic activity is defined
simply as the production
and distribution of good and
services at all levels. One
frequently used measure of
economic activity is Gross
Domestic Product (GDP).1
This section provides
summary information on:
1. the regional economy –
Auckland’s place in New
Zealand
2. international context – Auckland’s place in an
international context
3. industry sectors in the Auckland region, and
4. an analysis of industry sectors of special interest in
the region.
2.1 The regional economy: Auckland’s
place in New Zealand
This section is two-fold: first it provides a brief
introduction to the structure of the Auckland
region, and second it looks at the current economic
performance of the region.
• contributes 35 per cent of New 2.1.1 Structure of the
Auckland region
Zealand’s gross domestic product
• contributed $3.8 billion of the
government’s $6.2 billion 2005 fiscal
surplus
The Auckland region is New Zealand’s
• is the gateway for 70 per cent of all largest metropolitan urban area and
international arrivals to the country
the fastest growing region in the
• is home to two-thirds of the country’s
nation in terms of absolute growth.
top 200 companies
With a population of 1.37 million, it is
• is home to one-quarter of New
home to 32.4 per cent of the national
Zealand-based Fortune 500 companies
population and was nearly three times
• is destination for 26 international
airlines as populous as any other region. The
region’s population is comparatively
• connects to 160 other ports
young: the proportion of people over
• is the hub for 4 million tonnes of cargo,
and the age of 65 years (10 per cent of the
region’s population) is lower than the
• is the logistics centre for 40 per cent of
exports through air and sea ports and national average of 12 per cent. This
75 per cent of imports. indicates that the region has a large
Source: Committee for Auckland (2006). The proportion of New Zealand’s working
Case for Auckland. pp. 10. population.
At only 519,000 hectares, the
Auckland region is the second smallest in the country.
However, it is highly urbanised (urban areas accounted
for 96 per cent of the total land area) and has the
highest population density in the country, estimated at
2.6 people per hectare. A significant proportion of the
region is occupied by the Auckland metropolitan urban
area, stretching between the Manukau Harbour and
the Hauraki Gulf. Large areas of farmland are located
north and south of the metropolitan area, as well as
tracts of indigenous and exotic forests, particularly in
the western and northern parts of the region.
The Auckland region has four cities – North Shore,
Waitakere, Auckland and Manukau – and three districts
– Rodney, Papakura and Franklin. It offers rural, island,
coastal, suburban and inner-city living.

1
GDP is defined as the total market value of all final goods and
services produced within the country in a given period of time
(usually a calendar year). It is also considered the sum of the value
added at every stage of production (the intermediate stages) of all
final goods and services produced within a country in a given period
of time, and it is given a money value.

5
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Figure 2: The Auckland region
Source: Auckland Regional Council
The Auckland region contains New Zealand’s highest
concentration of people, businesses and specialists,
and is a knowledge base for education and research.
It is also New Zealand’s hub and gateway to the
international economy. The region is becoming an
increasingly specialised and creative economy with a
predominance of ICT, financial and creative industries.
The Auckland region is also home to 132,000
businesses. This equates to approximately a third of
all businesses in New Zealand. Auckland is the engine-
room of the national economy, providing more than a
third of all jobs.
Home to Mäori and more than 180 other cultures,
including New Zealand’s biggest Pasifika population,
6
the Auckland region is the chosen destination of most
new migrants to New Zealand. With more than 400
new residents arriving each week, from elsewhere
in New Zealand and overseas, the region is growing
faster than other cities in the country. Indeed, Auckland
is New Zealand’s only city region of international
scale. It is the second fastest growing urban area
in Australasia after Brisbane, and has become
comparable in size with centres such as Perth and
Adelaide2.
2
Auckland Regional Council (2007). Growth of Auckland Region:
Dynamics of Population Change 2001 to 2006.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Figure 3: Population growth, 1886 to 2006

1,400
Auckland
1,200 Wellington
Christchurch
Dunedin
1,000 Hamilton
Population (000)

800

600

400

200

0
1886 1911 1921 1936 1961 1996 2001 2006

Year

Source: Statistics NZ, 2006

2.1.2 Current economic performance
The Auckland region’s economy has consistently
grown at a greater rate than the rest of New Zealand
during the current decade. As detailed in Business and
Economy 2008,3 the region’s Gross Domestic Product
has grown in real terms by an average of 3.6 per cent
per annum since the March 2000 year, as against 3.2
per cent per annum nationally.4
per cent over the year. This was above the national
employment growth over the year of 3.3 per cent.
• The growth in employment has attracted increasing
numbers of people into the workforce. In the
year to March 2008, an average 68.4 per cent of
Auckland’s working-age population (persons aged
15 and over) were employed or actively seeking
work – a record level.

The same report for the year ending March 2008, • The most important changes in employment were
shows that: in:

• Regional GDP grew by an estimated 3.9 per cent,
above the national growth rate of 2.9 per cent.
• The above-average employment growth indicates
that economic activity in the Auckland region was
stronger than that nationally. Moreover, much
of the region’s growth has been in high-value-
added industries, especially transport; storage and
communications; and finance, insurance, property
and business services.
• wholesale and retail trade; accommodation;
cafés and restaurants: employment in these
sectors increased by 16,300 (in spite of low
growth in sales).
• other manufacturing: an increase of 4,900
persons.
• finance, insurance, property and business
services: an increase of 4,900 persons, and

• There was a monthly average of 677,000 people • health and community services; personal and
employed in the region, representing growth of 3.8 other services; and education: an increase of
2,700 persons.
3
New Zealand Institute of Economic Research (2008). ‘Recent Trends’
in Business and Economy 2008: The Auckland Region, pp 2–6.
4
Excludes the effects of inflation.

7
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
These increases were partially offset by:
• food, beverage and tobacco manufacturing
where employment fell by 2,700.
• Retail sales in Auckland grew 2.2 per cent to $21.4
billion. Retail sales growth has been slowing in
recent quarters, and this trend appears to have
begun relatively early in the Auckland region.
A comparison of regional economic performance
is not well developed in New Zealand because of
a relative lack of official data at the regional level.
Statistics New Zealand carried out a regional GDP
feasibility study in 2005. However, while the study
concluded that it was feasible to produce estimates
of regional GDP, Statistics New Zealand did not go
ahead with the production of a series. In 2005, G.
Lewis and S. Stillman looked at productivity arising
from agglomeration economies within large cities
by measuring productivity levels and growth in New
Zealand at a regional level.5,6 A key motivation for this
study was to investigate the hypothesis that Auckland
is ‘underperforming’. What the study found, however,
was that Auckland and Wellington have the highest
levels of productivity performance based on almost
all measures of earnings. Auckland also experienced
stronger growth in wages, in particular for wage/salary
workers, compared with other regions. More recently,
D. Mare argued that there is a sizeable productivity
premium in Auckland, around half of which is due
to industry composition. There is a cross sectional
correlation between productivity and employment
density, reflecting differences in both physical
productivity and prices. However, those studies do
not say how Auckland’s productivity performance
compares with innovative, high-skill cities in other
countries, an issue which is looked at in the next
subsection.
5
Lewis, G and Stillman, S (Nov 2005). Regional Economic
Performance in New Zealand: How does Auckland compare? New
Zealand Treasury Working Paper 05/08.
6 8
NZIER and National Bank have also developed their own
methodology for measuring economic performance at a regional
level and these are discussed in the report by Lewis and Stillman
(2005).
8
2.2 International context: Auckland’s
place in an international context
It is essential to put the region in an international
context. A country’s internationalisation can be gauged
on three factors: flows of capital, flows of goods and
services, and flows of people. This section looks firstly
at New Zealand’s place in the international context and
then at the Auckland region.
2.2.1 New Zealand’s place in the international
context
Information on New Zealand’s international
competitiveness is taken from the recently published
report ‘Economic Development Indicators 2007’
produced by the Ministry of Economic Development,
Treasury and Statistics New Zealand.7 It identifies New
Zealand’s progress towards a number of economic
goals by benchmarking its performance against those
of other countries in the Organisation for Economic Co-
operation and Development (OECD).8
For the New Zealand economy:
• The recent growth rate in GDP per capita has been
somewhat higher than the OECD average, but the
level of GDP per capita remains low (New Zealand
is ranked 22nd out of 30 countries, see Figure 4).
• Improvements in material living standards (GDP
per capita) can be attributed to increases in either
labour utilisation or labour productivity (total income
generated per hour worked). New Zealand has a
relatively high labour utilisation rate compared with
its OECD counterparts, but it has a relatively low
labour productivity rate.
• The level of New Zealand’s total fixed investment
as a percentage of GDP is around the OECD
average.
• Household and national saving rates are low and
have been falling more quickly in New Zealand
than in benchmark economies, creating a need for
7
Ministry of Economic Development, Treasury, Statistics NZ (2007).
Economic Development Indicators 2007.
In general the report uses OECD countries, together with an OECD
average or medium measure, as the comparison group. In comparing
growth rates across time it focuses on Australia, the United
Kingdom, United States and Denmark.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

overseas funds to supplement domestic savings in the OECD average. As a percentage of GDP, New
financing domestic investment. Zealand’s share of exports and imports falls in the
lower half of the OECD.
• Overall, New Zealand ranks low relative to other
OECD countries on the formal measures of • High levels of inward and outward foreign direct
innovation activity, i.e. research and development investment (FDI) are important for small, open
(R&D), and patenting. This underperformance economies like New Zealand. The stock of New
can be explained by distance from major world Zealand’s inward FDI is high by OECD standards,
centres, lack of large firms and a relatively large with ‘greenfield’ investment about average.
primary sector, suggesting that New Zealand has Outward FDI is among the smallest in the OECD as
to be better than other countries in promoting a percentage of GDP.
innovation.
• Flows of people (and their knowledge) also
• The level of high- and medium-technology products contribute to economic growth in New Zealand.
exported by New Zealand firms is also far behind Net immigration has been high relative to the
the OECD average, although sophisticated benchmark economies, with a significant share of
technology underpins the primary sector, which these people educated to tertiary level.
the OECD classifies as a ‘low technology intensive’
sector. • The quality of much of New Zealand’s
infrastructure appears to be at or below the OECD
• New Zealand’s share in world trade is 0.36 per average.
cent and has been relatively static, in line with

Figure 4: Real Gross Domestic Product (GDP) and real Gross National Income (GNI)9 per capita, 2005

75,000

65,000
US dollars, current prices and PPPs

55,000

45,000

35,000

25,000

15,000

5,000
0
S witzerland

P ortugal
Zealand
New Zealand
S weden
Norway

F inland
Ireland
Iceland

P oland
J apan

Italy
S pain

Hungary

Mexico
United K ingdom
Luxembourg

B elgium

G ermany

T urkey
C zech R epublic
F rance
G reece

S lovak R epublic
S lovenia
C anada
Aus tria
Aus tralia
Denmark

K orea
United S tates

Netherlands

New

G NI per capita G DP per capita

Source: OECD Factbook 2007

9
GNI is a measure of the total income that accrues to New Zealand residents from domestic and foreign sources. In comparison, GDP is a
measure of the total income earned from goods and services produced in New Zealand, including that produced by foreign-owned firms operating
domestically. On both measures, New Zealand is ranked 22nd in the OECD. However, New Zealand’s GNI per capita is around 7 per cent below our
GDP per capita. This difference between GDP and GNI reflects the fact that income accruing to foreign investments in New Zealand exceeds the
income accruing from our own overseas investments.
10
ASCARI Partners (2006). Metropolitan Auckland Project: Background Paper. Report to Auckland Regional Council. pp. 9-10.

9
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
The Auckland Metropolitan Project background
paper,10 which summarised a series of recent reports
on international trade, provides a summary of the key
issues associated with the New Zealand economy
including:
• New Zealand lags behind in relation to the export
performance of other small developed countries.
• The scale of export activity in New Zealand is
limited. Fewer than 4% of firms export, (although
this might be fluctuating from year to year) and the
top 10 exporters account for half of all exports.
• The International Monetary Fund Selected Issues
report (2004) attributes half of the difference in
annual GDP growth between New Zealand and
the OECD average between 1971 and 2002 to
geographic isolation. In practice, isolation limits
the potential for inter-regional linkages and
spillovers. Reinforced by the limitations of a small
domestic market, New Zealand must overcome its
geographic separation and more actively participate
in the global marketplace.
The same report also highlighted some of the reasons
for New Zealand’s poor export performance relative to
other OECD countries:
• Small and medium firms dominate the national
economic landscape (in the Auckland region,
85% of firms employ 5 people or less), and these
firms are not making sufficient connections with
international markets.
• High- and medium-tech businesses account for
only a small proportion of exports. NZ ranks 29th
out of 30 OECD countries in terms of the share
of manufactured exports that are high or medium
technology – although there has been a recent
increase in exports with an additional 78 firms
exporting more than $25 million in the year to
September 2005. This also reflects a lower relative
value-add proportion of exports.
• Emerging sectors such as the wine, information
technology and biotechnology industries do not
yet comprise a significant share of New Zealand’s
exports, which remain dominated by land-based
(particularly agricultural) exports.
• New Zealand has low levels of research and
development relative to other OECD countries.
10
The report also identifies New Zealand’s performance in
relation to outward Foreign Direct Investment (FDI) as
weak.11 As a share of gross domestic product over the
past decade, New Zealand’s total outflows of outward
FDI have amounted to just 3% of gross domestic
product. Only five OECD countries came in lower
– Poland, the Czech Republic, the Slovak Republic,
Turkey and Mexico.
Outward FDI has fallen back significantly since 1991.
A substantial investment income deficit has arisen for
two reasons:
• foreign investors into New Zealand generate higher
returns than what New Zealand investors achieve
on foreign investments, and
• the stock of inward FDI is 40% higher than the
stock of outward FDI.
2.2.2 Auckland’s place in the international
context
Auckland is a relatively small city by international
standards. In the New Zealand context, however,
Auckland is the only city that has the size necessary
to provide the benefits that large cities can offer.
Auckland’s performance is examined relative to other
regions of New Zealand and to a small number of
international benchmark cities of similar size, density
and economic makeup.12
In terms of the Auckland region economy:
• Auckland’s GDP per capita is lower than all but
one of the international benchmark cities chosen
(Adelaide), but only slightly so in most cases.
However, it is substantially lower than the cities
(predominantly large) with the highest GDP per
capita.
• Auckland’s productivity levels (GDP per worker)
are lower than the average of a sample of 78
metropolitan regions in the OECD and below most
comparator cities (Brisbane, Melbourne, Adelaide,
Seattle, Vancouver and Copenhagen).
• The difference in productivity between Auckland
and New Zealand as a whole – the Auckland
‘premium’ – is in the middle of the comparator
cities, suggesting that, in the New Zealand context,
11
Ibid. pp. 10–11.
12
Brisbane, Melbourne, Adelaide, Seattle, Vancouver and Copenhagen.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Auckland is contributing normally to economic
growth.
• Auckland’s population growth rate is very high
by international standards. This is driven by high
levels of inward international migration. Within
New Zealand, Auckland has experienced low net
population outflow over recent years relative to the
region’s population.
• With regard to the underlying factors that influence
productivity growth, Auckland’s performance is
mixed:
• Auckland’s level of patent applications
per capita is relatively low by international
standards, as is its share of the working-age
population with a tertiary education.
The focus of the report will now shift from looking
at the macro level and Auckland’s place in the
international context to the micro level by analysing the
different industry sectors which make up the Auckland
region economy.
2.3. Industry sectors in the Auckland
region
This section analyses the Auckland region’s economy
by looking at the industry sectors which make up
the regional economy in terms of their contribution
to the region, employment numbers and sectors of
comparative advantage.

• Auckland city’s share of employment in

high-tech services and goods manufacturing
is broadly in the middle of the international 2.3.1 Recent trends: business and job
comparator cities.
creation

Between 2000 and 2006, 23,486 new businesses were

In summary: established in the region (an increase of 23 per cent).13
• Auckland is the most populous and main urban The most significant growth in the number of new
centre in New Zealand. It will play a key role in businesses has been in:
New Zealand’s future economic performance.
• Auckland’s rapid population growth presents • property and business services (+13,169)
challenges and opportunities that are unique in
• retailing (+2,016)
New Zealand.
• construction (+1,470)
• The Auckland economy grew by an annual average
• finance and insurance (+1,485)
of 3.1% between March 2000 and 2004. Growth
has largely been driven by population growth – not • hospitality – accommodation, pubs and taverns,
productivity improvements. cafés and restaurants (+809).
• Auckland is New Zealand’s gateway to the world,
its main commercial hub, and education centre.
13
However, it still has a strong domestic focus. The Capital Strategy (2007). Auckland’s Regional Economic Futures –
Stock-take of Information on Business Sectors. Report to Auckland
region needs to ‘go global’ in order to expand its
Regional Council.
economic horizons.
• Infrastructure networks are a barrier to regional
economic development. Auckland has the
basics, but the quality of the transport and
telecommunications networks and the reliability of
the energy network need to be improved.
• The Auckland labour market is changing. Skilled
labour is hard to find. Immigration policies and
weak skill-development programmes in small–
medium businesses present significant challenges.
• Auckland features strongly in national research and
development funding, but there is still a need to
raise the bar in this area if it truly wants to improve
innovation.
Source: ASCARI partners (2006). pp. 26.

11
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Over the same period, more than 119,000 new

jobs were created. Property and business services
contributed 31,760 (26.5 per cent) of the new jobs;
14,700 (12.3 per cent) were in retail; 11,870 (9.9 per
cent) were in the construction sector; and 5,310 (4.4
per cent) were in finance and insurance. These trends
in employment are illustrated in figure 5.

Figure 5: Employment in industries in Auckland, 2001 and 2006

Number of people employed

0 20,000 40,000 60,000 80,000 100,000

Mining
E lectricity, G as and W ater S upply
Agriculture, F ores try and F is hing
C ommunication S ervices
G overnment Adminis tration and Defence
C ultural and R ecreational S ervices
P ers onal and Other S ervices
Trans port and S torage 2001
Accommodation, C afes and R es taurants 2006
F inance and Ins urance
C ons truction
Health and C ommunity S ervices
E ducation
W holes ale Trade
R etail Trade
Manufacturing
P roperty and B us ines s S ervices

Source: Statistics New Zealand, Census 2001 and 2006 (people whose workplace address is in the region)

2.3.2 Economic production and employment

According to the Auckland region Economic Futures Table 1 lists the top 20 of these industries. They are
Model (EFM), Auckland’s Gross Regional Product ranked in terms of their contribution to Auckland’s GRP
(GRP) for 2006 was estimated at $54.9 billion. This in 2006, as well as in terms of their contribution to the
accounts for 35.4 per cent of total GDP estimated for nation’s GDP.
New Zealand for that year, and is slightly higher than
the region’s share of the national population (32.4 per
cent).

Economic activities are aggregated into 48 different

industry sectors in the EFM. Appendix 2 provides a
concordance relating standard industrial classification,
the Australian and New Zealand Standard Industrial
Classification (ANZSIC), to the 48 industries in the
EFM.14

14
The Australian and New Zealand Standard Industrial Classification
(ANZSIC) is used to compile and analyse industry statistics in New
Zealand and Australia .

12
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Table 1: Contributions to Gross Regional Product by Auckland region’s top 20 industries, 2006

Industry Auckland Region Auckland New Zealand

GRP$2004million Ranking Ranking
Business services 6670 1 1
Wholesale trade 5144 2 3
Owner-occupied dwellings* 4109 3 2
Retail trade 3180 4 4
Finance 3048 5 8
Real estate 2958 6 6
Construction 2259 7 7
Health & community services 2202 8 5
Communication services 2087 9 11
Education 1880 10 9
Air transport, services to transport & storage 1719 11 14
Cultural & recreational services 1652 12 12
Central government 1140 13 10
Electricity generation & supply 967 14 13
Machinery & equipment manufacturing 931 15 16
Rubber, plastic & other chemical manufacturing 899 16 19
Sheet & fabricated metal production manufacturing 819 17 18
Accommodation, restaurants & bars 807 18 15
Personal & other community services 803 19 17
Printing, publishing & recorded media 771 20 20

Source: Auckland region Economic Futures Model

*Owner-occupied dwellings is an imputed rental value for people owning their own homes.

Auckland’s four largest industries in terms of GRP
contribution were also the nation’s four largest
industries in 2006. This reinforces the fact that
Auckland, being the largest city-region in New Zealand,
plays a significant role in the economy as a whole.
Industries shown to be more important to the
Auckland economy compared with the national
economy in terms of GRP contributions are:
• finance
• communication services
• air transport, services to transport and storage
• machinery and equipment manufacturing
• rubber, plastic and other chemical manufacturing,
and
• sheet and fabricated metal production
manufacturing.
The patterns are broadly similar with regards to
employment. Table 2 lists Auckland region’s top 20
industries, but this time looking at the total number
of full-time-equivalent employees (FTEs) in 2006.15
As with GRP, the ranking of each industry in terms of
employment in New Zealand is also shown. From the
table, the two largest employers in the Auckland region
are the same also for New Zealand. These are Business
services and Retail trade.
Industries shown to be more significant employers in
the Auckland region than in New Zealand as a whole
are:
• rubber, plastic and other chemical manufacturing
• sheet and fabricated metal production
manufacturing
• air transport, services to transport and storage
• printing, publishing and recorded media
• finance, and
• communication services.
On the other hand, the road transport industry was
seen to be comparatively less significant in the
Auckland economy than in the national economy in
terms of employment.

15
Statistics New Zealand classification of FTEs: The number of full-
time employees plus half the number of part-time employees.

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Table 2: Auckland region’s top 20 employers by industry, 2006

Industry Auckland Auckland New Broadly speaking, these results show

Region FTE Ranking Zealand that the Auckland region is more
Employment Ranking oriented towards high-value-added
Business services 96816 1 2 type manufacturing and the business
Retail trade 71226 2 1 and finance services sector than
Wholesale trade 59719 3 6 the rest of the country. In addition,
Construction 40845 4 4 air transport, services to transport
Health & community services 38568 5 3 and storage, and printing, publishing
Education 36334 6 5 and recorded media provide
Accommodation, restaurants comparatively high contributions to
& bars 25127 7 7 the Auckland economy in terms of
Air transport, services to GRP and employment. As would be
transport & storage 16938 8 13 expected, the Auckland economy is
Cultural & recreational services 16678 9 10 comparatively weak in the primary
Central government 16295 10 8 production sector.
Personal & other community
services 15496 11 9 To further illustrate the nature of
Communication services 13372 12 14 Auckland’s economy, Figure 6 shows
Finance 12703 13 17 the 10 most significant industries
Machinery & equipment in the region in terms of their
manufacturing 12643 14 12 contribution to the equivalent industry
Real estate 10771 15 15 in the national economy (measured
Sheet & fabricated metal in terms of GRP contribution). For
production manufacturing 10769 16 18 example, Auckland-based businesses
Road transport 10744 17 11 in the air transport, services to
Printing, publishing & recorded transport and storage sector
media 10390 18 19 produced 55 per cent of the national
Other food manufacturing 8809 19 16 GDP in this sector of industry. This
Rubber, plastic & other chemical denotes a strong concentration of this
manufacturing 7778 20 20 industry in the region.
Source: Auckland region Economic Futures Model

Figure 6: Top ranking Auckland industries in terms of percentage contribution to national GDP, 2006

Regional Average

Source: Auckland region Economic Futures Model

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

By comparison, the industries where contribution

from the Auckland region to the national economy is
of least importance are shown in Figure 7. Despite
dairy cattle farming and livestock and cropping farming
being among the most important industries in New
Zealand, the Auckland region is responsible for very
little of the total value-added contribution made by
these industries, i.e. only 4.8 per cent and 2.5 per cent
respectively. This would be expected in a region with a
high degree of urban influence.

Figure 7: Bottom ranking Auckland industries in terms ofpercentage contribution to national GDP, 2006

Source: Auckland region Economic Futures Model

2.3.3 Economic specialisation and

comparative advantage

The comparative strength or weakness of an industry
in a particular district, relative to the nation, can be
further analysed through the use of location quotients.
In this report we have used the Simple Location
Quotient (SLQ) index, as it is based on readily available
employment data.16 If the Simple Location Quotient
calculated for an Auckland industry is greater than 1
(SLQ>1), then the industry is deemed to be ‘strong’
(i.e. the industry is of comparatively high importance to
the regional economy).
Table 3 lists all the industries in Auckland for which the
SLQ is greater than 1. In order to provide a means of
comparison, the table also includes the SLQ calculated
for the equivalent industries in a select number of other
New Zealand regions.

16
Mathematically speaking, the SLQ for a given industry, i, is calculated
as:
(Empri / Empni)
SLQi =
(Empr / Empn)

where Empri is the total number of people employed in the

industry in the district or region in question, Empni is the total
number of people employed in the industry in the nation, Empr is
total employment in the region or district, and Empn is the total
employment in the nation.

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Table 3: Auckland region’s ‘strong’ industries by Location Quotient and Location Quotient results for
comparable regions, 2006

Industry Auckland Wellington Waikato Canterbury

Region Region
Air transport, services to transport & storage 1.67 0.61 0.36 1.10
Rubber, plastic & other chemical manufacturing 1.54 1.10 0.68 1.22
Wholesale trade 1.54 0.74 0.74 0.91
Basic metal manufacturing 1.51 0.53 1.22 0.46
Insurance 1.48 2.27 0.42 0.88
Furniture & other manufacturing 1.43 0.70 0.59 1.19
Beverage, malt & tobacco manufacturing 1.39 0.37 0.16 0.72
Transport equipment manufacturing 1.38 0.27 0.75 1.43
Water supply 1.37 1.56 1.17 0.30
Services to finance & investment 1.37 1.59 0.53 0.92
Business services 1.37 1.47 0.71 0.87
Finance 1.36 2.07 0.56 0.67
Printing, publishing & recorded media 1.34 1.23 0.70 0.93
Sheet & fabricated metal production manufacturing 1.32 0.63 1.16 0.92
Communication services 1.32 1.68 0.72 1.09
Non-metallic mineral production manufacturing 1.28 0.39 0.98 1.06
Textile & apparel manufacturing 1.18 0.61 0.40 1.70
Machinery & equipment manufacturing 1.17 0.58 0.97 1.47
Petroleum & industrial chemical manufacturing 1.13 0.33 0.68 0.91
Cultural & recreational services 1.13 1.25 0.99 0.94
Real estate 1.07 0.88 0.93 0.88
Paper & paper production manufacturing 1.06 0.66 1.48 0.52
Personal & other community services 1.03 0.88 0.93 0.88
Retail trade 1.00 0.92 1.00 1.00

Source: Auckland region Economic Futures Model and Market Economics Ltd

While the SLQ is very helpful in determining industries

in which there is a comparative strength, it is also
important to keep the size of each industry in
perspective. The petroleum and industrial chemical
manufacturing industry in Auckland, for example, while
calculated to have a SLQ greater than 1, is estimated
to contribute only $120 million to Auckland’s total
GRP or 0.23 per cent (ranked 37 out of 48 industries).
Petroleum and industrial chemical manufacturing
activities are therefore not actually of particular
significance to the region.

Overall, the industries that are of most importance

to the Auckland economy are those which are both
strong in the region (i.e. SLQ is greater than 1) and
of significant size in terms of GRP contribution. It has
been identified that there are a total of 13 industries
in Auckland satisfying both of these criteria (Table 4).
More information on these sectors of significance to
the region is provided in the next subsection.

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Table 4: Auckland region’s industries with comparative advantage and significant contribution to GRP, 2006

Industry GRP Contribution Rank by GRP SLQ Rank by SLQ

($2004mil) (out of 48 (out of 48
industries) industries)
Business Services 6,670 1 1.37 9=
Wholesale trade 5,144 2 1.54 2=
Retail 3,180 4 1.00 24
Finance 3,048 5 1.36 12
Real Estate 2,958 6 1.07 21
Communications Services 2,087 9 1.32 14=
Air transport, services to transport and storage 1,719 11 1.67 1
Cultural and recreational services 1,652 12 1.13 19=
Machinery and equipment manufacturing 931 15 1.17 18
Rubber, plastic and other chemical manufacturing 899 16 1.54 2
Sheet and fabricated metal production manufacturing 819 17 1.32 14
Personal and other community services 803 19 1.03 23
Printing, publishing and recorded media 771 20 1.34 13

Source: Auckland region Economic Futures Model

2.4 Analysis of sectors of interest in

the region
Businesses of interest to the Auckland region are The first step of this exercise was to define those
analysed in this section focusing on past trends, sectors currently not classified as the 48 sectors in
value chain where possible, and growth drivers and the EFM into the ANZSIC coding for consistency with
constraints. These sectors or businesses of interest other sectors in the model. This exercise was done in
represent the 13 industries listed in Table 4, although collaboration with a number of government ministries
some are not classified directly as such. The industries namely, Statistics New Zealand and the Ministry of
are classified according to current national and regional Economic Development. Some sector definitions were
priorities for economic development. also taken from a number of sector-specific studies
undertaken for the region. The ANZISC concordance
The focus of this report will remain on the 48 sectors for the above sectors is provided in Appendix 3 for
of the EFM. However, given their importance to the reference.
Auckland region economy, the following industry
sectors will be referred to throughout the report: It is important to note here that this list is not definite
and that each organisation has its own definition
1. Business and financial services of what should or should not be included. Another
2. Retail problem to note is the difficulty of identifying how
3. Information and Communication Technology much of a particular activity is undertaken by each
(ICT) sector. Most of the sectors also overlap or are subsets
4. Creative of each other; for example, marine is a subset of the
5. Digital content specialised manufacturing sector, digital content is a
6. Tourism subset of creative industries. Therefore, determining
7. Transport, transport services and logistics the exact activity for each of these sectors is based on
8. Biotechnology the analysts’ own interpretation and methodology. This
9. Specialised manufacturing area of sector classification calls for further research
i Marine and surveys to be conducted – an issue not addressed
ii Materials in this report.
10. Food and beverage manufacturing, and
11. Aquaculture. While the focus of this study is on the Auckland region
and on specific business sectors, it is important to
recognise that business in the region does not exist

17
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
in isolation. Each current and prospective business
in the Auckland region is part of both a global and
New Zealand value and logistics chain from suppliers
through to customers. Businesses operate in a global
market for goods and services.
Most of the analysis presented next is taken directly
from research work commissioned by central and
local government agencies, research institutions and
industry sector groups. The degree of understanding
and availability of information vary widely across
industry sectors. Most of the available literature
provides insight for the whole of New Zealand and
does not have an Auckland focus. Even so, Auckland-
specific information is provided in this section
whenever possible.
2.4.1. Business and financial services
Understanding the business services sector in the
Auckland city-region was undertaken by ASCARI
partners as part of this project with the key findings
presented next.17
Sector definition
There is no single industrial logic for business and
financial services. Rather, business and financial
services is made up of a wide range of activities,
participating in different markets that display different
competitive pressures, investment trends and
growth drivers. For example, ‘surveying services’ and
‘employment placement services’ both fall under the
banner of business and financial services, yet the two
will respond to very different drivers and processes.
The only commonality between these activities is their
production of non-tangible output.
Given that business and financial services enable other
economic activities (for example, providing accounting
support for a manufacturing firm), they are more
usefully considered as economic ‘functions’ rather than
sectors.
The Central Business District (CBD) is a key site for
business and financial services in Auckland. Auckland’s
position in the Australasian system of cities suggests
that, while Auckland is a key centre for business and
financial services in the New Zealand market, it plays a
17
ASCARI Partners (2008). Understanding the Business Services
Sector in the Auckland City-Region. Report to Auckland Reghional
Council.
18
subsidiary role to the financial and business centres of
Sydney and Melbourne.
For this report, ‘business and financial services’
represent the following sectors in the EFM:
• Telecommunication services under the broad
Communication Services sector
• Finance
• Insurance
• Services to Finance and Investment, and
• Business services.
The business and financial services sector in the
Auckland region has:
• strong contributions to GDP and value added,
relative to other sectors. In 2006, the business and
financial services sector contributed $13.2 billion or
24.0 per cent to total GRP in the region.
• strong growth in employment numbers since 2000
and in 2006. The sector employed approximately
133,000 people or 22.2 per cent of all FTEs in the
region.
Source: ASCARI (2008) and EFM.
Sector trends
At a national level, business and financial services
show:
• higher multi-factor productivity than business and
financial services in the United Kingdom
• high firm turnover rates relative to other sectors,
but little sign that turnover rates are enhancing
productivity
• a large number of small firms in existence
(consistent with evidence overseas)
• large contributions to company taxes (which
provides an indication of strong profitability), and
• activities that are spatially concentrated in urban
areas, with the Auckland region housing a
disproportionate share.
The business and financial services sector also shows
other trends:
• The literature suggests that cities, through the
spatial concentration of activity, provide key
advantages to business and financial services.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
However, applied research in Auckland shows
mixed results and is in an emergent stage.
• A large proportion of small firms may mean that
innovative activities are constrained (i.e. firms may
be focused on short-term outcomes), and that their
inability to exploit economies of scale may lead to
heightened vulnerability.
• Technology is increasingly deployed in service
activities. While some service firms use
technologies to improve their day-to-day business,
others are actively involved in the development of
new technologies.
• Services have a number of direct and indirect
roles in the innovation life cycle. However,
OECD data shows that innovation intensities in
service firms are lower than in manufacturing
firms when measured using traditional innovation
statistics. Statistics New Zealand 2007 Innovation
report suggests some services sectors, such as
communication services, are very innovative.
• Business services demonstrate strong forward
and backward linkages in the economy. This may
support notions of functional specialisation, as well
as considerations of the sector as a product of
derived demand.
• Business and financial services are constituted by
a myriad of effective markets, each with different
competitive pressures and value-chain processes.
This may not be captured when undertaking
analysis using ANZSIC classifications.
• Internationalisation, and increased competition
from developing countries, may hasten the need
for Auckland to specialise in knowledge-intensive
business services. However, strong international
exposure to date may have improved the
competitive prospects of existing business and
financial services firms.
Growth drivers and constraints
In terms of investments and disinvestments, some of
the key points raised in the ASCARI report include:
• Commercial property developments by developers
provide a signal of the demand from financial and
business services firms. There are a number of
developments planned in Auckland’s CBD, which
will provide significant additional capacity for
service activities.
• Human capital investments, both within the sector
and from outside the sector, may have critical
effects in leading service activities into knowledge-
based markets. However, as with all human capital
effects, human capital investments are very
difficult to clearly isolate and measure.
• Technology is increasingly used in business
services, so critical evolutions may provide a
significant growth spur. However, given the
importance of face-to-face contacts, increasing use
of technological inputs does not inevitably lead to
the dispersion of these activities away from urban
areas.
• Foreign direct investment through mergers
and acquisitions may have a significant bearing
on the prospects of service activities. Strong
Australian relationships already exist in the banking
sector, and with finance and insurance services
in Auckland. Potential effects may include the
rationalisation of activities between headquarters
and subsidiaries (impacting potential for value-
added), as well as employment contractions
stemming from the centralisation of processes
within a single corporate structure.
• Overall it is hard to determine the extent to which
investments and disinvestments will shape the
growth trajectories of the sector going forward.
This is driven, in part, by the fact that some
components of the business and financial services
sector are closely tied to offshore investments.
Outlook
Crude projections suggest that by 2024, GDP for
business and financial service activities in Auckland will
lie in the range of $14 billion to $16 billion. However,
given issues around possible agglomeration effects
in Auckland, as well as changing labour productivity
performance over the coming years, such projections
should be treated with caution.
Auckland’s business and financial services enable other
economic activities. As a result, such services are, in
large part, a product of derived demand. This means
that business and financial services growth over the
next twenty years is likely to be strongly correlated to
the overall output performance of the region.
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Business and financial services are showing sustained
growth in Australia, with major growth in both
employment and exports.
2.4.2 Retail
Sector definition
The retail sector is an important part of the economy,
responsible for a large component of household
consumption as well as spending by international
visitors. Retail is also a key driver of urban form and
function.18 Because of the CBD, Auckland city has
higher levels of retail employment and outlets per
household than the rest of the region, indicating a net
inflow of retail sales to the city.
The EFM has a specific sector on ‘retail’.
The retail sector in 2006 was:
• the fourth largest in the regional economy,
contributing value-added of $3,180 million (or 5.8
per cent), and
• the region’s second largest employer with 71,226
FTEs (or 11.8 per cent).
Source: EFM
Sector trends
A key trend in the retail sector over the last 15 years is
the emergence of large-format retail, locating outside
the established centres structure, often in cheaper
locations such as general business zones or in stand-
alone out-of-centre locations. This trend has been
led by large discount supermarkets, cheap general
merchandise stores, and retailers of large and bulky
items such as furniture, appliances and hardware/Do It
Yourself (DIY). This follows the international pattern in
North America, United Kingdom and Australia. Between
2000 and 2004, the average store size was estimated to
have increased by 10 per cent.19 The trend is expected
to continue over the long term.
Other retail trends include:
• an increase in hospitality and service spend based
on changing social patterns and behaviour
• a more mobile consumer market
18
Market Economics (2008).
19
Excludes Accommodation, Cafes and Restaurants. Reserve Bank of
New Zealand Bulletin, Vol 68, No.2.
20
• a weakening of the historical distinction between
wholesale and retail activity
• opportunities for retailers in supplying services,
e.g. financial services
• competition between retailers based on
differentiation of retail format, customer
experience and product mix
• the growing importance of green products.
• a steady reduction in the relative importance of
the CBD as a retail destination compared with
subregional and large suburban centres. These
centres have attracted investment, major stores
and a critical mass of smaller-format retailers,
dominating the comparison retail sector
• larger store size and retail chains, enabling
individual outlets concentrated in larger centres to
serve larger markets with competitive advantages
of increased buying power and other scale
economies
• the emergence of stand-alone outlets in cheap
locations to serve wide catchments
• online retail sales capturing a growing (but still
relatively small) share of the retail market. Multi-
channel businesses are also emerging, with the
store and online experience an integral part of the
brand, and
• a decline in the retail importance of smaller
centres, which have a developing focus on
convenience goods and hospitality.
On the demand side, there has been considerable
growth in retail spend per household in real terms.
Substantial population growth, strong economic
growth, low unemployment, sustained house price
rises and relatively low interest rates over the past
decade resulted in an average per household retail
demand growth of more than 3 per cent annually.
This was at the same time as a decline in the costs of
imported goods from a strong New Zealand dollar.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Value chain
Retail sales estimates for the Auckland region indicate
a net inflow of spending in both food and grocery (8–10
per cent) and comparison retail (11–12 per cent). The
region serves retail from adjacent regions, mainly from
Northland and Waikato as well as the Bay of Plenty.
Productivity growth within the retail sector has been
relatively modest. Between 1990 and 2004, productivity
growth rates averaged 0.1 per cent per annum for retail
compared with 1.1 per cent for the total economy.20
This is due to the increase in capacity in the retail sector
and relatively low capital utilisation.
Within the Auckland region, Auckland city accounts for
the largest share (41 per cent) of retail sales because
it contains the region’s CBD and is a focus of tourism
activity. There is also a substantial share of retail in
Manukau city (20 per cent) and North Shore city (18 per
cent). Cafés and restaurants, and apparel retailers are
concentrated in Auckland city, while supermarket and
department stores more closely match the distribution
of the regional population.
Growth drivers and constraints
The main drivers of retail demand are population and
household numbers, spending patterns, the economy
at large and, to a lesser extent, tourism.
Large-format outlets generally have lower sales
productivity and employment intensity than smaller
outlets, which means that land and building costs may
be relatively more important drivers for this type of
retail.
The current slowdown in the economy has led to
a significant contraction in the retail sector. The
immediate growth outlook for retail is expected to
be more in line with household growth. However,
the longer term forecast following recovery is for an
increase in retail spend of approximately 1 per cent per
household annually.
The Auckland retail market is expected to grow
substantially over the period 2006 to 2026. Retail sales
are projected to grow by $15.2 billion to $36 billion.21
The projected growth ranges from 83 per cent for
Manukau city to 63 per cent in Papakura district. The
largest quantum of retail sales growth is projected in
Auckland city, at $5.4 billion (or 71 per cent).
20
RBNZ ibid.
21
Excluding automotive and hardware/DIY, the projected growth is $9.5
billion.
Sector Interview
The interview with the New Zealand Retailers
Association confirmed that in the last 10 years retail
has been growing strongly, especially in Auckland
with 7 per cent growth year on year. This was largely
driven by the strong population growth, the booming
housing market (which is currently in a dip and may
take a while to bounce back) and the steady growth in
tourism. Other regions that also performed well were
Wellington and Queenstown. The retail sector is an
important contributor to the New Zealand economy – it
is a $62 billion industry and employs about 20 per cent
of the total workforce.
Prior to high energy prices in 2008 and the current
credit crisis affecting the economy, consumer
confidence had been very good. Given the current
situation, the industry predicts that there will be no
growth in the retail sector in the next two years. This
slow-down in retail activity will, in part, be assisted
by malls being in saturation, slower migration to
the region and an ageing population. However, it is
expected that retail activity will pick up again after two
years as the effects of the tax cuts kick in, tourism
activity picks up, and with the excitement leading up
to the Rugby World Cup (RWC) in 2011. The industry
also foresees that persistently high oil prices may
force people to work closer to home, and this may
lead to the growth of community-type retailing and
the development of infrastructure around these
communities.
The industry sees the lack of a single brand for
Auckland as a major impediment to promoting
Auckland as a World-Class Shopping City. Transport
congestion continues to drive costs up, impacting on
retail prices and inflation. Infrastructural development
is very important and, in particular, broadband which
is vital to the growth of on-line shopping. Skills
requirements will increase as skills needs become
more professional and there is a need to streamline
processes and by-laws by local government. The
industry has been very active in environmental
awareness through its waste management
programme.
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
2.4.3 Information and Communications
Technology
Sector definition
Information and Communications Technology (ICT) is
a key sector in New Zealand’s economic well-being
because of both its ability to lift productivity and its
status as a powerhouse of economic growth in its own
right.
The HiGrowth Project used the following definition for
the ICT Sector (OECD 1998):
‘The products of a candidate manufacturing
industry must:
• Be intended to fulfil the function of information
processing and communication, including
transmission and display; or
• Use electronic processing to detect, measure
and/or record physical phenomena, or to
control a physical process.
Components primarily intended for use in such
products are also included.
The products of a candidate service industry must:
• Be intended to enable the function of
information processing and communication by
electronic means; and,
• The service provided must go beyond simply
the supply of goods.’22
The ICT sector offers a high-value opportunity to help
grow the Auckland and New Zealand economies. It is a
key enabler and driver of productivity in the economy,
such as through providing links in global value chains.
In the EFM, ‘ICT’ is represented across a number of
sectors including:
• Machinery and equipment manufacturing
• Communication services, and
• Business services.
22
Refer www.nzte.govt.nz
22
ICT is an integral part of the New Zealand
economy, contributing:
• $6.2 billion, or 5.1 per cent to GDP.
• the equivalent of 36,300 full-time jobs, and
• around 8,800 New Zealand companies, of which
8.5 per cent have annual revenues of more than
$1 million.
Source: www.nzte.govt.nz
Sector trends
In 2005 the HiGrowth Project conducted a survey
of 400 ICT companies within the New Zealand ICT
sector.23 The survey findings included:
• The New Zealand ICT sector is dominated by
software vendors; however, there is increasing
hardware and services activity occurring within
secondary and tertiary business lines.
• One of the key differentiators between local
and multinational companies (MNCs) is the
lack of penetration local companies have within
international markets. While penetration by local
companies into the Australian market is far higher
than that by MNCs, this market appears to be the
sole focus for local companies.
• 47 per cent of ICT companies’ head offices were
based in Auckland.
• Auckland businesses contributed total revenue
of $5,543 million (or 55.3 per cent of total ICT
revenue nationwide), an average revenue per
business of $32.8 million.
• While the software market comprises more than
50 per cent of the total ICT sector in New Zealand,
it accounts for only 7.5 per cent of the total ICT
industry revenue.
• The telecommunications industry accounts for
only 7.5 per cent of the respondent population, but
represents more than 60 per cent of the total ICT
industry revenue. It was noted that this sector is
heavily skewed by the presence of both Telecom
and Vodafone.
• According to Statistics New Zealand, the IT
industry (excluding communications) contributed
about $7 billion in 2004 to GDP.
23
Survey: The HiGrowth Project: New Zealand ICT Sector Profile. IDC
#, Version : 1.4. February 2006.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• Australia is the top revenue-earner aside from New
Zealand, accounting for almost 25 per cent of total
ICT revenues. North America and Asia-Pacific also
contribute more than 10 per cent of total industry
revenues respectively.
Growth drivers and constraints
Growth drivers and constraints identified for this sector
by the ICT taskforce include:24
• High-value niche products and services have
the greatest potential for the growth of New
Zealand-based ICT companies. A number of these
companies have already achieved major successes
in the world marketplace. This illustrates the
opportunities for those companies that can
overcome the challenges of operating in the highly
competitive global market. The critical success
factor is having the necessary commercialisation
experience and skills to go global; i.e. to scale up
rapidly on a global basis.
• The long-term need is to build and sustain a highly
skilled ICT workforce. Based on existing levels of
graduate supply and productivity, it appears that
by 2012 sector growth will plateau at around 6
per cent of GDP, compared with the target 10 per
cent of GDP. It is imperative that New Zealand
takes urgent measures to address future ICT skill
shortages, especially since ensuring an adequately
trained and continuous supply of ICT talent will
have a long lead-time. An expanded immigration
programme, focused on ICT technical, marketing
and commercial skills, is likely to be a major
requirement in order to achieve the growth target.
• Although the growth target needs to be industry
driven, government has a role to play in terms of
its procurement policy. It is a major purchaser of
ICT (accounting for approximately 33 per cent of all
ICT expenditure). Government purchase is often
perceived overseas as a ‘vote of confidence’ in the
technology and plays an important role in building
the international credibility of New Zealand ICT.
Procurement attitudes also need to change at the
local government level.
Outlook
The same report by the ICT Taskforce proposes
growing 100 ICT companies, each earning over $100
24
ICT Taskforce (2003). Breaking Through the Barriers Report.
million in sales per year by 2012. This means that ICT
will increase from contributing 4.3 per cent of GDP to
10 per cent by 2012. Similarly, the report notes:
• Forecast levels of ICT employment in 2012 are
125,000, compared with the current level of
approximately 41,000.
• Export income from the ICT sector in 2001 was
$0.9 billion and, if the growth target is achieved,
should be in the order of $16 billion by 2012.
In recognition of the small–medium enterprise (‘SME’)
composition of New Zealand business, it is envisaged
that the growth from the current level of contribution
needed to reach the target will be largely achieved by
an increase in the number of companies that operate
at above $20 million of annual sales. Many of these
companies are existing ones, although some will be
start-ups. Some of this contribution is expected to
arise from the New Zealand-based activities of the
multinationals that currently comprise approximately
half of the 16 companies that have a turnover
exceeding $100 million per annum.
Sector Interview
ICT offers the greatest potential for the region around
innovation and new technologies. However, this
potential is largely constrained by the lack of skilled
labour, investment and collaboration in the region.
According to the ICT sector manager for NZTE, the ICT
sector is growing nationally at around 6.5 per cent per
annum, with the region growing at 7 per cent. Auckland
has a competitive advantage in the wireless, creative,
enterprise, resource-planning and health IT areas, due
to the sheer size of the region. Prospects for growth
will be in wireless technologies, embedded systems
and artificial intelligence. However, these will be driven
by a majority of SME-type businesses. Innovation will
remain to be the key area of growth for ICT companies.
The pace of broadband deployment is just starting
to take off in the region. ICT and, in particular,
communication infrastructure will be a high priority
for government investment over the next five years.
One initiative is the recently announced Broadband
Investment Fund (BIF), a major contestable fund aimed
at facilitating high-speed broadband connection. The
fund contains $325 million operating and $15 million
capital funding over a maximum of five years. The BIF
will be used to accelerate broadband investment in
three critical areas:
23
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• facilitating high speed broadband to businesses
and entities such as municipalities, universities,
schools and hospitals in urban centres
• extending the reach of broadband into underserved
regions, particularly in the rural sector, and
• improving the resilience of New Zealand’s
international connections.
2.4.4 Creative
Sector definition
The creative industries sector is important to New
Zealand’s economy because of its potential for growth
and its ability to enable innovation and improved
productivity across other sectors within the economy.25
It was highlighted that ‘…New Zealand has already
established competitive advantage in some niches
within the sector, notably screen production and post
production, and has a growing reputation across a
number of other areas including fashion and design.
In addition to our world class capability, the creative
industries can leverage New Zealand’s unique culture
and as [a] knowledge based sector, it has the potential
to generate wealth on a sustained basis.’
Creative industries are defined as those industries that
have their origin in individual creativity, skill and talent,
and have a potential for wealth and job creation through
generating and exploiting intellectual property26. The
sector is made up of the following sub-sectors:
• design, comprised of advertising services,
architectural services and graphic design
• screen production and radio, including television,
film, and video production and radio services
• publishing, including newspaper printing or
publishing, other periodical publishing, book and
other publishing, and authors
• visual arts, crafts and photography, including
jewellery and silverware manufacturing,
photographic studios, and visual arts and crafts
25
Creative Industries Sector Engagement Strategy 2005-06. NZTE
26
Auckland City Council (2008). Auckland’s creative industries: The
Numbers 2007.
24
• performing arts, including services to the arts,
performing arts venues, music and theatre
productions, and performers, and
• music, including composers, sound recording
studios, and recorded media manufacturing and
publishing.
The ‘creative’ industries are represented across a
number of sectors in the EFM including:
• Printing, publishing and recorded media
• Business services and
• Cultural and recreational services.
The creative industries sector currently
contributes:
• about $2.86 billion (3.1 per cent of total GDP).
However, the sector is growing at a faster rate than
the economy as a whole, at a rate of 9 per cent per
annum.
Source: www.nzte.govt.nz
Sector trends:
Key facts associated with the creative sector in the
Auckland region included:27
• the Auckland region is the centre of the majority of
New Zealand’s creative industries
• Auckland is the centre of the television,
advertising, commercial radio, commercial music
and publishing industries, and the largest media
market in New Zealand
• Auckland is the home of:
• the New Zealand fashion industry and Air
New Zealand Fashion Week, and the Pasifika
Auckland Festival
• the major television broadcasters and
production companies
• the major record companies, live music
performance, music video production, the Big
Day Out, the New Zealand Music Awards, the
centre of the commercial music industry and
a national magnet for artists in the commercial
music context
27
Auckland City Council (2005). Snapshot: Auckland’s Creative
Industries.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• the majority of the country’s architects,
designers, film producers, directors and
their crews, as well as the service agencies
associated with these industries, and
• a number of highly innovative creative talents
in areas such as digital animation, mixed-media
event production, interactive media and games
development.
• Auckland is also a major market for the performing
and visual arts. Artists, dealers and companies in
these fields are here in number, fed continually
by the prevalence of buyers, and by the arts and
creative industries’ degree programmes delivered
by the major tertiary institutions in the region.
Table 5 shows that 49 per cent of New Zealand’s
creative businesses and creative sector employees
are located in the Auckland region. The creative sector
had 16,660 employees located in the region in 2006.
This equates to 2.8 per cent of the region’s total
employment compared to 1.9 per cent of total national
employment.
Table 5: Locations of creative sector businesses
and employees, 2006
Auckland Auckland New
city region Zealand
Total number of creative
3,855 6,571 13,396
sector businesses
Total creative sector
13,118 16,660 33,658
employees
Creative sector’s share
4.3% 2.8%
of total employment
Source: Auckland City Council 2008
Most of the creative sector activity in the Auckland
region occurs in Auckland city, which provides 79
per cent of the region’s employment in the creative
industries. This concentration is greater in design,
screen production, radio and performing arts, and
lesser in publishing and visual arts, crafts and
photography.
The Auckland region had the greatest increase in
employment in the creative sector between 2000 and
2006, up 13.8 per cent compared to 10.5 per cent for
Auckland city and substantially greater than the 3.8
per cent employment increase in the national creative
sector.
Growth drivers and constraints
As with other sectors of the economy, the creative
sector is developing new business models that
enable New Zealand to produce unique products and
sell them to the world. Interviews conducted for the
Snapshot report identified that many of the creative
sector’s needs are similar to those in other industries,
including access to sizeable markets, appropriate
development finance and venture capital, appropriately
skilled labour, and business management skills and
expertise. Auckland’s infrastructure issues such as
transport, parking and the cost of business premises
are also an issue for the sector. The sector also has
specialist needs, in particular cheaper and easier
access to enhanced broadband capacity, both outside
and within the CBD. Some creative industries require
substantial physical space and finding affordable spaces
is increasingly difficult.
According to the report, many of the creative industries
have a distinctive mode of organisation: they are
often micro-businesses, networked, commercially
interdependent, and have the scale and commitment
to creativity of the typical arts company but the ethos
of commercial practice. It is increasingly a sector
where people with creative industry skill sets work in
both commercial and subsidised parts of the sector,
and beyond the sector into other service and primary
industries.
The creative sector is built on talent. Models of
economic development should consider the dynamics
of creativity and those who make their living from it, in
particular their attitude to growth and profit, their vision-
1.9%
led nature, and the strong influences of peer approval,
corporate social responsibility and social inclusion.
International partnerships are increasingly common.
Many creative businesses work via the internet,
where geographical boundaries are no longer a barrier.
Opportunities for international collaboration are greater
than ever. Successful creative businesses are exporting
more, so their leaders need a better understanding of
overseas markets, their environments and cultures.
Hence, any model for development should be informed
by the links between the creative industry subsectors,
the wider economy, and the public and private sectors.
It should also be based on an understanding of how
public sector infrastructure and investment feeds a
creative economy.
25
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Sector Interview
The creative industries sector in New Zealand has great
potential in the entertainment industry; in particular
screen production is seen to be where economic
development for New Zealand will lie in the future. The
NZTE sector manager for creative industries stated a
global growth of about 8–10 per cent per annum for
this industry. The creative industry in New Zealand
currently is very small and therefore does not add much
to the economy. However, the potential for growth and
value-added for this industry is significant, especially in
the Auckland region.
Infrastructural development, in particular broadband
and fast global-connected technology, is vital to the
success of this industry. Innovation and New Zealand’s
natural competitive advantage are also key drivers for
this industry.
There is expected to be increased foreign direct
investment in screen production and diversification
in films. Given the competitive global market, New
Zealand businesses need to step up their game to
remain competitive in the global market.
2.4.5 Digital Content
Sector definition
The digital content sector has the potential to
significantly transform traditional industry boundaries,
models and how commercial activities take place,
through the convergence of technology, skills and
the use of creative content. Through the 2005 Digital
Strategy, New Zealand has a vision of becoming a
world leader in using information and technology to
realise its economic, social, environmental, and cultural
goals, to the benefit of all New Zealanders.28
The research undertaken by Deloitte (2008) defines
digital content as the creation or production of content
or tools that enable the delivery of digital material
across a range of media.29
28
Government departments collaboratively (2005). The Digital
Strategy: Creating our Digital Future. Wellington: New Zealand
Government.
29
Deloitte (2008). Auckland Regional Innovation Systems Review –
Digital Content. Report commissioned by the Ministry of Economic
Development.
26
It covers the following applications:
• production design
• film and video services
• electronic media and film
• photographic studios
• computer games
• recorded media manufacturing and publishing
• music composition and publishing
• digital libraries and archives
• packaged software publishing and services
• commercial art and display services
• museum digital artefacts
• graphic design
• television and radio content production
• recorded performances
• newspaper printing or publishing
• electronic and reference book publishing.
Excluded applications are:
• broadcasting
• recorded music retailing, and
• internet development.
Within the EFM, the “digital content” sector is
represented in:
• Cultural and recreational services
• Business services, and
• Communications services sectors.
Sector trends
The OECD Information Technology Outlook 2006 report
identified that the digital content sector contains some
of the most rapidly changing business models of any
sector. Intellectual Property (IP) is easily poached and
international competition is intense.
Digital content has traditionally been considered a
subsector of New Zealand’s creative industries and
Auckland is regarded as an important centre of those
creative industries (from previous section). In terms of
digital content specifically (compared with the broader
creative sector), the report to Positively Wellington
Business (2006) gives national digital content sector
employment of 28,415 and for Auckland this was
estimated to be 14,565.30
In 2006 there were 2,052 active businesses in
New Zealand in the screen industry, which includes
production and post-production, television broadcasting,
30
O’Leary, C. et al. (2006). Mapping New Zealand’s Digital Content
Industry: Part 1. Wellington: Positively New Zealand Business. p.10.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
film and video distribution, and film exhibition. Six of
these firms earned over $50 million in revenue, 27
earned over $10 million, 288 earned over $500,000 and
1,764 earned less than $500,000. Of these businesses,
1,125 (55 per cent) were located in Auckland.
The importance of this sector is underscored in the
report by O’Leary and Duncan (2006) which highlights
that the digital content sector impacts significantly
on the performance of other sectors requiring digital
technologies.31 For every dollar produced by the
creative industries, 57 cents are generated in related
sectors.32
Growth drivers and constraints
The Deloitte research established that the sector is
fragmented, experiences productivity problems, and
operates within a boom-bust workflow. The research
also established the sector has pockets of excellence
and, with strong leadership and support, the sector
could contribute significantly to the economy as it has
the capability to innovate and grow rapidly, both locally
and internationally.
Key reasons for focusing on this sector reinforce those
outlined in the government’s Digital Strategy (2005):
• It sets a clear vision for the sector’s contribution to
economic growth.
• It identifies that innovation is alive and well in the
region, but that it is often hidden and informal.
Regional digital content companies were seen
as having a high degree of creativity in product
development. However, there was no systematic
approach to innovation and, due to the boom–bust
work cycle, companies could not plan for innovation.
The failure of firms to plan innovation affected their
ability to access funding to support growth and
innovation, to attract local and international investment,
and to plan in advance to address lulls in work-flow.
There are pockets of considerable strength in terms of
technology platforms and research and development
capability within the universities that have relevance to
the sector, but these are not strongly connected with
industry.
31
O’Leary, C. and Duncan, I. (2006). Valuing Digital Content: Economic
Perspectives. Report commissioned to inform the development
of the New Zealand Digital Content Strategy. New Zealand Digital
Content Strategy Working Paper 3
32
Smith, J. et al. (2002). Economic Sector Assessment: Report to
AREDS. Wellington: NZIER. p.10.
While reinforcing the potential contribution of the
sector to Auckland’s regional economic transformation,
the Deloitte research also identified problems within
the sector. Firms have proved unable to break the
boom–bust work cycles and therefore lack the ability
to address wider problems confronting the sector.
Inadequacies were identified in the management of
internal innovation and commercialisation, as well as
the lack of access to funding, and poor uptake and
commercialisation of IP stemming from research
institutions. The report also affirmed the ongoing
importance of the digital content sector because of
its broad applicability across other sectors. Further,
OECD research suggests that it will only continue to
become more important with the increasing economic
participation of younger generations of ‘digital natives’.
To address some of these impediments, the
government has approved funding of up to $2 million
for 2008/2009 for the region’s digital content sector.
The initiative is designed to address key issues in the
industry including improving collaboration, building
capability and increasing commercialisation.
2.4.6 Tourism
Key findings from the report ‘The Outlook for Tourism
in the Auckland Region’ undertaken by Covec as part of
this project are summarised next.33
Sector definition
The World Tourism Organisation defines tourists as
people who ‘travel to and stay in places outside their
usual environment for not more than one consecutive
year for leisure, business and other purposes not
related to the exercise of an activity remunerated from
within the place visited’. Tourism has become a popular
global leisure activity, facilitated by the change in
technology and advances in passenger travel, increases
in disposable income in developed countries, increased
leisure time and ability to take time away from other
responsibilities, and facilities for visitors such as
transport, accommodation and catering.
‘Tourism’ activity affects a numbers of sectors in the
EFM including:
• Retail
• Accommodation, restaurants and bars, and
• Air transport, services to transport and storage.
33
Covec (2008). The Outlook for Tourism in the Auckland Region.
Report to Auckland Regional Council.
27
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Gross visitor expenditure in 2006 was
distributed across industry sectors as follows:
• retail – $687 million (18 per cent)
• accommodation, restaurants and bars – $1.43
billion (37 per cent)
• road transport – $415 million (11 per cent)
• water and rail transport – $58 million (2 per cent)
• air transport, services to transport and storage –
$599 million (16 per cent)
• education – $170 million (4 per cent), and
• cultural and recreational services – $391 million
(10 per cent).
Source: Covec Report (2008)
Sector trends
A visitor strategy was prepared in 2007 for the
Auckland region: ‘Bringing the World to Auckland
– The Case for Investment in Auckland’s Visitor
Economy’. The extensive stakeholder consultation that
underpinned the research for the strategy confirmed
three main things about Auckland:
1. The CBD is the focus of most visitor activity but
in Auckland’s case delivers the lowest quality of
visitor experience compared with the rest of the
region.
2. Auckland’s main strength is its hinterland which
contains exceptional natural attractions and offers
outstanding experiences. However, this strength is
almost entirely negated by the lack of transport to
these areas.
3. Auckland has a rich and interesting history that
distinguishes it from other destinations.
Accordingly, the research identified the following key
success factors for Auckland as a visitor destination:
• Revitalise the CBD, with a focus on pedestrian
access and visitor (and resident) amenity.
• Connect visitors to Auckland’s outstanding
hinterland, i.e. make it easy for visitors to get from
the CBD to key hinterland precincts, and to travel
between precincts.
• Tell Auckland’s stories to extract additional value
from visitors and differentiate it from other
destinations.
28
The economic analysis conducted for ‘Bringing the
World to Auckland’ estimated that an additional $1.65
billion of public sector investment was required to
realise Auckland’s visitor aspiration, and that this level
of investment would result in a cumulative increase
in the Auckland visitor economy of $7.21 billion. The
research concluded that Auckland’s visitor economy is
a premium investment opportunity for Auckland, and
that it also represents a low-risk investment because
making Auckland a more compelling destination will
also make Auckland a better place to live, work and
play. Investing in the visitor economy will therefore
effectively subsidise Auckland’s transformation into a
world-class city-region.
Total visitor expenditure in the Auckland region was
estimated by the Ministry of Tourism at $3.74 billion in
2006. International visitors accounted for $2.52 billion
of this expenditure, with domestic visitors accounting
for the remaining $1.22 billion. In aggregate, the $3.74
billion of gross visitor expenditure in the Auckland
region generated total regional GDP of $2.99 billion in
2006. This implies an average expenditure per GDP
multiplier of around 0.80, i.e. on average, every $1.00
of gross visitor expenditure in Auckland generates
around $0.80 of regional GDP, including indirect and
induced effects.
Growth drivers and constraints
The key drivers of demand for tourism in the Auckland
region include:
• Consumer Demand: The short-term outlook
for consumer demand is quite negative. The
combination of lower disposable income and higher
airfares will most likely curb growth in tourism
demand in the next 12–18 months. The long-term
outlook for consumer demand is more optimistic,
particularly since most of the factors that are
currently having a negative impact on consumer
demand are cyclical in nature. Therefore, consumer
demand is likely to rebound in the next 24–36
months as economic conditions improve and new
airline capacity is released.
• The Success of New Zealand as a Destination:
Auckland’s success as an international visitor
destination, at least with its current visitor
proposition, depends largely on New Zealand’s
success as a destination. A key focus of
‘Bringing the World to Auckland’ is determining
how Auckland can establish itself as a more
independent (mono) destination within New
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Zealand, but until the visitor proposition is much
more compelling, international visitor activity in
Auckland will continue to depend on the strength
and popularity of the New Zealand brand. Auckland
has experienced declining domestic visitation
rates in recent years due to a marked increase in
outbound travel activity (which competes directly
with domestic tourism). The outlook for domestic
tourism is relatively weak with the Ministry of
Tourism predicting average growth in domestic
visitor nights of around 0.8 per cent per annum for
New Zealand over the next 7 years, and just 0.6
per cent for Auckland. The main reason for the low
expected growth rate is New Zealand’s slow rate
of population growth – less than 1 per cent per
annum. In addition, outbound travel is expected to
continue increasing, which will further suppress
domestic demand.
• The Cost of Travel: Around 95 per cent of all
domestic travel in New Zealand is conducted
using private vehicles – mainly cars; hence fuel
is a direct and significant component of the cost
of domestic tourism. Practically all international
tourism involves a flight to New Zealand, and
the airfare can be anything from 20–60 per cent
of the total cost of a trip to New Zealand; hence
fuel is also a direct and significant component
of the cost of international tourism. The general
consensus among tourism operators in New
Zealand is that we are entering a period of high
fuel prices that could persist for some time, and
that the tourism industry will need to find ways to
reduce its consumption of, and exposure to, fossil
fuels. Persistently high fuel prices will reduce New
Zealand’s competitiveness in long-haul markets
due to the large airfare component of a trip to New
Zealand, but domestic tourism is likely to increase
as overseas travel becomes relatively more
expensive for New Zealanders.
• Climate Change: The perceived threat to the
New Zealand tourism industry created by climate
change is clearly emphasised by the prevalence of
climate and environmental themes in the recently
released New Zealand Tourism Strategy 2015. The
general consensus within the tourism industry
is that the issue of climate change is not yet
having a material impact on travel or consumption
behaviour, but that it definitely has the potential
to do so. According to key industry stakeholders,
the main risk to New Zealand, and therefore to
Auckland, seems to be the perception that a lot
of carbon is generated in getting to New Zealand.
A further risk is the impact that emission trading
schemes may have on the price of getting to, and
travelling within, New Zealand. The general view
within the industry is that travel has become an
important and essential part of modern life; hence
it is unlikely that increasing awareness of climate
change will curb aggregate travel activity. However,
it is widely acknowledged that climate change
has the potential to alter the pattern of tourism,
i.e. it is anticipated that consumers will choose
destinations that are perceived to be relatively
more environmentally friendly than others.
• Aviation Capacity: Aviation capacity is currently
constrained due to well documented wide-body
aircraft production delays in both the Boeing
and Airbus plants. These delays are affecting
practically all major carriers, including Qantas
and Air New Zealand. This has resulted in higher
load factors for airlines and, consequently, higher
airfares for consumers. Airlines will take delivery
of pre-ordered A380s from late 2008 onwards,
and pre-ordered 787s from late 2009 onwards,
assuming there are no further production delays.
Both Qantas and Air New Zealand expect a large
increase in wide-body capacity internationally from
2010 onwards, which should result in greater seat
availability and lower prices. The long-term outlook
for aviation capacity is therefore very positive.
• Exchange rates: The exchange rate affects
inbound tourism by altering the price of a trip to
New Zealand. It also affects domestic tourism
by altering the price New Zealanders pay for an
international trip. The strength of the New Zealand
dollar has definitely played a part in the recent
growth in outbound travel, and the corresponding
slow-down in international arrivals. The New
Zealand dollar is expected to weaken relative
to major trading partners in 2008 and 2009 as
economic growth slows and interest rates decline.
A weak New Zealand dollar is positive for tourism
in New Zealand for two reasons: it makes New
Zealand a cheaper destination for international
travellers, and it makes outbound travel more
expensive, which induces more New Zealanders to
travel domestically.
• Major Events: Major events were identified as
a key opportunity for Auckland in the ‘Metro
Project’, and subsequently in ‘Bringing the World
to Auckland’. At present Auckland will be the
main host of two confirmed major events in the
next decade: the Rugby World Cup in 2011 and
the Cricket World Cup in 2015. In addition, there
is a possibility that Auckland will submit a bid for
29
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
the Commonwealth Games in 2018. Auckland’s
ability to expand its major events portfolio beyond
these events will depend on its ability to invest in a
dedicated regional major events office, develop the
infrastructure required to attract and deliver large
scale major events, and present a united front
when bidding for major events.
• Cruise Ship Industry: Recent analysis suggests
that the development of a new fit-for-purpose
cruise ship terminal in Auckland has the potential
to deliver major economic benefits to Auckland
and New Zealand. Consultation with Cruise New
Zealand confirms that with a new cruise ship
terminal in Auckland, and with the existing facility
at Princes Wharf used as overflow capacity, it is
likely that the major cruise lines would deploy
more ships to this region, i.e. at present, demand
for cruises in New Zealand is constrained by
Auckland’s cruise ship infrastructure. This would
have an immediate impact on the number of
cruises operating in New Zealand waters, and on
the economic impact generated by the cruise ship
industry.
• National Convention and Exhibition Centre: Local
tourism industry stakeholders unanimously support
the development of an internationally competitive
convention and exhibition centre in Auckland to
attract high-yielding visitors. A research report
commissioned by Auckland City Council concluded
that a convention centre of suitable scale would
increase Auckland’s GDP by $67 million per annum
at operational maturity, and New Zealand’s by $72
million per annum.
• Low Cost Air Travel: A study conducted by
Business and Economic Research Limited (BERL)
in 2002 concluded that significant economic
benefits would be realised from greater low-
cost airline activity in Auckland, driven mainly by
greater visitor numbers out of Australia.34 This
analysis was based on the development of a new
commercial airport at Whenuapai Airbase, but
could just as easily apply to greater low-cost airline
activity at Auckland International Airport.
Outlook
According to the Ministry of Tourism’s regional
forecasts, total visitor to Auckland region are forecast
to rise from 12.09 million in 2006 to 13.71 million in
34
BERL (2002). A Rejuvenated Whenuapai Airport – A Focus for North/
West Auckland’s Balanced Growth and Economic Development.
30
2013 – an increase of 13.4 per cent or 1.8 per cent per
annum. International visitors are expected to increase
by 33.7 per cent and domestic visitors by 8.1 per
cent.35
Total visitor expenditure is forecast to increase from
$3.74 billion in 2006 to $5.79 billion in 2013 – an
increase of 54.6 per cent or 6.4 per cent per annum.
International expenditure is expected to increase by
69.4 per cent to $4.28 billion in 2013 and domestic
expenditure by 23.9 per cent to $1.51 billion in 2013.
2.4.7 Transport, transport services and
logistics
Sector definition
Many businesses in the Auckland region rely on
transport and logistics providers to move goods along
the supply and logistics chain domestically, and the
logistic hubs associated with Ports of Auckland and
Auckland International Airport for import and export
trade. The Auckland region is the predominant
distribution hub for New Zealand, and is also integrated
with the main distribution hubs on the eastern
seaboard of Australia.
In the EFM, the ‘transport, transport services and
logistics’ sector is divided up as:
• Road transport
• Water and rail transport, and
• Air transport, services to transport and storage.
Sector trends
Auckland International Airport Limited (AIAL)
Auckland International Airport is one of New Zealand’s
most important transport and tourism infrastructural
assets. Twelve million people pass through the airport
annually. Seventy per cent of international visitors to
New Zealand arrive or depart through Auckland airport.
Auckland International Airport forecasts a 100 per cent
growth in passengers by 2025 to 24 million.
It is the country’s third-largest export cargo port by
value.36 In the year ended June 2007, $4.4 billion of
exports passed through Auckland International Airport,
35
Ministry of Tourism (2007). New Zealand Regional Tourism Forecasts
2007 – 2013.
36
Statistics NZ Feb 2007.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
representing 81.5 per cent of New Zealand’s air-
freighted exports (Table 6).
Auckland International Airport contributes:
• more than $19 billion annually to the New Zealand
economy, and
• employs the equivalent to 283,000 FTEs annually
(directly and indirectly).
Almost half of this impact is within the Auckland
regional economy ($10.7 billion and 153,900 FTEs).
This equates to 25.1 per cent of the Auckland
regional GDP and 25.2 per cent of employment.
Source: AIAL (2007). Economic Impact of Auckland
Airport.
Ongoing development of the Auckland International
Airport includes the expansion and upgrade of airfield
facilities to accommodate increased passenger
numbers and larger aircraft. A new northern runway
is being developed, with Stage 1 expected to be
operational in 2010/11, freeing up capacity on the
existing main southern runway. A new domestic
terminal is planned after 2015.
Table 6: Air cargo exported year ended June 2007
Tonnes Value
AIAL 86,838 $4.401 billion
All NZ airports 104,120 $5.400 billion
Source: Statistics NZ
Ports of Auckland Limited (POAL)
Ports of Auckland Limited is a vital economic driver,
servicing New Zealand’s supply-chain links with the
rest of the world.37 The port is New Zealand’s largest
and most important international seaport, handling 37
per cent of New Zealand’s total container trade and
840,993 TEU38 in 2007/08. Around two-thirds of New
Zealand’s imports and one-third of its exports (by value)
pass through the Ports of Auckland. The cruise ship
business is also an important element in the port’s
portfolio. Auckland welcomed a record 73 ships in the
2007/08 season, an annual increase of 58 per cent.
Passenger numbers were 112,000, each generating an
estimated $1,670 in value added to the economy.
37
Ports of Auckland includes the Port of Auckland (the main gateway
for international trade) and the Port of Onehunga.
38
20-foot equivalent unit is the international standard measure of
containers.
Ports of Auckland generates:
• $11 billion annually to the Auckland regional
economy through port operations and trade
related businesses
• around 155,000 jobs (including 600 at the port
itself), and
• 22% of the regional economy (13% of the New
Zealand economy).
Source: POA (2008). Port Development Plan
Ports of Auckland’s long-term growth forecast for
container volumes are 5 per cent per annum based
on long-term trade volume growth (Table 7).39The
port expects non-containerised volume growth to be
considerably lower than container growth.
Table 7: Ports of Auckland projected container
volumes
Year ended June TEU throughput
2008 840,000
2010 977,000
2015 1,246,000
2020 1,590,000
2025 2,030,000
2030 2,591,000
Source: Ports of Auckland
The significant trends impacting on the Ports of
Auckland Limited’s operations are:
• The past 20 years saw substantial trade growth
and the transition of non-containerised cargoes
into containers. Between 1988/89 and 2007/08,
container volumes increased at an annual
compound growth of over 7 per cent per annum.
This growth rate exceeds that of GDP growth,
which averaged less than 3 per cent per annum
over the same period.
• Global shipping trends are for larger ships that
generate economies of scale and reduce unit
freight costs. This supports hubbing, with shipping
lines calling at one port in a country or region,
rather than at several ports. A ‘hub & spoke’
network is developing with a small number of New
Zealand ports acting as international hub ports
and regional ports serviced by a coastal shipping
network. This is consistent with government
policy targets to double coastal shipping’s share
of domestic freight transport, yielding significant
39
Ports of Auckland (2008). Port Development Plan.
31
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
improvements in carbon emissions. There has
also been a strong renaissance in the cruise ship
industry over the past decade.
• The port has been consolidating its activities
in the eastern part of the port area, opening
up the western areas for alternative uses.
Seventy hectares of land were freed up for
redevelopment between 1996 and 2007,
including Viaduct Harbour, Princes Wharf and the
western reclamation. The port will continue its
consolidation and has identified Queens Wharf for
redevelopment, potentially as a ferry terminal.
Domestic freight
Around 24 per cent of all freight movements in New
Zealand occurs within the Auckland region. Rail and
road are the main modes used for the movement of
freight within the region.
Rail’s role in freight within the region is currently small
as it struggles to be competitive over short distances
and with the limited regional rail network, but it is
important in longer distance interregional traffic,
particularly of bulk cargo and in serving the port.
The majority of freight is transported by road within the
region (250 million tonnes in 2002).40 Road freight also
dominates movements between Auckland and other
New Zealand regions, accounting for about 60 per cent
of total traffic. Rail and sea freight each account for
around 20 per cent of freight traffic.
Road freight is expected to continue to dominate the
domestic logistics sector. However, there is potential
for rail to move large volumes of containers efficiently
between the port and the freight hubs served by rail
and road.
Value chain
The modern supply chain is much more responsive
to end-user needs than in the past. Whereas goods
used to be produced in response to general demand,
with inventories held at points along the production
and distribution chain, today’s goods are produced and
shipped as and when required by customers. Freight
logistics aim to add value along the supply chain by
streamlining the many processes involved in freight
management.
40
Auckland Regional Council (2006). Auckland Regional Freight
Strategy.
32
Ports of Auckland’s ambition is to be the best port in
Australasia with world-class performance. This means
that it will need to have the lowest cost supply chain
for New Zealand trade, world-class productivity and
Australasia’s premier container hub port. The port’s
business is primarily focused on containers although
bulk and break-bulk remain an important part of the
port’s activities. New and used vehicles are the most
significant component of non-containerised volumes.
Ports of Auckland’s preferred options for future
capacity enhancement are new terminal operating
plant and systems, and incremental reclamation using
dredging. The new terminal stacking operations that
are planned to be introduced over the next 15–20 years
can increase capacity per hectare of container terminals
by 250 per cent. The port is currently planning how the
investment should be phased.
It is important for supply chain logistics that New
Zealand develops the optimal hub and spoke
configuration for its ports. Ports of Auckland views
itself as the most viable option for an international
hub port in the North Island. It is New Zealand’s
premier container port, handling 30 per cent by value
of import–export cargos. Port of Tauranga is the only
other international port in the North Island and provides
strong competition to the Ports of Auckland.41
While Ports of Auckland is currently not achieving the
large productivity gains of the 1990s, staff hours per
container continue to decrease.
Growth drivers and constraints
The level of the New Zealand dollar and fuel costs has
a strong impact on passenger movements through
the airport. Other drivers of change for passenger
movements are immigration, population growth,
tourism growth, airline sales and marketing strategies,
route development and aircraft capacity.
For freight, the drivers include import and export
growth, trade characteristics, market share and
alternative transport options.
Congestion is the key issue for the regional road freight
industry, impacting on operational efficiencies. It slows
freight deliveries and reduces the reliability of delivery
times so that more freight vehicles are required to
undertake the same amount of work.
41
Rockpoint (2008). New Zealand Port Sector Report.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Sector Interview
Interview conducted with Ports of Auckland Limited
showed that port activities in volume terms has grown
strongly in the last 10 years, on average 6 per cent
per annum. There has been strong competition with
Port of Tauranga and shipping lines have consolidated,
resulting in prices going down whilst costs of port
operations go up. The current downturn in the
economy will see growth of about 1 per cent for
next couple of years. A great amount of investment
is needed in the next two to three years to increase
capacity at POAL, otherwise current capacity will
restrain future growth in port activity. The major driver
for this sector is trade and container growth, predicted
at about 2½ times the rate of GDP. Transport is an issue
for POAL and there is a need for better use of rail and
trucking capacity. Currently the POAL is handling 40–45
per cent exports and 60–55 per cent imports.
The future of air freight looks positive with expected
growth in tourism to provide for increased freight
capacity. According to the interview with Auckland
International Airport Limited, about $80 million per
annum was spent on capital investment for Auckland
international airport in the last five years ; this amount
is likely to decrease over the course of the next ten
years as improvements to the airport come to an end.
Threats to growth in the air transport industry are high
fuel prices, climate change and carbon footprints. As
with most sectors, AIAL also identified skills shortage
as an impediment to the industry.
For storage and logistics, it is expected that revenue
will double over the next five years but the sector
does not foresee an expansion in ‘footprint’. The
increase will come from more value-added services,
improved processes and productivity gains. There will
be limited new construction, given that constraints on
land and employment could increase by a possible 25
per cent. The industry is consolidating internationally
with many businesses moving to outsource. Existing
companies are either expanding or are being bought
out by international companies and this trend is likely to
continue. Customers will also increasingly be requiring
international solutions.
2.4.8 Biotechnology
Sector definition
The OECD defines biotechnology as ‘the application
of science and technology to living organisms as well
as parts, products and models thereof, to alter living or
non-living materials for the production of knowledge,
goods and services’.
The New Zealand Biotechnology overview on the New
Zealand’s Biotechnology Industry Organisation (NZBIO)
website notes that:
‘…New Zealand has one of the fastest growing
biotech industries in the world. Its biotechnology sector
comprises six public and 472 private core biotechnology
companies. Almost 50 per cent of these 47 companies
were created in the last three years. There are 28
research institutes, of which nine are Crown Research
Institutes (‘CRIs’) and are primarily funded by the
New Zealand Government. New Zealand’s geographic
isolation and strict quarantine standards contribute to
the best animal health rating in the world, uniquely
positioning the country as a global leader in agricultural
biotechnology research and application. This leadership
position is greatly assisted by the R&D capabilities
of sector leaders such as Fonterra, the CRIs, and the
universities that undertake R&D specifically targeted at
the primary industry sector.42
In the Auckland region, the biotech industry:
• employed approximately 3,000 people in research,
commercialisation, production or support/service
capacity
• generated revenue of $280 million in 2006 from
core biotech R&D companies
• attracted more than $300 million of overseas
investment in the past five years, and
• accounted for 34 per cent of the nation’s biotech
expenditure and 34 per cent of its income.
Source: LEK Consulting (2006). New Zealand
Biotechnology Industry Growth Report.
NZBIO outlines New Zealand’s biotechnology strengths,
and the principal areas of activity. These are:
• large-animal based biotechnologies
• plant-based biotechnologies
• biomedical science and drug discovery
• bioprocessing technologies and biomanufacturing
• innovative foods and health, and
• biocontrol, biosecurity and bioremediation.
The ‘biotechnology’ sector is represented across a
numbers of sectors in the EFM including:
• Dairy product manufacturing,
• Other food manufacturing, and
• Rubber, plastics and other chemical product
manufacturing.
42
Refer www.nzbio.co.nz
33
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Sector trends
There are some general trends and opportunities for
biotech businesses in NZ, and within the Auckland
region:
• Biotech has a close relationship with developments
in other technology sectors, like information
technology and nanotechnology.
innovative foods and human nutrition (57), and the
plant-based areas of application (48).
• Biotechnology income in New Zealand for the
2005 financial year was valued at $855 million, of
which $135 million can be attributed to the higher-
education sector. Biotechnology income was
measured at $675 million (excluding universities) in
2004.

• There are growing convergences between
biotechnology industry sectors. For example,
the personalisation of treatment through
genomic medicine is forecast to be mirrored in
developments in the food and nutrition sector
through advances in nutrigenomics.
• Biotechnology expenditure in New Zealand for the
2005 financial year was valued at $642 million. Of
this, $125 million can be attributed to the higher-
education sector. Biotechnology expenditure was
measured at $430 million (excluding universities) in
2004.

• In a recent publication by the Ministry of Research • Exports of biotechnology goods, services,

Science and Technology, MoRST noted that trends processes and knowledge for the 2005 financial
in genomic medicine are indicating that: year were valued at $142 million, up from $108
million in the 2004 financial year.
• diagnostics will become more predictive,
The Biotechnology Industry Growth Report highlighted
• therapeutic interventions will become more a number of key findings:
preventive, and
• The sector continues to grow at a robust pace.
• healthcare (including diet) will become more
personalised and tailored to the individual. • The sector encompasses a diverse range of
activities. New Zealand has particular strengths
• There are approximately 40 companies in the in the fields of agriculture, animal health, forestry,
Auckland region involved in the research or human nutraceuticals and pharmaceutical medical
production of biotechnology products. In addition research.
there is a range of companies providing specialist
services to the sector. • Funding remains an issue but overall trends are
positive, with more venture capital funds available,
Table 8: New Zealand bio-technology industry – an increase in public offerings, and the creation of
key statistics 2005 the SciTech index on the NZX to increase profile in
the public markets. The increasingly fluid exchange
2005 Auckland New % of public and private funds between Australia and
Zealand New Zealand is also positive.
Income (million) 280 810 35
Expenditure (million) 220 640 34 • Products and technologies continue to mature
FTEs 410 2424 17
and grow in commercial stature. New Zealand
Number of Organisations 36 126 29 organisations currently have almost a dozen
Number of Private pharmaceutical products in advanced clinical
Organisations 30 87 34 development. In addition, momentum continues
to build with key launches of agricultural, medical
Source: Capital Strategy, Statistics New Zealand, devices and industrial biotechnology products and
MoRST, L.E.K. Consulting diagnostics.

The key statistics on revenue, expenditure, and areas
of application in the Statistics New Zealand survey
results were:
• The main areas of application were the biomedical
science and drug discovery area (60 organisations),
• The sector continues to collaborate actively,
with more than 75 per cent of collaborations
involving international organisations. This has lead
to a growing number of significant commercial

34
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
collaborations with both Australian (assisted by the
trans-Tasman fund) and international organisations.
• Government funding and focus on the sector has
also been positive.
• The Biotechnology Taskforce set up in 2002 helped
catalyse a variety of positive activities including
the formation of NZBio. This organisation has
been critical to enhancing the sector’s profile and
building a community of participants which benefit
from increasing critical mass.
• Other policy trends are generally positive including
tax reforms, regulatory changes and increasing
harmonisation with Australian and international
regulatory standards.
• The most common areas of application in the
public sector were found to be environmental
technologies, and impact and integration of
emergent technology. The private sector had a
stronger focus on innovative foods and human
nutrition, and biomedical science and drug
discovery.43
Growth drivers and constraints
The main additional points raised in the New Zealand
Biotechnology Industry Capability survey44 for
BIOTENZ45 in 2003 were:
• Biotechnology in New Zealand is a growing
industry with almost 50 per cent of the 42 core
biotechnology companies being created in the last
three years.
• Core biotechnology companies expect to bring 750
products to market in the next five years.
• There are many collaborations and joint projects
within the industry, both with New Zealand and
overseas organisations. Just as important, there is
a willingness to develop even more partnerships.
• At least 244 patents have been granted to core
biotechnology companies during the last five years.
43
L.E.K. Consulting (2006). New Zealand Biotechnology Industry
Growth Report. Report commissioned by NZBIO, NZTE and MORST.
44
The New Zealand Biotechnology Industry Capability Survey. Report
to New Zealand Trade and Enterprise. Prepared for BIOTENZ by
Tradex NZ Ltd. July 2003.
45
BIOTENZ is a group of leading New Zealand providers of
biotechnology, natural products, pharmaceutical and biological
products and services.
• Core biotechnology companies predict they will
need to double the number of employees with
tertiary qualifications within the next five years.
• In the ‘Other Biotechnology’ category, respondents
predicted that they will need more than 140 new
staff with tertiary qualifications over the next five
years. This category includes product-focused
biotechnology organisations and a small number
of pharmaceutical companies and organisations
developing medical and veterinary devices (13 of
the 26 ‘Other Biotechnology’ organisations were
located in Auckland). In the Natural Products
category, respondents predicted that they will
require more than 180 new staff with tertiary
qualifications over the next five years.
Sector Interview
Almost all biotechnology entities sell high-value
product. The export potential for the biotech sector is
very high, with many New Zealand biotech companies
exclusively focused on export markets. In addition
to export of goods and services, the New Zealand
biotechnology industry exports intellectual property in
the form of licensing deals.
The other key drivers of growth for biotech industries
include the global push towards environmental
sustainability. New Zealand biotech companies have
been developing a range of clean technologies for
decades and, therefore, have an advantage in this area.
The need for increased foreign investment is important
as the biotech industry matures; this maturation
will also lead to an increase in domestic investment
prospects. Global connectedness is also essential
for the success of biotech companies, as is the
employment of experienced commercialisation staff.
According to the biotech sector manager, the biotech
sector underpins New Zealand’s agricultural and
environmental primary sectors and will continue to
increase their productivity and sustainability in the
short and long term. The biotech sector focuses on
high-value product and as the sector matures, more
and more value will be retained in New Zealand.
New Zealand has some smart biofuel technologies.
However, the sector is constrained by lack of capital,
lack of access to suitably qualified and experienced
research and technology experts, lack of access to
experienced life-science commercialisation experts,
and lack of infrastructure such as specialised
biomanufacturing facilities and large-scale clinical trial
capabilities.
35
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
2.4.9 Specialised Manufacturing
Sector trends
The manufacturing sector is an important contributor
to the Auckland region economy. Between 2000 and
2006, the total number of manufacturing firms in the
region has remained relatively flat.46
In 2006, total manufacturing activity in the
Auckland region generated:
• approximately 13.6 per cent of total GRP (or $7,458
million), and
• 15.1 per cent of all FTEs in the region (or 90,783).
Source: EFM
However, some categories have shown considerable
growth over this period, such as:
• publishing
• other food manufacturing
• recorded media manufacturing and publishing
• sheet metal product manufacturing
• photographic and scientific equipment, and
• cement, lime, plaster and concrete product
manufacturing.
Manufacturing categories on the decline were:
• furniture manufacturing
• knitting mills, footwear, leather products, and
• basic chemicals, rubber products, ceramics.
Manufacturing categories on the increase are in line
with the findings of the report on manufacturing for
Business NZ.47 The report states that many NZ firms
are well suited to supply to high-value niche export
markets, excelling in short-run production and quick
turnaround times, and that there is a need to steadily
move towards the ‘high end’, i.e. more processed,
higher-value goods commanding higher prices. On
the other end, high-volume low-value manufacturing
will continue to become less competitive and move
offshore to more competitive environments. This trend
is also reflected in the manufacturing categories on the
decline as shown above.
Value chain
The interdependence between manufacturing and
other industries is very important and can be seen in
46
Capital Strategy (2007).
47
Business NZ. Manufacturing Perspectives – A New Zealand
Perspective.
36
sectors such as food and beverage which requires
cost-effective as well as innovative packaging to assist
in product branding. There are also many value chains
within manufacturing itself, with a range of businesses
producing components for products for subsequent
assembly, or products as a means for production of
components (e.g. tools and dies). Examples include:
• Plastics NZ indicates that about 50 per cent of
polymers manufactured in New Zealand are used
in agricultural packaging, compared with perhaps
25–30 per cent in other countries.
• The aviation manufacturing sector has developed
linkages with software development companies,
boat manufacturers and electronic companies.
Successes from these linkages include:
• fitting tracing-software technology from the
America’s Cup yachts into gliders
• sourcing particular composites for aeronautical
engineering from boat builders
• sourcing skilled labour for fit-outs of corporate
jets from boat building
• marketing New Zealand-assembled aircraft to
purchasers of New Zealand-built yachts, and
• utilising software firms for flight-planning and
in-flight cellular technologies.
Specialised manufacturing is manufacturing on the
higher end of the scale and is considered a high priority
for investment by government in the next 2–3 years. It
is a sector comprising of:
• general manufacturing
• aviation
• marine, and
• materials including composites, plastics, light
alloys, coatings, etc.
Sector Interview
Specialised manufacturing according to the NZTE
sector manager is nationally growing at around 0.5 per
cent per annum. Hamilton is seen to be growing faster
than parts of Auckland, particularly around medical
devices, materials, and food and beverage equipment.
However, Auckland has the competitive advantage
in the marine sector. Prospects for growth in this
sector are in electronics and high-tech manufacturing/
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
engineering. This sector comprises a majority of SME-
type businesses. Impediments to growth include the
availability of labour, the standard of skills, transport
logistics, lack of investment funds, and lack of
collaboration between SMEs. Export potential is seen
to be around supply-chain integration of components
and services.
Two subsectors of specialised manufacturing important
to the Auckland region are marine and materials.
i. Marine
Sector definition
The marine sector comprises the following subsectors:
• trailer power boat manufacture
• launches/yachts and race yachts manufacture
• superyacht manufacture
• inflatables (RHIBs) manufacture
• refits
• services, supplies and components, and
• ‘Other’ which includes consumables, insurance,
berthage etc.
The New Zealand marine industry (excluding ship-
building) is diverse and highly interlinked.48
In 2005, the marine industry contributed:
• $1,545 million of total marine activity in New
Zealand. Of this, an estimated $890 million, or 58
per cent, occurred within the Auckland region. The
three main contributors were:
• services, supplies and components sector (35
per cent or $292 million)
• launch and yacht production (19 per cent or
$164.8 million), and
• superyacht production (17 per cent or $150.8
million)
• 2,870 full-time-equivalents working in 340
businesses in the Auckland region and more
than 2,000 supporting industries agglomerated
around the core marine industry businesses to
directly benefit from close association with training
institutes, skilled workers, and good road, port and
airport infrastructure.
Source: NZ Marine Industry Survey 2005.
48
New Zealand Marine Industry Survey 2005. Summary Report.
Market Economics. Prepared for the Marine Industry Association,
NZ Marine Export Group Inc., and the Boating Industry Training
Organisation. February 2006.
In the EFM, the ‘marine’ industry is largely represented
in the following sectors:
• Transport equipment manufacturing
• Machinery and equipment manufacturingn and
• Structural, sheet and fabricated metal
manufacturing.
Sector trends
According to the Deloitte (2008) report, the total
recreational marine sector is valued at $1.6 billion in
2006 and has grown by 6 per cent in the last year and
20 per cent since 2003.49The largest subsector of the
marine industry is ‘services, supplies and components’.
This accounts for 30 per cent of total sales and is
growing at 20 per cent per year. Other growth sectors
are rigid-hull inflatable boats (RHIBs) and trailer power
boats. Superyacht sales have remained relatively
constant over the three years to 2006, but racing
yacht sales have decreased. Domestic sales of locally
produced boats totalled $250 million; refits totalled $96
million; equipment, $197 million; and services, $279
million. For boat sales, the majority ($129 million) were
trailer power boats, followed by yachts and launches
as the second highest-grossing category ($68 million).
In the year to 2006, marine imports grew 15 per
cent whereas exports grew only 4 per cent. Or, for
every dollar earned from exports, $1.60 was spent on
imports. Export sales of boats totalled $282 million;
refits totalled $39 million; equipment, $230 million;
and services, $6 million. However, a buoyant export
performance (more than doubling in three years) of
the equipment sector has gone some way to redress
the trade imbalance, which has been largely driven by
imports of trailer power boats, inflatables and RHIBs.
Value chain
The marine sector interacts with suppliers of new
materials, advanced electronics and other new
technologies to ensure production needs are met.
These technologies have application in a range of
sectors, including aviation, oil drilling and bridge
building. The marine sector has been an early adopter
of composites, at a stage when boat builders had
difficulty convincing their customers to embrace the
change.
49
Deloitte & Walker Projects (2008). Auckland Regional Innovation
Systems Review – Marine. Report commissioned by the Ministry of
Economic Development. pp.10.
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
The sector requires input from designers, engineers,
mechanics and architects; skilled carpenters, surveyors
and painters; divers and drivers; specialised insurance
assessors; computer programmers and chefs.
The sector has major impacts on the New Zealand
economy, creating demand for products such as sails
and ropes, fitments and accessories, fine leather,
foodstuffs, wine, flowers, furniture, plumbing fittings,
linen, upholstery and carpets, pool chemicals and
excursion craft. It involves regular and extensive refit
and repair activity. It can be defined in terms of the
types of boats manufactured, but this definition fails to
capture the extensive value chain and the wide range
of skills and technologies associated with the industry.
A build or a refit project generates orders from diverse
companies in Auckland, around New Zealand and
offshore.
Growth drivers and constraints
New Zealand’s marine industry has built a solid
reputation by developing flexible production processes,
with solutions-based approaches and a highly skilled
workforce. New Zealand has also developed a
sustainable competitive advantage in design and
construction technology, e.g. New Zealand has three
out of the five major carbon spa manufacturers in the
world.
However, marine firms are facing a number of global
trends and challenges:
Figure 8: NZ Marine Industry Forecast Sales 2005–2020 ($ billion, March Year Ended)
Source: New Zealand Marine Industry Survey 2005
38
• The growth in the size and sophistication of
superyachts, requiring new engineering solutions
in many areas.
• The sophistication of marine electronics and
other technologies to meet the communications,
navigation and entertainment needs of customers
is increasing at the same pace.
• Analytical tools for testing (animation, simulation
and modelling) are also increasingly used to
meet changing demands, and are supporting a
continuous chain of innovation.
• Refit has become a more significant global-market
opportunity and Auckland is playing a role to secure
a larger share of this market.
• More New Zealand marine companies are
establishing or considering a presence in offshore
markets.
• Strong international recognition of the skills of the
New Zealand marine industry continues following
the successive America’s Cup challenges. As
such, skill shortages have driven the need for
productivity improvements such as the introduction
of lean manufacturing in some companies.50
Over the last several years, concerns have arisen
within the industry about the capacity for growth in
Auckland, particularly with limitations being applied to
the prime Westhaven/Wynyard Point/Viaduct Harbour
cluster site, and with Hobsonville not being a viable
50
Deloitte and Walker Projects (2008). ibid.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
alternative for commissioning and refit due to the
limited berthing and manoeuvring space.
Outlook
The survey results also provided industry forecasts of
growth in sales. By 2020 it is forecast that the marine
industry turnover will have grown by over 100 per cent
to $3.2 billion, with export sales of $1.8 billion.
ii. Materials
Sector definition
Advanced industrial materials are defined as:
• plastics, coatings, polymers (including biopolymers)
• composites, ceramics
• metal alloys
• processed wood materials (e.g. Medium Density
Fireboard)
• concrete, cement, steel, and
• any combinations of these.51
It does not include textiles, leather, rubber or
unprocessed wood unless these were crucial
components, substrates, or other inputs to the target
advanced material grouping.
In the EFM, ‘advanced materials’ is largely represented
in the following sectors:
• Rubber, plastics and other chemical product
manufacturing, and
• Basic metal manufacturing.
Sector trends
A regional snapshot of the advanced materials
subsectors include:
Plastics
Key statistics for the plastics industry in New Zealand
are:
• 50 per cent of sales are exported, with 20 per cent
of exports direct
51
Deloitte and Vantage Consulting Group (2008). Auckland Regional
Innovation Systems Review – Advanced Materials. Commissioned
by the Ministry of Economic Development.
• $350 million in direct exports and $500 million in
indirect exports, mainly in packaging (PlasticsNZ,
2006)
• 38 per cent of manufacturing output used for
packaging
• an estimated $71.7 million was spent on R&D by
the plastics industry in the 2004/05 financial year
and this is expected to increase.52
Plastics manufacturers:
• are predominantly based in the Auckland region. In
2006, 48 per cent of New Zealand’s plastic-product
manufacturing enterprises were based in the
Auckland region (267 of 555 enterprises), up from
36 per cent in 2000.
• employed 5,850 people in 2006 in the Auckland
region, up from 4,670 in 2000.
Source: Statistics NZ (2007) Business Tables
Food, dairy and meat industries are key markets for
plastics products. Based on a web-based questionnaire
and a series of face-to-face interviews done for Plastics
New Zealand, it was predicted that within ten years,
the plastics industry could be a $4 billion industry.53
The industry’s annual sales are currently estimated at
$2 billion.
Composites
About 20 per cent of the total composites industry
in New Zealand is advanced composites (by value of
material). There are approximately 400 New Zealand
companies in the composites sector, across a wide
range of applications from marine to aerospace.54
A significant majority of New Zealand’s 110 or so
boat-building firms using composites are based in
the Auckland region, as well as around 200 furniture
manufacturers using composites, notably fibreglass.
Metal
The Light Alloy Metals Technology roadmap cites
a multiplicity of companies involved with light alloy
metals.55 Firms surveyed included foundries (28 per
52
R&D projects were mainly designing and prototyping products and
processes. Other R&D funds were used on attending international
trade shows and development of networks and marketing channels.
53
Unitec New Zealand (2005). Plastics led growth: Growth
opportunities in the New Zealand Plastics Industry. Wellington:
New Zealand Trade and Enterprise.
54
Investment New Zealand (2007). Advanced composites for
aerospace – New Zealand: A value proposition. Wellington: New
Zealand Trade and Enterprise.
55
Light Alloy Manufacturing New Zealand (2005), Mark Taylor and Ian
Paine, Light Metals Research Centre, University of Auckland.
39
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
cent), marine (23 per cent), industrial engineering (8 per
cent), and transport (7 per cent). There were numerous
subcategories including fabrication, distribution,
automotive, aviation, architecture, construction,
toolmakers, surface coatings, heat treatment,
electronics, scrap, extrusion – the range reinforces the
importance of light alloy metals across many important
industries.
The Auckland region tends to account for 30–40+ per
cent of firms in significant subsectors. The region
dominates heat treatment, which means that firms
from outside the region requiring these services send
products to Auckland for heat treatment.
Value chain
There is a high level of diversity in the advanced
materials sector in the Auckland region. There are
variations in materials: e.g. plastics, composites,
metals and ceramics. There is also a plethora of supply
chains: e.g. international metal auctions, specialist
local suppliers, specialised coatings companies varying
from owner-operated heat-treatment firms to overseas-
owned powder-coating firms, quartz (available only
from a handful of Russian producers), multinational
materials manufacturers who vary in their supply
arrangements, and local importers.
There is a wide range of firm sizes and ownership
types, from major subsidiaries of overseas corporations
to owner-operated enterprises, and very different
end-users spanning large dairy- and meat-export firms,
manufacturers, construction companies, furniture
companies, marine companies, supermarkets, offshore
materials companies, small retail companies, and
individual consumers. This variety implies differing
distribution channels and intermediaries.
Firms need to embrace value webs within networks,
whereby firms identify value-enhancing linkages with
non-traditional technologies, competencies, materials
and suppliers.
Growth drivers and constraints
The proposed innovation centre focused on the theme
of advanced materials and drawing particularly on the
R&D capabilities at the University of Auckland’s Tamaki
campus, represents a more promising path forward
for the sector. Technical skills availability is a general
issue confronting manufacturers and users of advanced
materials, and is certain to be an important issue for the
40
potential advanced-materials-focused innovation centre
in the Auckland region.
2.4.10 Food and Beverage Manufacturing
Sector definition
The food and beverage (F&B) sector comprises dairy,
meat, seafood (and aquaculture), horticulture (fruit and
vegetables), wine, other alcoholic beverages, non-
alcoholic beverages, processed foods, confectionery,
honey, eggs, etc.
Auckland appears to have a substantial number of
food and beverage companies engaged in further-
processed foods and beverages, many of which are on
a significant growth path and are also actively engaged
in exporting.
In the EFM, the ‘food and beverage’ sector is
represented across:
• Meat and meat product manufacturing,
• Dairy product manufacturing,
• Other food manufacturing, and
• Beverage,malt and tobacco manufacturing.
In 2006, the food and beverage sector:
• contributed $1,501 million (or 2.7 per cent) to the
region’s GRP, and
• made up 2.4 pr cent (or 14,533) of FTEs in the
region.
Source: EFM.
Sector trends
The food and beverage sector is the lynchpin of
New Zealand’s prosperity. It is the country’s largest
manufacturing sector by total output, and through its
contribution to a positive trade balance and the value
of its exports, which have doubled since 1990 to $15
billion per annum. The sector contributes around 10 per
cent of GDP and half of all New Zealand’s merchandise
exports by value. Therefore, the food and beverage
sector has a crucial effect on the nation’s economy.
Key findings from a study into the level of value-added
products in New Zealand food and beverage exports
included:
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• Between 2000 and 2004, value-added products
as a proportion of total exports grew nearly 10 per
cent from 44.5 per cent to 54 per cent. This is a
trend that has occurred year on year. It is expected
to see the focus on value-added products continue
into the future.
• Export revenue from food products and food
ingredients increased from $11.9 billion in 2000
to approximately $17 billion in 2007. The food
sector represents around 50 per cent of the total
merchandise exports from New Zealand.56
At 2.4 per cent, New Zealand is a significant exporter of
processed foods. No country has greater than a 10 per
cent share of world trade.
All the key markets are demanding product traceability,
driven by issues such as biosecurity, food safety,
physical security and brand/market protection.
Growth drivers and constraints
Auckland is well serviced by the tertiary sector and
crown research institutes. Those which play a key role
in the development of the F&B sector are the University
of Auckland and Auckland Uniservices, Massey
University, Crop and Food, Horticulture Research, the
National Institute of Water and Atmospheric Research
(NIWA) and AgResearch (Hamilton).
The F&B Taskforce set up in partnership with the
industry, government, science and education is
proposing the development of a Food Innovation
Network New Zealand (FINNZ). FINNZ plans to address
the various infrastructure and commercialisation
hurdles in the F&B sector across the whole of New
Zealand. Given the FINNZ establishment, early stage
commercialisation of research could be a future
opportunity and focus.
Auckland is often the head-office location for a number
of F&B companies including the wine sector which
sources its raw or primary ingredients from other
regions such as Canterbury, Hawke’s Bay, Waikato/
Hamilton and Nelson/Marlborough.
Internationally, the key trends of health and wellness,
and sustainability are reshaping how New Zealand
companies respond. Awareness of these trends has
greatly improved across the sector (especially at the
56
A Study into the Level of Value-added Products in New Zealand Food
and Beverage Exports. Report prepared for New Zealand Trade and
Enterprise. Professor Ray Winger. Institute of Food, Nutrition and
Public Health. Massey University. 2005 update.
primary sector end), which has seen some companies
now obtaining certification to show their green
credentials to world markets.
The F&B and primary sector are considered high
priority for investment over the next 2–3 years by
government. This led to the introduction of the Fast
Forward Fund ($700 million over 15 years) in 2008 to
boost innovation in pastoral and food industries. This
may mean the development of a Food Innovation
facility at Manukau specifically targeted to food
processing and fast-moving consumer goods.
Productivity (and process efficiency) needs to continue
to improve dramatically across the sector if it is to
remain competitive on the world stage. Auckland
has a key role to play given the high percentage of
manufacturing and further-processed companies based
in the region.
New Zealand Trade and Enterprise investment will
continue to be with firms and subsectors which are
actively seeking to transform themselves by moving
up the value chain (from commodity to added-value).
For example, wild catch seafood is restricted in growth
by quota coupled with a depletion of natural resources,
so the opportunity for transformation and growth of
the seafood sector must be via aquaculture. Other
opportunities are with the dairy, meat and horticulture
sectors in particular.
New Zealand Trade and Enterprise has also provided
funding to specifically support international market
development activities. This includes the Aquaculture
Strategy Market Development Activities; trade fair
participation in China, Japan and USA; and specific
projects in the meat, horticulture and wine sectors.
Sector Interview
The food and beverage sector makes up 10 per cent of
the nation’s GDP with an export revenue of $17 billion
(in the year to June 2007), and 20 per cent of all New
Zealanders are either directly or indirectly employed in
the sector according to the NZTE F&B sector manager.
F&B products are either consumed through retail or
foodservice, or are exported.
Auckland is the main location for head offices, and
the region has a substantial number of companies
engaged in further-processed food and beverages,
many of which are on significant growth paths and
actively engaged in exports. The trends of health
and well-being, and sustainability are reshaping the
41
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
sector, and the Free Trade Agreements are opening up
opportunity for co-investment.
Impediments to growth includes the availability of
labour and the standard of skills, the distance to
markets including domestic transport logistics (roading,
rail and airport), the lack of investment funds, the low
productivity levels, the lack of collaboration between
SMEs, and the fact that too many companies export but
not enough operate internationally.
In terms of export potential, there is a need for
collaboration and cooperation between firms to build
critical mass and to focus on extracting and building
new value from global value chains.
2.4.11 Aquaculture
Sector definition
Aquaculture is the practice of cultivating aquatic
organisms for harvesting and sale. Within the Auckland
region, there are 69 marine farms covering 330
hectares in total (largely mussels and oysters). There
are other ‘exploratory’ farms in the region cultivating
different species such as abalone, but they do not
operate on a commercial basis at present. The industry
in the Auckland region includes aquaculture processing
plants and a research community based at Leigh Marine
Laboratory and the University of Auckland. There are
active aquaculture industries in neighbouring regions
(Northland and Waikato) and inter-linkages between
regions.
In the EFM, ‘aquaculture’ is represented in the Fishing
sector.
The New Zealand aquaculture industry:
• produces around 0.2% of all global aquaculture
sales by weight
• produced an estimated $325 million in sales in
2005, 34 per cent being for domestic sales and
the rest being sold to the export market. The
United States is an important destination market
for greenshell mussels, while Japan dominates as
destination for salmon exports
• is the fourth-largest agricultural export earner after
dairy, meat and forestry in New Zealand
• has many firms that are niche, export-oriented with
a high degree of innovation.
Source: The New Zealand Aquaculture Strategy (2006).
42
Sector trends
The combination of an export orientation and a focus
on innovation was a factor in the aquaculture industry
being targeted under the Economic Transformation
Agenda.
The Auckland region is not amongst the largest regional
aquaculture producers in New Zealand but does have
some significant farms. It is of strategic significance to
the national industry. In particular, the sector sees the
north-east of the country as vitally important in meeting
its growth target, especially through the development
of higher-value-added species and processes. Auckland
has a range of strengths when it comes to aquaculture.
These include:
• a large and physically diverse coastal marine area
• highly productive water space
• the largest local market for aquaculture products
• being close to local and international distribution
points and infrastructure (including transport,
marketing and research services)
• warm water – Auckland’s warm temperature
waters are ideal for a range of species including
some very high-value-added species such as
kingfish.
Growth drivers and constraints
Drivers for growth in the aquaculture sector come
from global trends in the demand for protein rich
food57, and the benefits of seafood in general. The
global aquaculture industry is estimated to be one of
the world’s fastest growing primary industries. There
is recognition that catching and harvesting seafood
needs to be managed in such a manner to avoid
collapse of wild fish stocks. Technical efficiencies can
be harnessed giving the ability to control elements of
the growing conditions, in contrast to harvesting wild
stocks of fish.
The aquaculture industry has articulated a desire for
expansion of the sector in the Auckland region. The
ARC has taken an initial precautionary position on the
future management of aquaculture in the region’s
57
From United Nations Food and Agriculture Statistics, aquaculture
provided 8 per cent of global fishery production (or 11 per cent of
food fish) in 1984, and this rose to 22 per cent (or 26 per cent of
food fish) in 1996. About 59 per cent of aquaculture production (15.6
million) was from inland waters and 41 per cent (10.8 million) from
marine waters in 1996.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

coastal marine area, and is currently undertaking

consultation as it develops its policy framework.

There is also interest from within the sector to develop

land-based aquaculture (on-land farms) and polyculture
(farming two species alongside each other). Either of
these could provide significant growth in the sector,
without expansion of the area within the ‘Aquaculture
Management Area’, which is the policy tool used to
manage area under aquaculture.

Outlook

A clear growth strategy for the aquaculture industry

was articulated by the New Zealand Aquaculture
Council in 2006, in collaboration with government
departments, iwi, non-governmental organisations and
research providers. The Council estimates that total
aquaculture sales will reach $1,330 million by 2024.58
The vast majority of these ($1,038 million) are expected
be export sales, suggesting a significant shift in the
industry’s orientation towards international markets.

There is increasingly recognition for kaitiakitanga and its

importance to Mäori, whereby the cultural importance
of collecting seafood as a customary practice is
incorporated into the development of the sector. Thus,
20 per cent of any new development of an aquaculture
management area is allocated to iwi.

It is envisaged that productivity gains in the sector

will be driven from efficiencies in marine farming
and further industry innovation. There is potential
for technological change within the sector, and
also species change within the areas that are
farmed. The vision for the sector, as outlined in the
industry strategy, is to move toward high-quality
environmentally sustainable products.

There is also potential for innovative marketing, i.e.

increasing the export value of the sector by marketing
products as high-value niche foods. This has occurred
in the last year with the value of exports increasing
without an increase in the volume produced/harvested.

58
Macroplan Australia (2007). Quadruple Bottom Line Report
Aquaculture in the Auckland Region. Preliminary Draft July 2007.

43
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
3 Context of Change and Future Directions for
Auckland
This section examines the factors that drive change and
influence the future of the Auckland region’s economy.
It provides summary information on:
a. the economic drivers in the Auckland region
b. future demographic changes
c. how New Zealand society has historically adapted
and embraced changes. This provides some
context for what is likely to happen in the future, be
new technologies, or climate change policies
d. the national and regional policy context which
provides a framework for economic development
e. the views of key informants about the future focus
of regional economic growth, and drivers and
constraints, and
f. economic aspirations of the community: the views
of Mäori, Pacific and Asian communities around
economic issues.
3.1 The changing nature of the
Auckland region: Key economic
drivers of change
Auckland’s economy, its industries and firms are
influenced by a number of economic drivers of change.
These drivers can be global, national or local. They
are interconnected and do not operate in isolation but
culminate in a complex manner, with responses to
the drivers taken at individual, business, industry and
governmental levels. Those responses are shaped by
Aucklanders’ attitude to change, which are highlighted
in Section 3.3. Considering the drivers of Auckland’s
recent economic growth helps understand the future
prospects for the regional economy. This section
provides an overview of what the main economic
drivers of the Auckland economy are thought to be in
the future.
44
3.1.1 Global, national and local economic
drivers
The global drivers include:
• international business cycles
• international markets for commodities and money
• consumer demand for New Zealand products, and
• multi-lateral international agreements.
The level and use of technology also has a profound
impact on the economy, and changes regarding
technological development are perhaps the most
certain, yet unpredictable. For example, recent
advances in information and communications
technology have been instrumental in the development
of new business models, driving significant productivity
gains.
The national drivers of the Auckland region economy
have evolved with both formal (legislation) and informal
(norms within society) institutions, which directly
affected the patterns of economic development.
Included in the national drivers which are of particular
relevance to Auckland (but this is by no means a
definitive list) are:
• immigration policy
• local government legislation
• infrastructure and energy policy, and
• the skills and innovation levels within the country.
The local drivers affecting the Auckland region
economy include:
• infrastructure: Auckland is New Zealand’s most
important cargo and transport centre with the
nation’s largest port, and the country’s largest
airport in terms of passenger numbers and cargo
throughput
• levels of public and private investment in
construction: investment catalyses activity in the
region, initially in the construction sector but with
flow-on effects to other sectors
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• educational institutions and opportunities for young
people
• demand for housing and residential services in a
region with sustained population and urban growth
• agglomeration effects: evident with urban growth,
making Auckland an attractive region for business
and financial services, and
• certain industries which benefit from economies
of scale, relative to other locations in New Zealand,
choosing to locate in the region.
3.1.2 Structural factors affecting the
Auckland economy
Evidence shows that city-regions play an important role
in economic growth. The benefits of agglomeration
mean that large, densely populated areas are often
more productive and innovative, and have greater ability
to attract people, capital and activity. Auckland, as the
largest city-region in the country, is no exception.
Auckland’s economy has many of the characteristics
which one would expect to see in a successful regional
economy:
• A major national gateway: The region is the major
gateway to and from New Zealand. About three-
quarters of New Zealand’s imports and 40 per
cent of exports pass through either the Ports of
Auckland or Auckland International Airport. 70 per
cent of all international visitors to New Zealand
arrive at and depart from Auckland International
Airport.
• A commercial hub: Despite there being a large
number of small firms in the region, Auckland
is also home to two-thirds of the country’s top
200 companies and 35 per cent of its firms
overall. In this sense, Auckland is New Zealand’s
commercial hub. In addition, the region has a large
share of the nation’s employment in high-income
service sectors and in many sectors of national
significance, as discussed in Section 2.
• A key education and research centre: Auckland
dominates the New Zealand education industry.
Approximately one-third of the total national
education industry is located within the region,
and a number of regional universities and tertiary
institutes have campuses or satellite campuses
here (unique in the New Zealand context). It
supports an innovative research community,
which is known for excellence in biotechnology,
environmental science, material science, and
health and medicine.
Despite having these characteristics in its favour, other
aspects of the regional economy provide clues as to
the reason for Auckland’s low productivity growth by
international standards – although it is worth noting
that low productivity levels are a national issue, rather
than solely a regional one. Over the last twenty years,
two-thirds of the economic growth in New Zealand was
generated by increases in the number of hours worked,
and only one-third from increased labour productivity.
This explains New Zealand’s limited improvements in
income per capita.
While the Auckland region enjoys higher labour
productivity than the rest of the country, it remains low
compared to the OECD average.59 A number of reasons
can be cited in relation to this national issue that also
affects Auckland. In a nutshell, they include:
• A small domestic market and geographic
remoteness: The 2004 International Monetary
Fund Selected Issues report attributes half of
the difference in annual gross domestic product
growth between New Zealand and the OECD
average between 1971 and 2002, to geographic
isolation.
• A high proportion of small and medium enterprises:
The regional economy remains dominated by small,
domestically focused and locally owned firms.
Small firms tend to be the least active in areas
which will help lift New Zealand’s productivity,
including research and development, skills
development, and global engagement.
• Low level of capitalisation: New Zealand has
limited levels of private sector investment.
• Skills shortages: Over the past six years, New
Zealand businesses have consistently reported
difficulties in finding labour, especially skilled
labour. The economy is facing capacity constraints,
although this might be somewhat softened by the
current economic slowdown.
• Low level of private sector investment in research
and development: Business expenditure on
research and development is only about 0.5 per
59
New Zealand Treasury paper, 2008
45
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
cent of gross domestic product, which is low
by OECD standards. Public sector expenditure
on research and development accounts for
approximately 1.15 per cent of gross domestic
product.
• Deficient infrastructure: Adequate transport, energy
and telecommunications infrastructure are all linked
to productivity gains.
• A limited global engagement: Two of the biggest
clues to our poor record of global engagement are
low levels of export growth and outward foreign
direct investment.60
This last point, given its importance as a driver of
economic prosperity, is examined in more depth in the
next section.
The way the region addresses the issues listed above
will be critical in defining our economic futures.
3.1.3 Signs of internationalisation of the
regional economy
As discussed above, exports are a major driver of
economic growth and of productivity gains. Given
the size of New Zealand’s market, international
engagement is vital to lift the economic bar. The
New Zealand Institute, in a number of recent reports,
provides the following remarks on New Zealand’s
export performance:
• ‘Although early colonial New Zealand may have
been a trading nation, it has had a much weaker
record of international engagement in recent
years. Although we have enthusiastically adopted
liberal trade and economic policies, New Zealand
firms have been slow to take on opportunities in
the global marketplace. New Zealand is the only
OCED country that has gone backwards in terms of
internationalisation since 1990.’
• ‘Exporting is important for small countries like New
Zealand that do not have large domestic markets
to fall back on. New Zealand’s share of world trade
has dropped from 0.28 per cent in 1980 to 0.22 per
cent in 2004. Had New Zealand’s exports matched
the growth rate of world trade since 1971, our
exports would be 66 per cent higher than they are
60
For further details, please refer to the ‘Background paper to the
Metro project’, Ascari 2006.
46
today. The scale of export activity is also limited.
Only 50 New Zealand firms exported more than
$75 million worth of goods and services in 2005.
New Zealand firms that operate internationally
do not tend to generate the shareholder returns
achieved by domestic firms.’
• ‘One of the main reasons for this poor export
performance has been an inability to ‘move with
the times’. The composition of New Zealand’s
exports looks similar to twenty-five years ago,
and remains dominated by land-based (particularly
agricultural) exports. A large portion of our ‘top
20’ export categories in 1980 were still on that
list in 2004 and still accounted for 60 per cent of
New Zealand’s goods exports. Emerging sectors
such as the wine, information technology and
biotech industries do not yet comprise a significant
share of New Zealand’s exports (wine exports, for
example, represent just 1 per cent of total exports,
despite the rapid export growth of this industry).
In addition, few improvements have been made to
the value-added component of traditional exports.
New Zealand ranks only 29th out of 30 OECD
countries in terms of the share of manufactured
exports that are either high tech or medium-high
tech, and it has the largest share of low-tech
manufactured exports in the OECD, with a share of
70 per cent.’
The New Zealand Institute paints a very alarming
picture. It is difficult to fully gauge the contribution
the Auckland economy makes to the national trade
balance due to a lack of official export data at a regional
level. However, there are clear signs that the regional
economy has become increasingly oriented towards
foreign markets. Many new industries have emerged
over the past decade and have grown strongly (for
example, software, biotechnology, electronics,
marine, education exports, media/film and wine), all
contributing to the region’s export portfolio.
Here we examine the industrial composition of the
Auckland region’s economy over the last twenty years,
with a special interest to the markets they serve in
order to assess the extent to which the economy has
become more globally oriented.
A trend analysis of industry sectors outputs between
1986 and 2001 using regional input–output models
reveals significant changes in the market orientation
of some industry sectors in the region.61 Industry
61
McDonald, G.W. and Patterson, M.G. 2008. Auckland’s Economy
and its Interactions with the Environment: Insights from Input-
Output Analysis. NZCEE Research Monograph Series – No. 10.
Palmerston North: NZCEE
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

sectors are segmented according to the markets they future. Section 3.2 provides a review of those dynamics
serve: intermediate demand, local market, or export and their effects on the region. In the future, given
market (to include overseas and the rest of New changes in demographics, a higher proportion of
Zealand). In 1986, the air transport sector was the only economic growth needs to be generated by productivity
significant regional industry sector serving the export improvements. This change will require New Zealand
market. However, by 2000/01 a number of industry to lift its rates of capitalisation and its total factor
sectors based in Auckland had also become significant productivity. In addition, the potential for big economic
exporters, including basic metal manufacturing; growth gains is limited unless Auckland can increase
textile and apparel manufacturing; beverage, malt and its access to global markets and international export
tobacco manufacturing; rubber, plastic and chemical activity.
products manufacturing; and machinery and equipment
manufacturing. The challenge for the Auckland region in the next 25
years is to become an ‘internationally competitive,
In 2006, eleven regional industry sectors produced inclusive and dynamic economy’. Increasing
exports valued at more than $300 million, as shown in globalisation, the opening up of the New Zealand
Table 9. economy to free trade agreements, the emergence
of wireless systems and economies provides
Table 9: Largest exporters by industry sector in opportunities and challenges for the region. Auckland’s
Auckland, 2006 position and function within the Australasian region
will clearly influence its economic growth potential
$m Export Gross and how it chooses to go global. Despite being the
output largest regional economy within New Zealand, it does
Air transport, services to transport & not enjoy the same status within Australasia, being
storage 1,175 4,519 comparable to Brisbane or Perth, rather than Sydney or
Machinery & equipment Melbourne.
manufacturing 919 1,905
Other food manufacturing 659 2,319 Successful innovation, particularly in the sectors of
Wholesale trade 595 11,708 comparative growth, is fundamental to this success.
Dairy produce manufacturing 583 1,319 The region by 2031 is expected to become more
Textile & apparel manufacturing 432 854 outward focused, more export-oriented, and supported
Basic metal manufacturing 426 1,036 by a highly innovative workforce. The sectors that
Accommodation, restaurants & bars 402 1,577 will drive the region’s economy will have a strong
Business services 369 11,707 focus around niche, high-tech value-added activities.
Transport equipment manufacturing 322 1,354 It is expected that they will include ICT and related
Rubber, plastic & other chemical subsectors (creative and digital content), specialised
manufacturing 317 1,774 manufacturing (including advanced materials, marine
and advanced foods), and health technologies (including
Note: export includes exports overseas and to biotechnology).
regions outside Auckland
Source: Auckland region Economic Futures Model While this argument may be controversial, agriculture
is expected to remain the backbone of the New
This provides some perspective into the evolving Zealand economy, albeit with more processing
regional export performance. However, it is clear that taking place on our shores. Although the primary
New Zealand businesses need to be more active in sector is not very prominent in the Auckland region
their international engagement for New Zealanders to (except for horticulture), its significance to the New
fully benefit from globalisation. Zealand economy will impact on the Auckland region
economy through inter-linkages with other sectors of
the economy. Given global trends in food shortages,
high food prices and the need for food security, New
3.1.4 Future drivers Zealand needs to retain its comparative advantage.
This requires New Zealand businesses to focus on
The primary driver of economic growth in the Auckland innovation and raising productivity in an environmentally
region in the last ten to fifteen years has been sustainable way.
population growth. Demographic dynamics will still
determine much of the Auckland region’s economy’s

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
The international trends of health and wellness, and
sustainability have become a major market force,
at least in rich countries. It is forcing New Zealand
businesses to rethink how best to position themselves
in the global market. While these trends impact most
sectors, their effects are most felt in the food and
beverages industry where there are strong consumer
pressures for healthy food and for products with low-
carbon footprint. Despite a resurgence of business
resistance to climate-change policies in the rise of the
current international financial crisis, it is anticipated
that the trends started in the 1990s towards more
environmentally friendly production processes will
continue in the next 25 years. Sustainability will be
a major driver of economic and employment growth
in the next 25 years. Issues around rising oil prices,
emissions-trading schemes, carbon footprints, climate
change and the Kyoto Protocol will continue to
influence consumer behaviour and preferences. They
will shape future businesses practices and encourage
productivity growth and innovation through the
development and application of new technologies and
practices.
3.2 Future demographic changes in the
Auckland region
As mentioned earlier, population growth has been the
primary driver of economic growth in the Auckland
region since the mid 1990s. Demographics will
continue to have a major impact on the region’s labour
supply and on household consumption levels, and thus
on future economic growth rates. This section therefore
focuses on anticipated demographic changes and their
likely impacts.
3.2.1 Population in 2006
In 2006, there were 1.37 million people living in the
Auckland region, that’s a third of all people in New
Zealand. The region’s population grew by 12.4 per cent
between 2001 and 2006, making it the most rapidly
growing region in New Zealand. Nearly half (49.6 per
cent) of the overall national population growth during
this period occurred in the Auckland region. Over the
decade from 1996 to 2006, growth in the Auckland
region has accounted for over half (57.2 per cent) of the
total national population growth.62 Approximately 55 per
62
Auckland Regional Council (2007).
48
cent of the population increase between 2001 and
2006 was the result of net gains from migration (both
from within New Zealand and from international
immigration) and 45 per cent was due to natural
increase (births minus deaths of those resident in the
region).
Figure 9: Age-sex structure, Auckland region and
New Zealand (shaded) (2006)
Males Females
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5- 9
0- 4
5 4 3 2 1 0 1 2 3 4 5
Percentages
Source: Statistics New Zealand 2006 Census
Auckland has a relatively young population compared
to New Zealand as a whole. As shown in Figure
9, Auckland is overrepresented in all age groups
between 15 and 49 years (especially for those aged
between 15 and 30 years) when compared with New
Zealand’s national profile. This reflects the region’s
prominence as a central location for immigration, study,
employment and family formation. On the reverse, the
Auckland region has a relatively smaller proportion of
people aged 50 years and over when compared with
the national profile. This suggests out-migration by
people in these groups to other centres for life-style
reasons and retirement.
Ethnic data needs to be interpreted with care as total
responses add up to over 100 per cent. At the last
census, the majority of the residents of the Auckland
region identified themselves as New Zealand European
(56.5 per cent).63 This proportion has decreased quite
dramatically from previous years, dropping from 75.1
per cent in 1991. While this is partly a result of the
separate classification of ‘New Zealander’ in the 2006
census, it also reflects the growth of other ethnic
groups. The greatest increase of any ethnic group was
of those of Asian origin. In 1991, 5.5 per cent of the
region’s population identified themselves as Asian. A
decade later, this figure reached 13.1 per cent and by
63
ARC (2007).
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Table 10: Ethnic groupings in Auckland region, 2006

Total responses Ethnic group as Total Auckland region’s

Auckland region a % of Auckland responses, population as a %
region’s population New Zealand of NZ total
NZ European 698,622 56.5 2,609,589 26.8
Asian 234,222 18.9 354,552 66.1
Pacific Peoples 177,936 14.4 265,974 66.9
Mäori 137,133 11.1 565,329 24.3
New Zealander 99,258 8.0 429,429 23.1
Middle Eastern/ Latin American/ African 18,555 1.5 34,746 53.4
Other ‘Other’ Ethnicity 648 0.1 1,494 43.4
Total People 1,237,239 — 3,860,163 32.1

Note: This data includes only those who specified at least one ethnicity (i.e. ‘not elsewhere included’ responses are
excluded from the calculation). Total percentages add up to more than 100% because people could identify with more
than one ethnicity.

Source: Statistics New Zealand 2006 Population Census

2006 it had grown to 18.9 per cent. This change is the
result of rapid increases in immigration, especially in
the mid 1990s and then again early in the new century.
This is accentuated by the fact that Asian migrants
tend to settle in the Auckland region. In 2006, Auckland
was home to two-thirds (66.1 per cent) of those of
Asian ethnicity in New Zealand. Pacific populations
also continued to increase as a proportion of the total
Auckland population, from 11.9 per cent in 1991 to
14.4 per cent in 2006. This increase is mainly the result
of natural increase. The period saw only modest levels
of immigration from the Pacific Islands to New Zealand
as well as some return movements to the Islands.
Although the number of Mäori in the Auckland region
has increased between each census, the proportion
has remained relatively stable at around 11 per cent.
3.2.2 Population and labour force projections
The latest ARC medium population projections
indicate the regional population could reach 1.9 million
by 203164. This would see an increase of around
500,000 people, or 40 per cent more than our current
population of 1.37 million. This means that 38 per cent
of all those residing in New Zealand in 2031 would live
in the Auckland region, increasing the significance of
the city-region as the main population and employment
centre in the country.
While the rate of population growth remains high by
all standards, the pace of growth is not expected to be
as high as previously experienced (see Table 11). The
reason behind this slow-down in population growth is
a lower replacement ratio in the coming years. With
an ageing population, mortality rates are expected to
increase while fertility rates are expected to decrease
due to the growing trend for women to build their
careers and have children later in life. Migration, on the
other hand, is much more difficult to predict; however,

to 2031 it is assumed that there will be a growing demand

worldwide for skilled migrants and this may result in
the numbers of migrants slowing down in the next few
The main demographic trends in the region for the next years compared with the strong growth in the past.
25 years are:

• fast population growth, yet at a slower pace than

that of the past 15 years

• an ageing population, and

• a more ethnically diverse population.

64
Medium population projections, Auckland Regional Council 2008

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Table 11: Auckland region’s population 1981 to 2031*

1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031
Population (millions) 0.82 0.88 0.95 1.08 1.22 1.37 1.48 1.60 1.71 1.82 1.93
% change between periods 7.2 8.3 12.9 13.0 12.6 8.2 7.7 7.1 6.5 5.9

* Actuals 1981 to 2006 and medium ARC projections 2011 to 2031

Source: Auckland Regional Council

In line with other developed countries, the process • the Asian population may grow by 75.6%, and
of population ageing is occurring in New Zealand.65 • the European and other population may grow by
Projections indicate that by 2031 the median age of only 7.4%
the region’s population is expected to rise from 34
years (in 2006) to 38.4 years, and the proportion of the This trend would dramatically change the composition
population aged 65 years and over could increase from of the labour force in Auckland, and presents
9.8 per cent to 17.1 per cent. The relative proportional both opportunities and challenges for the region’s
changes across all age groups of the Auckland region businesses. As a note of caution, the ethnic population
is evident below, with the expansion of people in age dataset sums to 110% of the total regional population
groups over 50 years, and a corresponding contraction as respondents are able to associate with more
of younger age cohorts. than one ethnicity. This creates issues for the ethnic
projections summarised above.
Figure 10: Structure of population for the Auckland
region in 2006 (shaded) and projected for 2031
(lines)
3.2.3 Impacts of demographic changes
Males Females
85+
80-84 The demographic trends outlined above will have
75-79
70-74
noteworthy impacts on domestic demand, as
65-69
60-64
well as on the availability of labour. They present
55-59 both opportunities and challenges for the region’s
50-54
45-49 businesses and governing authorities.
40-44
35-39
30-34
25-29
The growing population will continue to fuel growth in
20-24
15-19
the domestic market filtering through to the wholesale
10-14 trade and retail services, construction and community
5- 9
0- 4 services. However population-driven economic growth
5 4 3 2 1 0 1 2
Percentage of population
3 4 5
is anticipated to be lower than that of the recent past.
Hence Auckland businesses will increasingly need to
Source: Statistics New Zealand 2006 Census and ARC look to new and existing export markets for business
population projection model opportunities.

The ethnic mix is also predicted to change over the
period. Between 2006 and 2021, the Mäori, Asian
and Pacific Island populations are predicted to grow
at a faster rate than the ‘European and other’ groups
(Statistics NZ medium growth rate projections). By
2021:
• the Pacific Island population may grow by 43.8%
• the Mäori population may grow by 28.8%
65
This refers to the gradual rise of the average age of the population,
and is caused by lower fertility rates and decreased mortality rates
(people are generally living longer) resulting in an increase in the
median age of the population, and in the number and proportion of
older people.
In addition to a lower population growth rate than
previously experienced, demand in the domestic
market will be somewhat hindered by the change
in the population’s age profile. Those aged 25 to 49
years old represented 58.7 per cent of the regional
labour force population in 2006. As these people are
in their biggest income-earning years of life, this is a
considerable driver of household consumption, and
therefore of domestically driven economic growth.
As the regional population is ageing, the proportion
of those aged 25 to 49 years old in the labour
force is expected to reduce to 54.3 per cent of the
population in 2031. This change may impact household

50
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Figure 11: Projected age spread of Auckland regional labour force, 2006 and 2031
70.0
58.7
60.0
54.3
50.0
40.0
30.0
21.3
20.0 17.8
15.4
10.0
0.0
15 to 24 25 to 49
Source: Statistics New Zealand (2008): based on resident population in the labour force at June 2006
consumption levels which can be expected to decrease
in the next 25 years, suggesting more limited domestic
growth opportunities. However, some industry sectors,
such as health and community services, will benefit
from the ageing of the population.
Another impact of the population becoming older is
that the labour market will grow at a lower rate than
the population growth rate. This will increase the
dependency ratio (i.e. the proportion of those in work
supporting those not in work), and the population’s
ability to pay for publicly funded services and
infrastructure.
The ageing of our population will also impact on the
size of the labour market. In 2006, 68.5 per cent of
Auckland’s total population was of working age; in
2031, this proportion is expected to decrease to 64.7
per cent.66 This suggests a need for more flexible
work and employment practices in order to maximise
labour participation rate, and retain older workers in
the workplace. This relative contraction of the labour
force may also lead firms to substitute capital for labour
and to be increasingly dependent on global sourcing
of labour. Migration will remain an important source of
skilled labour in the region. However, given the global
trend in ageing, the competition for talents with other
countries will be acute.
The labour force will become, on average, older and be
very ethnically diverse. The changing face of the labour
force will present both opportunities and challenges for
the region’s businesses. With the ageing population,
66
Working age: those aged 15 to 65
2006
2031
24.3
6.0
2.2
50 to 64 65 and over
it is anticipated that people will remain in work for
longer, suggesting a need for constant upskilling to stay
employable and productive.
Moreover, given Auckland’s ethnic composition,
a greater diversification of the labour force is also
projected for the region by 2031. Ensuring high
skills and participation levels of all ethnic groups
will be essential in a labour force that is contracting
comparatively to the population.
3.3 Societal adaptation to changes:
lessons from New Zealand history
The state of the regional economy is affected by
a number of global, national and local drivers, as
discussed in the Section 3.1. Many of those drivers are
exogenous: we have limited control over factors such
as migration trends, climate change, energy prices, the
introduction of new technologies, global commodity
prices, international money markets, foreign demand
for our products and services, or geo-political
alignments.
While future changes cannot be controlled nor
predicted, we can be certain that change will occur,
be it in an incremental fashion or in a cataclysmic way.
Here are a few past examples of change that could
happen again:
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• Economic shocks: global economic downturns in
1958, 1973–79, 1987, 1991, 1999 and 2008.
• Energy shocks: geo-political situations result in
upheaval to energy prices in 1973 and 2007.
• Climate shock:
• Changing global perception of ecological issues
(e.g. 1970s, 2005) and effect on products (new
technologies replacing old waste technologies),
carbon emissions etc.
• Specific climate shocks, such as the summer
of 1998 and resulting serious infrastructure
failure.
• Technology shock: radical changes due to
computerisation, growth of web-based economy
and wireless technologies.
• Political shocks: world wars, Britain entering the
European Community, ‘nuclear fallout’ in 1984, and
an increase in global terrorism with political and
military responses from 2000.
• Natural phenomena: such as SARS, and the
tsunami in 2006.67
While we cannot predict changes, the way we react
to, adapt to or anticipate these changes has significant
implications for the future state of our economy.
This section provides some insights into how New
Zealanders, and in particular Aucklanders, have adapted
to specific changes in the recent past. This provides
some context for how unforeseen changes (caused
by shocks) could be responded to, and thus how
economically resilient the region and the country could
be in responding to change.
Adaptation to change is a social institution, dependent
on the norms within the community or society at any
given time. Institutions structure economic, political and
social activity, by providing incentives and disincentives
to behaviour. One cannot make sense out of economic
facts and figures in isolation, for an understanding of
behaviour within the economic, social and political
spheres is required. Within a society as ethnically and
culturally diverse as Auckland, there will not be one set
of social norms, but a diversity of norms in operation
at any point in time. However, there are discernible
historical trends of behaviour and reactions to incidents
which could provide indicators for behaviour in the
future.
67
Kudos Ltd, 2008
52
A strong trait of the regional population is its mobility.
Aucklanders have responded to various economic
shocks by migrating en masse to foreign countries,
notably Australia and the UK, or to other parts of the
country.
Some historical and current examples which reveal
Aucklanders’ social norms are:
• The 1998 power outages resulting from a weak
and unreliable infrastructure.
• The poorly focused education sector which
resulted in skill shortages for certain industries.
• The investment infrastructure, which has in recent
years resulted in capital investment in housing and
property, rather than investment in sectors with
higher employment and value-added potential.
• The divergent response to 1990s immigration,
which resulted in diversity within Auckland but also
in opinion.
• The response to connectedness issues, given
lagging mobile and broadband services.
• Lack of robust industry clusters resulting in
volatility in, for example, film and television, and
food manufacturing.
• Political will and lack of shared narrative, resulting
in competing Auckland messages.
In the future there is the potential for societal
resistance to change. These can be brought about by:
• Social divisiveness: generational, political,
philosophic, cultural
• Lack of vision: when pragmatism hits a wall, where
next?
• Leadership: for example, clear (Lange 1984) or
unclear (Lange 1987)
• Decision-making skills as a society:
• The way we frame objectives: Is it economy
versus environment? Is it progress versus
heritage? How do we frame our choices and
objectives?
• Do we have clear, efficient processes for
listening, consulting and reaching decisions?
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• Do we have fair systems for redressing poor
decisions?
• Social fractiousness: due to weak perceived levels
of fairness, amenity or safety.
• Weak structures: that are ill-suited for change.
However, there is a set of conditions to prepare for
change, to create a sustainable economy that can adapt
to change and is resilient:
• People need a sense of safety that enables
them to be free from the fear of crime. This
sense of safety occurs through formal and
informal interaction with their neighbours and
the development of a strong community spirit,
as well as a sense of belonging and attachment
to the Auckland region. Their sense of belonging,
participation and safety is reinforced through
the region’s amenity value, as evidenced by
Aucklanders’ regular use and enjoyment of
Auckland’s built environment and the quality of the
region’s unique natural environment.
• Aucklanders need to know that they are being
heard through effective consultation and that
they can participate effectively in decision-making
processes that affect Auckland’s well-being, while
also recognising the need for effective and resilient
leadership with vision.
• People require an income that sustains them,
while providing opportunities for investing in their
personal growth so enabling their continuing
contribution to Auckland’s economy and society.
• The sense of belonging and the ability to
participate is enforced further through the provision
of and access to services and facilities that
support Aucklanders and visitors in their day-to-day
activities. Ease and affordability of access to both
hard and soft infrastructure facilities determine
the ability and effectiveness of participation in all
activities within Auckland. Unaffordable or difficult
access to services and facilities deters participation
and leads to social disengagement and unrest.
3.4 The policy context
As a rapidly growing centre undergoing change, the
Auckland region is facing a range of interconnected
issues not previously grappled with by other New
Zealand centres.
A number of integrated strategies will influence how
economic development takes place. The national and
regional policy context affecting this issue is outlined
next.
3.4.1 National policy framework
In the 1980s, New Zealand moved rapidly from a
relatively closed economy based on a small number of
trading partners to an open market-based economy.
Through this period, the focus was on providing a
relatively limited set of broad-based, sector-neutral
interventions. The government’s role was seen as
establishing fair rules for the game and little more.
In the late 1990s there was a growing sense that this
approach to industry and economic development, while
important, was not sufficient in itself. It became clear
that if New Zealand was to improve its economic well-
being, it needed to participate more effectively in an
increasingly dynamic global environment.
This required an economy built on innovation and
entrepreneurship, and there was a concern that New
Zealand lagged in the development of a knowledge
economy. The government has therefore pursued a
more active economic development policy with greater
recognition of the need to partner with key actors
within the economy.
The Growth and Innovation Framework guided
economic development between 2002 and 2006.
This strategy emphasised that the foundations of the
economy needed to be sustained and strengthened,
and that these foundations include a stable
macroeconomic framework, an open and competitive
micro-economy, sound environmental management,
and a more cohesive society.
The Framework highlighted the importance of
enhancing innovation, paying attention to skills,
improving global connections and focusing effort in
specific sectors. It identified three areas of focus
where special attention was warranted: biotechnology,
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
information and communications technology, and
creative industries.
This explicit focus on three sectors was a first step
towards a more targeted government effort in areas
that could influence economic growth. These areas
were seen as important for building capability across
the whole economy.
Today, these fundamentals are continued through
the Economic Transformation Agenda. The Agenda’s
priorities may differ, but the goal is still the same:
to lift the living standards of New Zealanders
through innovation and by raising productivity in an
environmentally sustainable way.
The Economic Transformation Agenda was one of three
priorities for New Zealand announced by the Labour
government in 2005; the other two were ‘Families –
Young and Old’ and ‘National Identity’.
Economic Transformation is about government
working to transform New Zealand’s economy into
a thriving and internationally competitive market
economy that is both innovative and creative with a
highly skilled workforce, and that provides a unique
quality of life to all New Zealanders.
In December 2007, the government announced a
sharper focus on its Economic Transformation Agenda,
by identifying six priorities that will work to advance the
economic transformation agenda. These priorities are:
1. World class infrastructure: improving access to
quality, fast, reliable broadband services
2. Environmental sustainability: positioning New
Zealand as a world-leading exponent of smart and
innovative responses to environmental issues
3. Innovative and Productive Workplaces:
underpinned by developing workplace skills, with
an emphasis on basic literacy and numeracy
4. Growing Globally Competitive Firms: supporting
New Zealand businesses to go global and extract
full value from the global supply chain
5. Focusing government investment: in areas that
reflect and extend New Zealand’s strengths, and
6. Auckland an internationally competitive city:
transformed, Auckland will become the home of
globally competitive firms supported by a first-class
pool of skilled labour. Auckland will be seen as one
54
of the best places in the world to live, do business
and visit.
Families – Young and Old is about all families having
the support and choices they need to be secure and be
able to reach their full potential within New Zealand’s
knowledge-based economy.
Five sub-themes underpin this vision:
1. Strong families
2. Healthy confident kids
3. Safe communities
4. Better health for all
5. Positive ageing
National identity is about New Zealanders being
able to take pride in who we are, where we live, and
what we do through our arts, culture, film, sports and
music, as well as by way of our appreciating our natural
environment, understanding of our history and of our
stance on international issues.
Four sub-themes underpin this vision:
1. Who we are
2. What we do
3. Where we live
4. How we are seen by the world
Government has a strong interest in Auckland’s growth
and development. Therefore it has established the
Auckland-based Government Urban and Economic
Development office, a shared policy office with
staff from the Ministry of Economic Development,
the Ministry for the Environment, the Ministry of
Transport, the Ministry of Agriculture and Forestry, the
Department of Internal Affairs, and the Department
of Labour. The office recognises the interdependence
of many issues faced by Auckland, and aims to bring
greater focus on Auckland perspectives in central
government policy-making.
Government innovation investment
The government proposes to target innovation
investment within the themes of sustainable bio-
economy and building capabilities to support niche
high-tech sectors.
Sustainable bio-economy is about maintaining and
extending the value gained from New Zealand’s
strengths in pastoral and food production. The New
Zealand Fast Forward partnership between government
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

and industry will transform the pastoral and food the entertainment and health sectors and distance
sectors through a series of major projects. The areas of learning.
focus are:
• Health technologies: Health technology and service
• Sustainable pastoral systems: New Zealand innovation deployed for leading health delivery.
maintains its leading position in sustainable
pastoral productivity and procession.

• Added-value foods: Firms export added-value 3.4.2 Regional Strategic Framework

food products that deliver high margins by a
combination of factors such as consumer brand
appeal and significant new technology.
• Environmental solutions: Environmental verification
and mitigation of the impact of pastoral and
added-value food production to give New Zealand
products and firms an international advantage and
maintain market access.
The Auckland Regional Council coordinates a
variety of regional strategies affecting economic
development and has an Economic Development
Unit that undertakes targeted regional economic
development activities. The following is a diagrammatic
representation of the main strategies and tools that set
the bones of the policy framework for the Auckland
region.

New Zealand needs to build firm capabilities to support

niche high-tech sectors, and this is supported by high
technology platforms in the New Zealand Research
Agenda. The New Zealand Skills Strategy seeks
to support skills development in a number of high-
technology industries. Early indications point towards
the following areas of focus in the Auckland region:
• Application of materials technologies: Use
materials in new and innovative ways, such as
in plastics, marine and packaging, to improve
the productivity and profitability of high-value
industries.
• Digital content and tools: Develop New Zealand’s
strong international reputation and core capability
to capture global market niches. This encompasses
Auckland Sustainability Framework
The Auckland Sustainability Framework has been
developed with the support of the Auckland Regional
Growth Forum. It is a joint project by all the local
authorities of the Auckland region. The concept of
sustainability lies at the heart of this framework: it
acknowledges social, cultural, environmental and
economic interdependencies, and the need to work
within ecological limits.
The Framework’s 100-year vision and long-term
goals facilitate effective long-term planning and allow
for ongoing review of challenges and responses.
It is flexible enough to allow for the fact that some
shifts, especially those that challenge current societal

Figure 12: Regional Strategic Framework for Auckland Economic Futures

Vision and long

Auckland S us tainability Framework
term goals
Regional
Strategic direction R GS R LTS AR E DS Policy
Statement
Delivery
M etro
One Plan Programmes

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

norms, could take a generation to achieve. It also
accommodates shifts that could be achieved within a
decade and suggests a number of short- and medium-
term strategic responses. Shifts are significant or
fundamental movements that must occur in our social
values and expectations, and systems and processes
needed in order for the changes to occur.
A recent review of progress (Growing Smarter, 2007)
showed an urgent need to move faster and more
effectively to implement the RGS.
Auckland Regional Economic Development
Strategy (2002)

The framework focuses on developing a resilient The AREDS vision for Auckland’s economic future is:
region that can adapt to change by building strong ‘Auckland is an internationally competitive, inclusive
communities and robust ecological systems, and and dynamic economy, a great place to live and
by designing flexibility into the Auckland regional conduct business; and a place buzzing with innovation,
economy, infrastructure and buildings. where skilled people work in world-class enterprises.’
To achieve this vision, eight platforms were identified,
The framework identifies eight goals for achieving the with both outward- and inward-facing focuses.
vision:
Table 12: AREDS platforms
1. A fair and connected society
2. Pride in who we are Outward focus Inward focus
3. A unique and outstanding environment
• Promoting the • Providing a high quality
4. Prosperity through innovation
Auckland region living environment
5. Te puawaitanga o te tangata
6. A quality, compact urban form • Encouraging • Building an entrepreneurial
7. Resilient infrastructure, and innovation and culture
8. Effective, collaborative leadership. excellence
• Producing a skilled and
• Developing overseas responsive labour force
This long-term framework is used to guide and assess
markets
the alignment of regional strategies, including the • Delivering a high
Auckland Regional Economic Development Strategy • Supporting exports quality and responsive
(AREDS). government

Source: AREDS, 2002

Auckland Regional Growth Strategy 2050
(1999)
The focus of the strategy is a more compact
settlement pattern with growth focused in a network
of vibrant, walkable centres offering a diverse range
of services and facilities connected by high-quality
passenger transport. Underlying principles of the RGS
are:
• intensified development in parts of the city where
public transport and other services can be provided
more easily
Metro Project Action Plan (2006)
In 2006 the Metro Project Action Plan was developed
to give life and effect to the AREDS vision for
Auckland’s economic future. The role of the Metro
Project is to integrate existing and new regional
activities into a single transformational economic
delivery plan that reflects best practice around
five key action-plan objectives. It also aims to align
these objectives with the government’s Economic
Transformation themes.

• preservation of other areas so that they can The objectives of the Metro Project Action Plan are to:
develop in ways that retain their character and
values, and 1. take effective and efficient action to transform
Auckland’s economy
• development of identified areas outside the current
city limits that will accommodate future growth. 2. develop world class infrastructure and world class
urban centres

3. transform Auckland in to a world class destination

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
4. develop a skilled and responsive labour force, and
5. increase Auckland’s business innovation and export
strengths
Auckland Regional Land Transport Strategy
(2005)
The Auckland Regional Transport Strategy (ARLTS)
sets the high-level objectives and policies that
govern the transport network in the region. It aims to
increase travel choices for Aucklanders by providing
and encouraging reliable, attractive and accessible
alternatives to car travel. Recognising that transport
has a major impact on the spatial development of the
region, recent revisions of the strategy have attempted
to ensure that it complements the Regional Growth
Strategy. The successful development of the transport
network in the region is key to overcoming some
existing economic development barriers.
A range of players, including the Auckland Regional
Transport Authority, plan, fund, build and maintain
different parts of the transport network in Auckland.
The current strategy sets out an estimated $11 billion
of transport funding over the next 10 years, of which
approximately 62% is allocated to roading, 34%
to passenger transport, and 4% to travel-demand
management.68
Regional Policy Statement
The Regional Policy Statement’s purpose is to manage
the use, development and protection of the natural and
physical resources of the region. It also clarifies the
respective roles of the agencies with responsibilities
under the Resource Management Act (RMA) in the
Auckland region. The Regional Policy Statement
is currently being reviewed with notification of the
reviewed document expected in 2009/10.
One Plan (2008)
One Plan is a single strategic framework and plan of
action for the Auckland region. In the short term, it
is about delivering better on existing decisions and
commitments and setting a clear direction for how the
region plans to achieve its aspirations for sustainable
development. Longer term, it is about making and
implementing better decisions. Those decisions will
68
Auckland Regional Land Transport Strategy 2005
be guided by the Auckland Sustainability Framework’s
vision of a resilient region that can adapt to change.
The three objectives are to:
1. mplement seven programmes of action to drive
the region forward in the short term
2. develop an infrastructure plan (by August 2009),
based on an inventory of currently identified
priorities, and
3. identify other priority areas that address important
challenges and opportunities for inclusion in future
versions of One Plan.
The seven programmes of action will contribute
to the goals and shifts described in the Auckland
Sustainability Framework, support central government
policy platforms to make a significant difference, be
transformational and be both regionally and nationally
significant in scale and impact.
The One Plan’s seven programmes of action are:
1. Improving public transport
2. Completing the network
3. Digital Auckland
4. Destination Auckland
5. CBD/Waterfront
6. Building communities
7. Growth through skills
3.4.3 Summary of strategic themes
There is a strong focus in national and regional policy
on ensuring that the workforce has the skills necessary
to drive future economic development.
The government is undertaking interventions in the
following high-growth-potential sectors:
• sustainable bio-economy, including added-value
foods and sustainable pastoral systems
• creative industries, including digital content and
tools
• advanced materials, such as in plastics, marine and
packaging
• environmental solutions, and
• health technologies, including biotechnology.
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
There is significant activity around building firm
capability and the ability to meet the challenges of
internationalisation in niche high-technology sectors.
Investment in infrastructure focuses on transport and
broadband.
Building Auckland’s international competitiveness is
also a priority of government policy.
Regional policy intervention is aligned with the national
focus. There is additional focus in the region on
infrastructure development and the transformation of
the Auckland region as a world-class visitor destination.
3.5 Stakeholder consultations
In order to augment and confirm the knowledge on the
drivers of the regional economy, be it research or policy
documents, a number of stakeholders were consulted
through group meetings and one-on-one interviews in
June and July 2008. The interviewees can be divided in
two broad groups: those with in-depth knowledge of a
‘priority’ industry sector for the region,69 and those who
have a good overall understanding of the region’s or
local economy.
A complete list of interviewees is provided in Appendix
4, and a summary of the interviews in matrix format as
Appendix 5. The interviewees were asked to comment
on:
• Auckland’s regional economy compared with the
New Zealand economy
• the Economic Transformation Agenda and its
potential for the Auckland economy
• major sectors or industries driving the regional
economy
• emerging and decreasing sectors, and
• the key drivers of growth and/or impediments to
growth.
It is worth noting here that most interviewees had a fair
understanding of the regional economy in the near-
to-medium future (usually out five years at the most),
given known and proposed investments planned for
69
One of the sectors that are thought to be driving growth within the
Auckland region
58
the region. However, interviewees were cautious about
predicting longer-term trends and events.
3.5.1 General Interviews
General interviews were conducted with the region’s
territorial authorities and economic development
agencies, central government, the Auckland Chamber
of Commerce, the Employers and Manufacturers
Association, the Council of Trade Unions and a
representative of the Exporters Incorporated.
Current sectors of growth
Most territorial authorities identified the strong
population growth over the last 25 years as the major
driver behind local economies. This has been reflected
in the strong growth in retail, construction, education,
health and community services sectors to serve a
growing local population base. Very strong growth
was also experienced in the business services sector,
largely reflecting the overall growth in the economy,
and was more prominent in the CBD and CBD-fringe
areas.
Manufacturing continues to be a major part of the
regional economy, although most of the people
interviewed see this sector, especially low-value,
high-volume manufacturing, declining in the future as
operations move closer to markets. This is seen as not
necessarily a bad thing for the region as most of the
higher-end-value manufacturing will be retained; this
includes design and R&D.
The tourism sector has also performed strongly and
the future potential for this sector in the region was
seen as significant. Given that 70 per cent of all visitors
to New Zealand pass through Auckland, the challenge
now for the region is to move away from Auckland
being the gateway to New Zealand to Auckland being
the destination, with world-class and boutique visitor
offerings. A number of initiatives are currently being
implemented to this end including an Auckland brand
and the ‘Bringing the World to Auckland’ strategy.
Certain sectors are more established in some areas
of the region than others. The following sectors were
identified by each of the territorial authorities as
particularly strong in their area:
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
• While employment in North Shore city is currently
concentrated in retail and business services, there
is a growing specialised manufacturing and high-
tech sector. The city’s economy was also viewed
as having a niche sport and health sector.
• Waitakere city interviewees highlighted the
importance of the marine and film industries to the
city’s economy, and of specialised manufacturing.
• The key point of difference for Auckland city is
the CBD with its concentration of business and
financial services. The city also has strong creative
and advanced materials sectors.
• Manufacturing is the largest employer in Manukau
city. It has a dynamic food and beverage industry
with solid growth prospects.
• In the rural parts of the region, agriculture and
horticulture sectors are still very prominent.
Franklin district is considered the food bowl of
the region and sees this as a key growth sector in
the future, especially in the higher-end side of the
food industry. Aquaculture is seen as a significant
industry in Rodney district and is also considered
to have a good growth outlook, particularly for land-
based aquaculture.
Future growth sectors
The sectors identified to be prominent in each of the
respective territorial authorities above are the same
sectors which the interviewees identified as future
growth sectors. Most see these sectors as having the
potential to lead the Auckland region economy in the
future. The identified future growth sectors are:
• advanced materials
• marine
• food and beverage
• digital content
• creative
• ICT
• biotech, and
• aquaculture.
In addition, the more traditional sectors such as
tourism, business services, construction and retail are
expected to continue to drive growth in the Auckland
region’s economy over the next 20–25 years.
The ageing population is also going to have implications
on the region’s economy, particularly on health
services. Aged care, currently a small sector in the
economy, is expected to become significant given the
ageing population.
Environmental solutions and green technologies is
also an area expected to be significant in the future
given the drive for sustainability and towards a greener
environment.
On the downside, all those interviewed foresee
that high-volume manufacturing, including clothing
manufacturing, easily substitutable products and heavy
manufacturing, will decline in the future as these move
offshore to be closer to their main markets.
Investments and events
The lead up to the Rugby World Cup and the actual
event in 2011 is expected to provide a much needed
impetus to the current economic downturn. The
impacts are to be most pronounced in the tourism and
retail sectors. Interviewees foresee that the tourism
sector will also be greatly boosted with the help of
proposed additional amenities such as a convention
centre and/or cruise ship terminal. The retail sector is
expected to be boosted from late 2009 onwards as the
effects of the tax cuts are felt.
The major infrastructure plan developed for the region
is expected to be the driving force behind growth in
the construction, business services and communication
services sectors. The plan will include investment in
the waterfront, in roads, rail electrification, broadband,
energy, and tourism amenity. Broadband in particular
will be given priority over the next five years with
the deployment of broadband in the region. All were
identified by interviewees as essential for the region’s
future economic growth.
The New Zealand Innovation Centre and Precinct at
Tamaki, with an initial focus on advanced materials
and R&D in materials manufacturing, is seen as an
important initiative of the government’s economic
transformation agenda for a high-value niche and
knowledge-intensive sector. The priority placed on
high-value niche sectors such as marine, creative,
digital content and biotechnology will also enable the
transformation of these sectors within the Auckland
region.
For the primary sector, the recently announced
Fast Forward Fund by government, intended to
boost innovation in pastoral and food industries,
could potentially lead to the establishment of a food
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
processing centre in the region. This will greatly assist
development of the food and beverage sector.
Impediments
Impediments to growth identified by the interviewees
have been well canvassed in the region’s strategic
planning documents. These include:
• Skills: continues to be an issue of concern for
most businesses in the region. The ability to attract
and retain the right skills mix, the effective use of
migrant skills and future skills needs are issues of
real concern for most businesses in the region and
they are likely to hamper efforts to transform the
region into a knowledge-intensive and innovative
economy.
• Infrastructure: deficient infrastructure in the region,
in particular transport /logistics, roading, water,
energy, and broadband, also remains an issue of
concern. These infrastructure issues need to be
seriously addressed if the region is to become an
internationally competitive and dynamic economy.
• Size: the small scale of the domestic market
and size of firms is prohibiting growth. This
reinforces the need to look to new and existing
export markets for business opportunities, and for
businesses to collaborate, build capabilities and
increase commercialisation.
• Regional governance: is greatly affecting business
operations in the region. The Metropolitan Urban
Limits, consents process, compliance costs,
constrained business land and development cost
are all issues identified by the interviewees as
impeding growth in the region.
• Investment capital: a lack of capital and limited
government investment in the region is also
another issue identified by interviewees as limiting
growth in Auckland. Most see Auckland as the
driving force behind the New Zealand economy,
yet this is not reflected in the level of government
investment in the region.
• Demographics: the ageing population and slow-
down in the population growth compared with the
past is expected to affect growth in the region in
the future.
The country’s low productivity levels was also an issue
identified by the interviewees, as was uncertainties
60
around the impact of the emissions trading scheme
and how this will affect businesses.
3.5.2 Sector-specific interviews
Sector-specific interviews were conducted for a
number of key sectors in the Auckland region.
Interviews were held for the following sectors:
• creative, with NZTE sector manager
• specialised manufacturing, which includes
marine and advanced materials, with NZTE sector
manager
• ICT, with NZTE sector manager
• food and beverage, with NZTE sector manager
• biotechnology, with NZTE sector manager
• retail, with the New Zealand Retailers Association
• logistics, with Ports of Auckland, Auckland
International Airport, and Keene and Nagel
• dairy, with Fonterra
• construction, with NZ Property Council, and
• health, with the Auckland Regional Public Health
Service.
Interviews for some of the sectors were undertaken
as part of the research work commissioned for this
project. These sectors and reports commissioned
were:
1. ‘Understanding the Business Services Sector in the
Auckland City-Region’ by ASCARI partners
2. ‘The Outlook for Tourism in the Auckland region’ by
Covec Limited, and
3. ‘Rural economies in the Auckland region –
Examining the transformational potential’ by
ASCARI partners.
These sector-specific interviews have been compiled
into Section 2 of this report on industry analysis. For a
summary of the interviews, please refer to Appendix 5.
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
3.6 Future prospects: a view from
Mäori, Pacific people and Asian
communities.
3.6.1 Economic Futures of the Pacific people
and Asian communities
Community sector interviews were conducted with
representatives of the Pacific people community and
the Asian community. The material summarised next
provides at a glance the interviewees’ aspirations
for their communities. However, it does not provide
a comprehensive understanding of the place of
these communities within Auckland society and the
economy. Further research would help refine the
potential future involvement of these diverse and
varied communities in the Auckland economy.
Pacific Community
Every community aspires towards an improved
quality of life for its people through improved outputs
and incomes, better quality employment, better
housing, better health, personal safety, and access to
education. These were the main issues identified by
the interviewees for the Pacific sector who saw that
the key to achieving an improved quality of life was to
ensure that all, rather than a few, segments of society
move up the prosperity ladder. Interviewees viewed
the Economic Futures Project as a good starting point
to reinforce Pacific people’s contribution to economic
development in the region with the identification of
economic sectors of growth through which Pacific
people can add the most value.
Some of the key sectors identified where Pacific
people can make the most contribution to economic
development in the Auckland region include:
• Tourism development, leveraging on Auckland’s
multicultural population. An idea brought forth was
setting up a Pacific Cultural Centre here similar to
the one in Laie Hawaii which could provide that
extra impetus for travellers to stay another night
in Auckland. Cultural economic development has
yet to be fully realised in the region and events
to capitalise on Auckland’s multicultural identity
need to be promoted and enhanced. For example,
the annual Pasifika festival is unique to Auckland
and could be developed into an internationally
recognised event.
• Pacific people are very creative and there is great
potential for them to contribute to the economic
development of the region in the creative
industries. However, a number of constraints seen
to be hindering their full potential: most lack initial
capital or financial support to implement initiatives,
and there is a lack of access to formal training as
well as low levels of educational achievements for
Pacific people.
• Entrepreneurship is also an area where Pacific
people could increase their contribution with
the help of improved educational achievements.
The Ministry of Pacific Island Affairs and Pacific
Trust recognise this potential and are currently
continuing work on SME start-ups to assist Pacific
people develop small businesses.
• Sports development is an area where Pacific
people are fully engaged and where they may
continue to provide a significant contribution given
Pacific people’s natural physique and talent in this
area.
• Social services are expected to continue to grow
in the region with the large percentage of Pacific
people here in Auckland and with the ageing
population. Social services include services
to health and education undertaken by non-
government organisations, community groups and
others.
Given current skills levels, constant upskilling is very
important for Pacific peoples to fully engage and/or
re-engage back to communities and to the working
environment. As such, education support and training
programmes are expected to increase.
Cultural obligations were identified as prohibiting
economic growth for Pacific people, although this can
be mitigated with increased income levels. Therefore,
a growing economy with employment opportunities
and increased incomes will help the Pacific people
meet their cultural obligations as well as improve their
quality of life. The challenge is to ensure that they are
not left behind but have a leading role in the economic
development of the Auckland region.
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
Asian Community
A great majority of Asian migrants tend to settle in
Auckland where employment and businesses are
concentrated. However, the interviewee does not
foresee that the Asian population as predicted is
going to overtake that of the Mäori population in the
Auckland region. Asian migrants are largely dependent
on government policy on skilled migrants as well as
educational opportunities. For most Asian migrants,
the language barrier is the major obstacle to finding
employment in their area of expertise and, as a result,
most become self-employed or are employed in low-
skilled employment.
Asians tend to participate more in education and also
perform well. International student numbers are on
the upswing and are expected to increase further,
with most students settling in the region if they find
employment.
In businesses, networks already exist and there may
be further opportunities opening up with the Free Trade
Agreements with China and other countries in the
Pacific–Asia rim.
For the Asian community, the key sectors where the
Asian population are concentrated in the Auckland
region include:
• Retail: Asians are self-motivated and tend to
pursue business opportunities, with most new
migrants setting up small businesses, mostly in the
retail trade.
• Hospitality and property development: again, most
own their own businesses in these industries.
• Professional services: accountants, lawyers and IT
specialists are also on the rise.
It is perceived that Auckland will remain the driving
engine for the New Zealand economy. There are a lot
of human resources from both the Asian and Pacific
communities that could be utilised better. These are
their greatest assets – the available level of human
resource. This, however, would require high-level
research and strategy with regards to the effective
engagement of these communities in the economic
development of the Auckland region.
62
3.6.2 Mäori aspirations
The information summarised here comes from two
sources:
1. interviews conducted in 2006 with senior
representatives and leaders of Ngati Wai, Ngati
Whatua, Pare Hauraki and Tainui as part of the
development of the Metro Action Project Plan, and
2. review and analysis of the following reports and
follow-up interviews with some of the report
writers:
• ‘The Context for Mäori Economic
Development: A background paper for the
2005 Hui Taumata’. Prepared by The NZ
Treasury.
• ‘Mäori business and economic performance’
2005. A summary report for Te Puni Kokiri by
NZIER.
• ‘Mäori Commercial Asset Base’ 2007. A
report by Te Puni Kokiri.
• ‘ForMäori Future Makers’ 2007. A report by Te
Puni Kokiri.
It should be noted that Te Puni Kokiri will release by
the end of 2008 a report on the role of Mäori in the
economic future of New Zealand and the Auckland
region. While Te Puni Kokiri’s input in the project would
have been very valuable, they were not available for
interview. We will review the in-coming report in
due course and adjust the economic scenarios and
modelling results as appropriate.
The material gathered from the interviews conducted
for the Metro Project Action Plan provides little explicit
information on what the interviewees consider to be
key economic sectors for Mäori in the region. However,
there was consensus that the region needs to focus on
developing its infrastructure in order for it to compete
in the global economic markets and that iwi/Mäori
have a role in developing the region’s infrastructure
and in particular, infrastructure for supporting Mäori
businesses to develop and grow.
These interviews also identified innovation and skills
as investment areas critical to Mäori, and Auckland’s,
economic development. Currently large numbers of
Mäori are in unskilled or semi-skilled occupations.
However, this is slowly changing as a result of
investment in skill and professional development in
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
certain sectors, resulting in approximately 10% of
employed Mäori classified as professionals.
The reports provided a high level overview of Mäori
economic wealth and contribution to New Zealand’s
GDP over the last decade. When economic futures was
discussed, it was frequently within the national context
and in the context of how Mäori can build on their
entrepreneurial and creative talents, their leadership
strengthens, and their strong and increasingly global
cultural identity.
Forty per cent of Mäori investment in New Zealand
is in the trade and service sectors. These sectors are
generally seen to be less volatile than the primary
sectors (which have been experiencing general long-
term downward price trends since the 1990s) and than
the manufacturing and construction sectors. They are
also viewed as providing more stable and full-time
employment for Mäori . More specifically, much of this
investment is in the property and business services,
transport and storage, health and community, and
education – these sectors employing close to two-
thirds of all Mäori. Investment is mainly driven by
individuals starting up a business and by Treaty of
Waitangi settlements.70
Discussions with report writers identified the following
key sectors offering Mäori and the region a strong
economic future focus and opportunities:
• Health-care provision and the associated health ITC
sector
• Mäori involvement in health-care provision
will grow strongly for three reasons:
Auckland’s Mäori population is growing in
size, fewer older Mäori are returning to their
ancestral lands so Auckland is becoming their
turangawaewae, and Mäori are starting to
want health care from a Mäori perspective.
• This growth in health care will lead to more
Mäori becoming involved in health-based ITC
technology and a growth in Mäori participation
in biotechnology products and bioactives
existing in New Zealand’s native fauna and
flora.
• Health-based ITC technology will provide Mäori
with the possibly of exporting this technology
and its indigenous health-care services and
programmes to other indigenous peoples.
70
Mäori Commercial Asset Base – TPK 2007
• With more Mäori aging ‘at home in Auckland’,
there could be a rise in the number of Mäori
retirement villages.
• Tourism and cultural services
• This growth is likely to reflect Auckland Mäori
providing cultural services for tourists and
visitors, encouraging people to experience
Mäori cultural entertainment programmes
and dinners in Auckland rather than travel to,
say, Rotorua. This will also result in tourists
spending an additional bed night in Auckland.
• Educational sector
• There is anticipated growth in the wänanga
(tertiary education) sector and the number of
wänanga and private educational providers.
Their goals are twofold: to get Mäori back to
and to keep Mäori in education.
• The first goal involves encouraging Mäori
(particularly young males) who have left school
with minimal or no educational qualifications
and low skill levels back into the educational
sector through Mäori tertiary education
providers.
• The second goal involves encouraging young
Mäori school-leavers into tertiary education
that is appropriate and suitable for them
rather than leave school with minimal or no
qualifications.
• Mäori tertiary educational providers are likely
to be either registered wänanga or private
educational providers.
• Financial services and property market
• This will remain a significant sector for
Mäori. Investment will be driven by the fact
it provides Mäori with a strong asset base
in New Zealand’s biggest and only truly
internationally connected city. Investment in
this sector is more a focus on a strong and
safe investment portfolio.
• Digital content and creative sectors
• These growing sectors have the potential
for Mäori to create a niche market that
reflects their creative and cultural talents
and expertise. Investment in these sectors
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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

by Mäori is predicted to remain low until the for Mäori moves to other professions such as
sector has proved itself. However, this will not environment law, environmental conservation
inhibit Mäori involved in the sector. and management.

• The digital and creative sectors will help define
the role of Mäori, particularly in the creative
sector and especially in front of the camera.
Such roles will raise the profile of Mäori both
locally and internationally, and ensure they are
participants than being just the subject matter.
• Low-value manufacturing
If Mäori are to truly participate in New Zealand’s and
Auckland’s economic future then Mäori need to be
better represented in the marine sector, as scientists,
engineers and resource management consultants.

• Growth of the digital and creative sectors In conclusion, the success of the Auckland region’s
is seen as a key enabler in growing Mäori economic future does rely on the participation of
involvement and investment in the ITC health- Mäori and on their capacity and skill to participate and
care and tertiary education sectors. encourage investment in existing and emerging sectors
that will contribute to the region’s economic future.
• These sectors are also crucial for the growth of
social networks and social network platforms.
These are now acknowledged as important
drivers of economic growth and development.
If the social network side can be integrated
with economic development, then Mäori will
be able to more freely participate in economic
growth.

• Marine

• This is likely to be a key sector of growth for

Mäori, particularly in three areas:

1. aquaculture and marine farming

2. development of high-tech marine

engineering and manufacturing facilities,
and

3. greater participation in the application of the

RMA, and in particular how it applies to the
marine sector, rather than Mäori being ‘just
a party to consult with’.

• Recreational services

• This sector will continue to be strong and will

continue to grow, particularly as it is significant
for Mäori health-care and is a key component
in Mäori social networking.

Areas of lessening Mäori involvement and therefore

lessening role in economic futures:

• Law

• It is likely that there will be a lessening in the

numbers of Mäori law graduates as the focus

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4 Appendices

Appendix 1:
Auckland Region Economic Futures Project Steering and Advisory Group Members
Name Organisation
Steve Wilcox Waitakere City Council
Gill Plume North Shore City Council
Angela Goodwin Rodney District Council
James Robinson Auckland City Council
Geoff Cooper Auckland City Council
James Rowe Manukau City Council
Phyllis Anscombe Franklin District Council
Lucy Baragwanath AucklandPlus
Evelyn Marsters AucklandPlus
Ram Padullaparty New Zealand Trade and Enterprises
Eemun Chen Ministry of Economic Development
Michael Tucker Auckland Regional Council
Carole Canler Auckland Regional Council
Catherine Murray Auckland Regional Council
Penelope Tuatagaloa Auckland Regional Council

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Appendix 2: Concordance relating ANZSIC Codes to the 48 Input-Output Industries

Industry Sector Corresponding 6-Digit ANZSIC Code
1 Horticulture and fruit growing A011100-A011990
2 Livestock and cropping farming A012100-A012500, A015910
3 Dairy cattle farming A013000
4 Other farming A014100-A015300, A015930-A016990
5 Services to agriculture, hunting and trapping A021200-A022000
6 Forestry and logging A030100-A030300
7 Fishing A041100-A042000
8 Mining and quarrying B110100-B110200, B131100-B142000,
B151400-B152000
9 Oil and gas exploration and extraction B120000, B151100-B151200
10 Meat and meat product manufacturing C211100-C211300
11 Dairy product manufacturing C212100-C212900
12 Other food manufacturing C213000-C217900
13 Beverage, malt and tobacco manufacturing C218100-C219000
14 Textile and apparel manufacturing C221100-C226200
15 Wood product manufacturing C231100-C232900
16 Paper and paper product manufacturing C233100-C233900
17 Printing, publishing and recorded media C241100-C243000
18 Petroleum and industrial chemical manufacturing C251000-C253500
19 Rubber, plastic and other chemical product manufacturing C254100-C256600
20 Non-metallic mineral product manufacturing C261000-C264000
21 Basic metal manufacturing C271100-C273300
22 Structural, sheet and fabricated metal product manufacturing C274100-C276900
23 Transport equipment manufacturing C281100-C282900
24 Machinery and equipment manufacturing C283100-C286900
25 Furniture and other manufacturing C291100-C294900
26 Electricity generation and supply D361000
27 Gas supply D362000
28 Water supply D370100
29 Construction E411100-E425900
30 Wholesale trade F451100-F479900
31 Retail trade G511010-G532900
32 Accommodation, restaurants and bars H571010-H574000
33 Road transport I611000-I612300, I661100-I661900
34 Water and rail transport I620000-I630300, I662100-I662900
35 Air transport, services to transport and storage I640100-I650900, I663000-I670900
36 Communication services J711100-J712000
37 Finance K731000-K734000
38 Insurance K741100-K742200
39 Services to finance and investment K751100-K752000
40 Real estate L771110-L772000
41 Ownership of owner-occupied dwellings N/A
42 Business services L773010-L786900

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Industry Sector Corresponding 6-Digit ANZSIC Code

43 Central government administration, defence, public order and safety M811100, M812000-M820000,
services Q963100-Q963300
44 Local government administration services and civil defence M811300
45 Education N841000-N844000
46 Health and community services O861100-O872900
47 Cultural and recreational services P911100-P933000
48 Personal and other community services D370200, Q951100-Q962900, Q963400-Q970000

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Appendix 3: Concordance relating ANZSIC Codes to the Industry Sectors of Interest to the
Auckland region
Industry Sector Corresponding 6-Digit ANZSIC Code

J712000, K731000- K734000, K741100- K742200, K751100-K752000,

Business and financial services
L773010-L786900.

Retail G511010-G532900

C2841, C2842, C2849, C2852, F4613, F4614, F4615, J7120, L7831, L7832,
ICT
L7833, L7834, C2839, F4612

C242100, C242200, C242300 C243000, P911100, P912100, P912200,

P924100 , P924200 , P925100 , P925200, P925900 , L782100, L785100,
Creative
L785200, L786900, Q952300 , C221500 , C222900 ,C232900, C261000 ,
C262900 ,C294100 G525900

C243000, P911100, P911200, P911300, P925100, P924100, J712000,

Digital content
L782900, L783100, L783200, L783300, L783400, N844000,P924200

G511010-G532900, H571010-H574000, I611000-I612300, I661100-I661900,

Tourism I620000- I 630300, I662100- I662900, I640100- I 650900, I663000-I670900,
N841000-N844000, P911100-P933000

I611000-I612300, I661100-I661900, I620000-I630300, I662100-I662900,

Transport, transport services and logistics
I640100-I650900, I663000-I670900

A0301, B1101, B1200, C2121, C2129, C2161, C2182, C2183, C2331, C2543,
Biotechnology
C2544, L7810, L7829, N8431, O8611

C221200, C222100, C222300, C221500, C253300, C276200, C276300,

Marine C276400, C276900, C282100, C282200, C283900, C284200, C285900,
C286600, F461400, F461900, G524500, L782300

C221200, C232100, C232200, C253300, C256100, C256300, C256400,

C256500, C256200, C254200, C256600, C261000, C263200, C264000,
Materials
C271200, C271300, C272100, C272200, C272300, C272900, C273300,
C273100,C273200

C211100-C211300, C212100-C212900, C213000-C217900,

Food and beverage manufacturing
C218100-C219000

Aquaculture A042000

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 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

Appendix 4: Interviewees for the Auckland region Economic Futures project

Organisation / sector Name Designation
Auckland Chamber of Commerce Michael Barnett Chief Executive
Auckland City Council James Robinson Economic Strategy Manager
Stephen Cavanagh Investment Manager
Janet Schofield Business Development Area Manager
Auckland International Airport Limited John McShane Environment and Planning Manager
Don Huse Chief Executive Officer
Auckland Regional Public Health Service Andy Roche Policy, Planning and Reporting Analyst
Ron King GIS Consultant
AucklandPlus Susan Milner Manager, Business Capability and International
Connections
Clyde Rogers Group Manager
Asian community representative Pansy Wong Member of Parliament
Council of Trade Unions Peter Conway Policy Director / Economist
Creative sector Dame Cheryll Sotheran Sector Director, NZ Trade and Enterprise
Employers & Manufacturers Association Bruce Goldsworthy Manager, Advocacy Services
Peter Atkinson Executive Officer, Advocacy Services
Enterprise Franklin Development Trust Astrid Lambert Chief Executive
Lynda Fleming Economic Advisor
Enterprising Manukau Gaelle Deighton Chief Executive
Enterprise North Shore Terry Hoskins Chief Executive
Exporters Inc. Lyall Pacey Member & Manager, Export Actions
Franklin District Council Phyllis Anscombe Policy Team Leader
Fonterra Dr Eric Hansen Senior Advisor, Strategy and Growth
GUEDO (MED) EeMun Chen Senior Policy Analyst
Tanya Perrott Chief Advisor
ICT, Food & Beverage, Specialised Ram Padullaparty Strategic Research Analyst, NZTE
Manufacturing and Biotechnology sectors Adam Bennett Regional Manager, NZTE
Kuehne & Nagel John Payne Manager
Pacific Economic Development Agency Mose Saitala Director

Manukau City Council Filemoni Timoteo Manager, Economic Development

Mäori Tipa Campain Mäori Planner - Kaiarahi
Ministry of Pacific Island Affairs Fuimaono Tuiasau Principal Analyst
North Shore City Council Roger Matthews Group Manager, Economic and Community
Planning
NZ Retailers Association Russell Sinclair Northern Regional Manager
Ports of Auckland Limited Wayne Thompson Chief Financial Officer
Property Council of New Zealand Connal Townsend Chief Executive
Rodney District Council Peter Vari Manager, Policy Planning
Warren Maclennan Assistant Chief Executive
Paul White Manager, Strategic Projects
Anthony Dow Manager, Economic and Community
Development
Angela Goodwin Policy Planner
Rodney Enterprise Development Trust Valerie Freeman Chief Executive Officer
Waitakere City Council Steve Wilcox Manager, Economic Development
Waitakere Enterprise John Wadsworth Chief Executive

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Appendix 5: Summary of interviews with key regional stakeholders for the Auckland region’s Economic Futures Project

Current and future sectors of growth Key Drivers/Investments Impediments/Threats Emerging Sectors Declining Sectors
Auckland City Key point of difference for Auckland city is the Investments proposed: Impediments include: Growth sectors: Declining sectors:
Council CBD. • New Zealand Innovation • Skills shortage • Environmental solutions • High-volume
Precinct (Tamaki) – focus on • Infrastructure – water, • Digital content manufacturing
Main sectors: advanced materials congestion, shape of Auckland, • Health solutions and • Heavy
• Business services – financial and • Convention Centre broadband, reliable energy biotech manufacturing
professional • Cruise ship Terminal • Constraints on business land • Marine
• Education (MUL) • Advanced materials
• Strong ICT sector • Cost of land • ICT and creative
• Creative – stronger than rest of country • Community resistance to • Financial services
• Tourism including cafés and restaurants intensification around the CBD • Food and beverage
• Manufacturing headquarters more • Demographics – ageing • Production and distribution
concentrated here • Lack of capital • Retail
• Advanced Materials • Lack of investment • Business services
See great future for Auckland – very positive infrastructure especially from • Renewable energy
central government • Tourism
AucklandPlus NZ is a commodity-based market and Film and TV – investors Impediments: Declining sectors:
Auckland servicing the commodity sectors. interested • Management structure of firms • Low-end
• Inability to attract international manufacturing
Main sectors in the region: investment • Impact of carbon
• High-value-added manufacturing • Scale and size of firms – lesser miles – could impact
• Pastoral – bio sector extent due to networks long-haul tourism.
• Digital content – screen post-production • Consents process –compliance
• Advanced materials (industrial materials) costs
• Health technology – instruments • Fragmentation of effort in
• Marine – over 50% of superyachts built in different sectors – collaboration
Auckland needed to exploit networks and
• Food and beverage horizontal opportunities
• ICT – more than 50% employed in Auckland

Currently building capabilities across the

region – looking at global value chains

Horizontal relationships are now more

Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

important (previously vertical relationships)

 Current and future sectors of growth Key Drivers/Investments Impediments/Threats Emerging Sectors Declining Sectors
Asian Many Asian migrants self-employed and Free trade agreements some Language seen to be a major
Community setting up small businesses. potential there. impediment for Asian migrants to
fully engage in the community and
Largely engaged in the following sectors: Human capital – great
in the economy.
• Retail potential to tap into the Asian
• Property development and real estate community for needed skilled Lack of support groups for new
• Hospitality workers. migrants.

Professional services also on the increase e.g. Education – Asians more

accountancy, lawyers engaged in education and also
perform well.
Chamber of Main sectors in the region: Investments proposed: Major impediment seen to be Emerging sectors: On the decline is low-
Commerce • Manufacturing – higher end • Infrastructure – waterfront, skills, now and for the next 5-10 • High niche products cost labour-intensive
• Tourism – moving from gateway to road, rail years, especially for engineers, • High-value end of the food manufacturing.
destination • Tourism – amenities project managers, etc.. chain
• Research – changed with growth in • Broadband
Continued population growth
Universities • Energy – depends on
government strategy
Growth industries seen to be in Fashion,
• Research – innovation
Film, Design, Research
centres by Universities
Key sector will be food. Franklin considered
food bowl for the region.
Council of Trade Current and future sectors of growth seen to Labour force very important Impediments in the region: Those identified as sectors of Low-value
Unions be those identified in government’s Growth driver of economic growth. Infrastructure – congestion, growth. manufacturing as is
and Innovation Framework: Need both skilled and semi- broadband, etc. currently happening in
skilled workers. the economy.
• High value manufacturing Human capital
• Biotechnology Manufacturing will continue
• ICT to be important to New
• Creative Zealand, especially higher-end
• Food and beverage manufacturing.
Employers & Main sectors: Services driving regional Impediments: Emerging sectors seen to Declining sectors
Manufacturers Manufacturing has changed – more economy: • Low productivity levels be in: moving offshore or
Association specialized manufacturing now. Advanced business services. • Exchange rates (high NZ dollar) • Food and beverages – closing down mainly
• Attitude – businesses reluctant higher-end and niche in:
Dairy/agriculture will remain an important Central and local government to expand markets, e.g. wine • Manufacturing – in
sector in NZ. – sets business environment • Attraction and retention of the • Marine particular, apparel.
to large extent. right skill
Construction had very strong growth. • Forestry
• Business environment – too
Public sectors – health and education.
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

much compliance
Agribusiness. • Energy situation
• Supply of business land

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Current and future sectors of growth Key Drivers/Investments Impediments/Threats Emerging Sectors Declining Sectors
Exporters Inc. Growth sectors: Need to increase air freight Impediments: Niche markets – key Traditional exporting of
Should focus on what we get off the land capacity. • Exchange rate raw materials – need
– that is where New Zealand’s competitive • Low productivity rates to add value.
Sea freight – whether
advantage is. • Resource Management Act –
enough product to export.
compliance costs
Higher-end manufacturing
Growth in tourism. • Stable domestic demand
Food products of all types • Economies of scale in logistics
• Shortage of skills
Communications (www) and banking services • Price of land
– impacts on people’s ability to export.
Franklin District Main sectors: Investments: Impediments:
Council • Agriculture – exporters, processing, organic, Innovation centre – target • Transport / Logistics
dairy growers, R&D, processing and • Water
• Horticulture high value. • Emissions trading scheme
• Poultry, piggery, cut flowers • Strategic location – rural context
• Services to agriculture
• Tourism – food boutique
• Construction – supply of aggregate
• Equestrian community
• Manufacturing – NZ Steel
GUEDO (MED) National priorities: Investments: Impediments: Green technologies Manufacturing – low
• Environment solutions • Broadband • Public investment – limitation of value.
• Advance materials • Fast Forward Fund vision, scale and size
• Advance foods • NZ Innovation Centre • Regional governance
• Health solutions –Tamaki. • Connectivity – closing the gaps
• Digital content • R&D tax credits (transport, communication, use
• Pastoral solutions • Urban development of migrants)
• Transport works • Skills – some groups lacking
• Rugby World Cup 2011. behind
• Urban amenity not competitive
Manukau City Main sectors: Investments: Impediments: Emerging sectors:
Council • Manufacturing is a large employer • Food Innovation Centre • Land cost and availability • Quick moving companies
• Construction – driven by population growth • Tertiary sector precinct • Productivity issues • Digital content
• Transport and storage – close to airport • Tourism – initiative around • Skills
• Tourism – not quite there yet gateway. Regional tourism
• Food and beverage – big sector with huge development
potential • Construction works
• Community services – ethnic population • Innovation and production
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
 Current and future sectors of growth Key Drivers/Investments Impediments/Threats Emerging Sectors Declining Sectors
North Shore City Sectors of growth: Key driver: Niche value products. High volume
Council • Health – services, hospitals and auxiliary Educated labour force manufacturing.
• Sport – niche sport health/medicine
• Hi tech – niche manufacturing and ICT
• Education

Current main employer – retail and business

services.
Pacific Sector Main sectors: Investments: Major impediments:
• Tourism – cultural economic development • Education support and • Low skills levels.
yet to be fully developed by the region, e.g. training programmes • Cultural obligations – can be
Pasifika festival unique to Auckland • MPIA and Pacific Trust work mitigated by increased incomes
• Social service delivery – Pacific island on SME start-ups
service provision, non-government
organisations, services to health and
education
• Small businesses
• Sports – natural physique.
• Creative arts – great potential
Rodney District Main sectors: Treaty settlement – huge Impediments: Emerging sectors: Again, low-value
Council • Property services, construction, retail – investment of government • Infrastructure – roading, • Information technology manufacturing is
driven by population growth money. wastewater. service provision. closing and moving
• Retail – strong competition from North • Lack of zoned business land • High quality protein food – offshore.
Shore malls. • Ability to fund developments use IP
• Agriculture – high value organics, vineyards • High environmental standards • Farming techniques –
• Aquaculture – especially land based has • Workforce skills harnessed
high yield. Need to integrate environmental • Security of power supply • Freight train transport
outcomes • Fast reliable broadband • Renewable energy – tidal
• Tourism – boutique tourism power Kaipara Harbour
• Digital – key sector especially in animation
• Business services
Waitakere City Main sectors: Drivers: Impediments: Emerging sectors: Declining sectors:
Council • Retail, Social and Community services, • Businesses of typical scale • MUL • Specialist manufacturing – • Clothing
Construction – serving growing population. and innovation /R&D, niche • Skills a big issue heating manufacturing
• Manufacturing – metal/light engineering, competitive. • Limited finance for council • Environmental technology • Easily substitutable
plastics and packaging • Change driven by exports • Medical plastics products
• Marine – industry underestimated • Land availability and SH18 • Green Technology
• Film – small employer but high value-added and SH20 transport link • Aged Care
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08

• Education • Change in occupation mix

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Sector Sector Performance
Biotechnology Employs approximately 3000
people.
Core R&D companies generated
revenue of $280m in 2006.
Attracted $300m overseas
investment in past five years.
Auckland accounts for 34%
of the nation’s biotechnology
expenditure and 34% of its
income.
The number of organisations
increased 15% from 2004/05 and
by a further 30%, 2005–7
FTEs increased by 20%, 2004/05.
Export revenues grew by 30%,
2004/05.
Majority of growth from private
sector consistent with vibrant
industry in strong growth mode.
The number of biotechnology
patents granted increased by
12%, 2005–7.
Construction Very strong growth in last 13
years in property and construction
sectors.
Future Growth
High-value product.
As sector matures, more and
more value will be retained in
New Zealand.
Underpins New Zealand’s
agricultural and environmental
primary sectors; will continue to
increase their productivity and
sustainability in the short and
long terms.
New Zealand has some smart
biofuel technologies.
Currently, future very gloomy.
Building sector in contraction –
flat growth expected over the
next few years,
Growth will be in green building –
sustainable homes.
Key Drivers/Investments
Sustainability push – NZ well
positioned in this area.
Replace commodity markets
with added-value, knowledge
based industries.
Increase foreign investment.
Increase in domestic investment
prospects.
Increase in experienced
commercialisation staff.
Increase in global
connectedness.
Key drivers:
• Population growth – migration
• Australian superannuation
• Green-building concept
• Kiwisaver – next few years will
help comeback in sector
Impediments/Threats Export Potential
Lack of capital. Potential very high.
Lack of access to suitably Many companies exclusively
qualified and experienced focused on exports.
research and technology
Exports goods and services
experts.
as well as exports intellectual
Lack of access to experienced property in the form of
life-science commercialisation licensing deals.
experts.
Lack of infrastructure, e.g.
specialised biomanufacturing
facilities and large scale clinical
trial capabilities.
Impediments: Very minimal
• Compliance costs
• Building Act requirements
• Land constraint – running out
of greenfield and brownfield
quickly
• Development contribution –
new tax introduced by govt
• Skills – all skills right through
to semi-skilled
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
 Sector Sector Performance
Creative Sector is very small and does not
contribute much to the economy.
Sector made up of:
• Conventional – arts, media and
cultural production, screen,
film advertisement, fashion,
performing arts
• Creativity – innovation and
design as enabler of all sectors
(Better by Design programme)
• Convergence – innovation in
digital space
Dairy Head office in Auckland – close
to professional labour force
(additional 500–600 employed).
30–40% of world dairy production
traded – Fonterra comprises 2%.
Farms in China.
Modelled increasing income
levels and consumption of dairy –
positive correlation.
75
Future Growth
Emergence of content industry
and intellectual property.
Global growth of 8–10% p.a.
Entertainment has great potential
Screen production – economic
development for NZ in the future
National growth of 2% p.a.,
dependent on amount of land
converted, and innovation in
cows per ha.
Consolidation of processing
plants.
Lots of potential for high-niche
products – area of nutraceuticals,
consumer demand for general
health and well-being. Research
into protein.
At the moment, sells 85%
commodity, and15% value-
added; this composition could
change.
Key Drivers/Investments
Drivers:
• Broadband and fast global
connected technology
• Infrastructural development
• FDI in screen
• Diversification in film
• Innovation and natural
competitive advantage
• New technology
• Business model up to global
economy
• Company is supply driven, i.e.
depends on how much milk
it gets
• Investment at farm level in the
North Island is slow growing
compared with the South
Island
• Innovation and research – new
research centres in Melbourne
and Chicago exporting
knowledge while developing
research in tandem with
overseas markets.
• Sophisticated food
preferences in overseas
markets
• Global drivers – global prices.
• Outlook very positive
• International opportunities
associated with bio-fuels
Impediments/Threats Export Potential
Impediments: Minor except for screen (very
• Lack of investment small sector, therefore not
• Business capability – not a major contributor to the
growth oriented economy).
• Business size in NZ is small
About 3% of exports
• Competitive global market –
(equivalent to 3% of GDP for
compete in different global
the sector).
economy
• Competing urban use of land Forecast sector growth
in the region – urban sprawl all export-led – 2%
and forestry steady growth. Domestic
• Constraints to growth – consumption to remain the
environmental consideration same.
and regulatory issues around
Current production 95%
climate change and water
exported and 5% domestic.
quality – can be overcome
with science
• Competing land uses for food
crops driven prices high
• Constant threat for substitute
of dairy e.g. soy protein
• Limitations to volumes
produced
• Environmental – methane,
carbon, leaching and access
to water
• WTO requirements
• Efficiency in ports and
transport networks
• Energy – security of supply
and prices both of concern
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
76
Sector Sector Performance
Food and • 10% of GDP
Beverage • Export revenue of $17 billion
(year to June 2007)
• 20% of NZers directly or
indirectly employed in sector
• Products either consumed
retail, foodservice or exported
• Auckland main location for head
offices
• Auckland – substantial number
of companies engaged in
further-processed food and
beverages; many on significant
growth path and also actively
engaged in exports
Health Health services (hospitals)
and health units (preventive
community programmes)
ICT Growing nationally at around
6.5% p.a.
Region growing at 7%.
Auckland has an advantage in
wireless, creative, enterprise
resource planning and Health IT.
Future Growth
• Trends of health and well-being
and sustainability reshaping the
sector
• Early stage commercialisation
of research – FINNZ
• FTE – opens up opportunity for
co-investment
Forward planning – focus on
preventive and community
health services.
Holistic approach to tackling
health issues.
Prospects for growth – wireless
technologies, embedded
systems and artificial intelligence
– mainly SMEs.
Early-stage commercialisation
could be future opportunity.
Innovation key area of growth.
Key Drivers/Investments
• Development of a Food
Innovation Network NZ – to
address various infrastructure
and commercialisation hurdles
• Development of a Food
InnovationCentre in Manukau
• High priority for government
investment over next 2–3 yrs
• Investments target firms
moving up the value chain
and to specifically support
international market
development activities
Health problems mainly driven
by poverty, increasing inequality,
poor housing, lack of education –
mainly impacts vulnerable parts
of society
Ten health targets adopted for
funding.
High priority for government
investment over the next five
years.
Invest in communication
infrastructure.
Sustainable technology driven by
RWC 2011.
Impediments/Threats Export Potential
• Availability of labour and Great potential – need
standard of skills collaboration and cooperation
• Distance to markets including between firms to build critical
domestic transport logistics – mass.
roading, rail and airport
Focus on extracting and
• Lack of investment funds
building new value from global
• Productivity levels low
value chains.
• Lack of collaboration between
SMEs
• Too many companies
export – not enough operate
internationally
Limited budget. Potential especially with
neighbouring island countries
90% considerations out of the
for exporting health services.
control of the health sector.
• Skilled labour Great potential, especially
• Transport around innovation and new
• Lack of investment technologies.
• Lack of collaboration
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
 Sector Sector Performance
Logistics Ports – grown strongly on
average 6% p.a. in volume
Strong competition with Port of
Tauranga
Shipping lines consolidated –
resulted in prices down and cost
of operation for ports going up
Storage and Logistics –
consolidation of the industry
internationally
Businesses moving to outsource
– existing companies increasing
and are being bought out by
international companies.
Path likely to continue.
77
Future Growth
Ports – Current downturn in
economy – growth of 1% for
next couple of years
Airports - Air freight future very
positive
Storage and Logistics –
Revenue likely to double over
next 5 years – doesn’t foresee
expansion in ‘footprint’
More value added services and
improved processes.
Limited new construction
Employment could increase by a
possible 25%
Increase in productivity too
Key Drivers/Investments
Ports - Investment needed for
increased capacity in next 2/3
years or won’t grow
Major driver – NZ trade
Container growth – 2 ½ rate of
GDP
Airports - Growth in tourism
provided for increased freight
capacity
Last 5 yrs - $80m/yr on capital
invt for Akl airport – next 10yrs
likely to decrease
Storage and Logistics –
• Continuing expansion
• Retail growth can affect
business but normally
companies downgrade
product rather than decrease
trade
• Greater focus on efficiency,
customer service and smarter
about warehouse demand
• Maturity in sector.
• Customers increasingly
requiring international
solutions
Impediments/Threats Export Potential
Ports - Issue of transport – Ports - Currently handling
better use of rail, trucking 40/45% exports and 60/55%
capacity imports
Governance of region
Airports - Climate change
–carbon footprints
Fuel prices
Skills
Storage and Logistics –
Space – land coverage
constraints
• Different standards between
organizations
• Current investment climate
(business cycle) affect growth
• Compliance costs
• Skilled staff – do own training
• No industry sector group –
not allowed by Commerce
Commission
• Transportation in Auckland a
disaster – affects productivity
levels
• Port access needs to be
sorted out
• NZ businesses still not
specialized – cannot gain from
economies of scale
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
78
Sector Sector Performance
Retail Last 10 years – growing strongly
especially in Auckland last 5-10yrs
– 7% growth year on year
Other regions performing well –
Wellington & Queenstown
Prior to high energy prices &
downturn in economy– consumer
confidence very good
In NZ- $62 billion industry, 20%
of workforce, biggest contribution
GST, income tax, etc. but not
much recognition from govt
Specialised Nationally growing at circa 0.5%
Manufacturing pa.
Hamilton growing faster than
parts of Akl particularly around
medical devices, materials, f&b
equipment.
Future Growth Key Drivers/Investments Impediments/Threats Export Potential
Next 2 years – no growth, Drivers Impediments Through tourism spending –
malls in saturation, falling out of • Population growth • No. of councils in Auckland high and potential to increase
migration, ageing population • Tourism sector – difficult to develop and
• Housing market – currently in inconsistency between
After 2 year – tax cuts kick in,
a dip and may take a while to councils – need one set of
tourism picks up, lead up to
bounce back bylaws
RWC 2011
• 2011 RWC – turning point for • No single “brand” for
Community type retail will grow retail Auckland – councils doing own
as high price of fuel force ppl • Tax cuts – boost to shopping thing
to work closer to home lead to • Currently some firms • Transport congestion – drives
expanding, some retrenching costs up and impacts on retail
development of infrastructure
• Infrastructural development prices and inflation
around communities
• Broadband – internet shopping • Requirements for skills will
Auckland as a World Class • Environment – waste increase – skills needs much
Shopping city - Retail will management more professional now.
continue to be major driver of
economy.
Auckland competitive advantage High priority of govt for next Impediments Great potential – around
in marine sector 2-3 years • Availability of labour supply chain integration of
• Standard of skills components and services
Prospects for growth in Invest in Aviation and marine at
• Transport logistics
Electronics and High tech event and industry level
• Lack of investment funds
manufacturing/Engineering
Global Airport Infrastructure • Lack of collaboration between
–comprise majority of SME type
event SMEs
businesses
Early stage commercialization of
research
Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
 Economic Futures for the Auckland Region: Part 1 Knowledge base for scenarios development – Dec 08
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