Auckland vs the world

By Simon Collins

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A new report has found that Auckland's quality of life is among the best in the world, but its relative lack of high-tech industry is dragging it down economically.

The Ministry of Economic Development's latest indicators report says Auckland's performance is crucial because "large, outwardly-facing global cities" play an increasing role in driving economic growth.

Auckland shapes up well against other big cities on lifestyle, and even on traffic congestion - but it has relatively low incomes, low productivity, and low levels of tertiary education and high-tech industry.

The ministry's chief economist, Roger Procter, said Auckland had lost high-tech stars such as marine navigation company Navman because of weak local capital markets.

But Navman founder Peter Maire, who is now a director of four other local high-tech companies, said Auckland would keep lagging behind other cities until it imposed a capital gains tax or found some other way to manage property-based inflation without driving up the exchange rate.

"The artificially high dollar is impacting on the four companies that I'm a shareholder and director of.

"That is causing us the most pain and causing us to not expand here in a significant way."

The ministry report says big cities are now a key to growth because they "allow greater levels of specialisation, and thicker and deeper markets, attract highly skilled workers, and are centres of innovation and entrepreneurship".

It says this shows up in Auckland's gross domestic product per person being about a quarter higher than the New Zealand average - a bigger "Auckland premium" than the premiums for comparable cities such as Brisbane, Adelaide, Melbourne, Vancouver and Copenhagen.

Auckland also came fifth-equal out of 215 cities on "quality of life", ahead of all Australian cities, and registered less traffic congestion than Sydney, Melbourne, Adelaide or Perth.

But on a world scale, Aucklanders' average incomes lag well behind other big cities - 80th out of 116 cities in gross domestic product per person, and 54th out of 78 in the value of output per worker.

The report says this low productivity reflects relatively small shares of employment in high-tech manufacturing and services, fewer new patents and one of the developed world's lowest proportions of adults with at least bachelor's degrees - only 22 per cent in Auckland compared with more than 45 per cent in the world's three most educated cities of Vancouver, Paris and Tokyo.

Stuttgart, Dublin and Helsinki topped the lists for the share of employment in high-tech industry, while Stockholm, Helsinki and Paris held the top ranks for high-tech services.

Auckland University geographer Dr Ward Friesen said the European cities had captured high-tech niches, such as Helsinki-based Nokia's role in cellphones, whereas the nearest Auckland equivalents such as Navman had been sold offshore.

Northcote-based Navman grew into a $500 million company but Mr Maire sold it in 2003 to a US company, Brunswick, which recently broke it up and sold the parts to Norwegian firm Navico, Taiwanese Mitac and a Chicago private investment company, Prairie Capital.

Mr Maire said all three companies still had major operations in Auckland, there had been "no significant loss of jobs" here, and one of his new companies, Cadmus, had recently signed a strategic research and development agreement with the part of Navman now owned by Navico.

"So we are levering businesses back on those Navman businesses and you'll see a lot more of that," he said.

But he said high Auckland property prices, made higher in world terms by the high kiwi dollar, made it hard to attract top engineers from elsewhere, and the high and unpredictable exchange rate deterred investment.

"A lot of New Zealand inflation is driven by property values, so much of holding property values down is done by using the exchange rate," he said.

"You could put a capital gains [tax] in place. It's the most unpopular thing that could ever happen in this country, but what else can you do?

"It seems to me that, through not wanting to be [un]popular, we are actually punishing the future of the country in a potentially nasty way."

Economists were more sceptical about the report. Auckland University's Professor Tim Hazledine said New Zealand incomes had fallen behind Australia's in the past 30 years because of a lack of investment in productive capital per worker.

"Australia has done a better job of encouraging investment in manufacturing and possibly high-tech," he said.

"We have taken this ... approach that if you build a level playing field, people will turn up to play. But we have to give an inducement."

The director of the university's Centre for Development Studies, Associate Professor Ken Jackson, said the main factor holding back Auckland's growth was low wages.

"If you push the wages up, people use labour in a very considered fashion."

Check out the Mercer worldwide quality of living survey here.

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