City of Sails runs out of wind

Auckland is in the economic growth doldrums compared with other parts of the country - managing to score a mere two stars out of a possible five on the latest ASB/Main regional economic scoreboard.

The economic survey found it was the third bad quarter on the trot for the country's largest city, which scored "poorly" in growth rates for house prices, construction activity, retail and tourism.

The two-star rating - described as "needs an energy injection" and one above "take pity" - puts Auckland equal bottom with Nelson out of 16 regional council areas.

The region, with a 31 per cent share of the national economy, achieved a "fair to middling" three stars in the September quarter last year.

But on the positive side, the survey says average house prices are still rising and job growth is continuing. The jobless rate - 3.1 per cent for the June quarter compared with a national rate of 3.6 per cent - is at its lowest in 19 years in spite of continuing strong population growth centred on Manukau City and Rodney.

However, the survey also found that Auckland City's growing population was not moving fast enough "to soak up the excess apartment space in the centre and stop central city rents from slipping".

Also, judging by poor retail sales growth - in spite of new shopping facilities - Aucklanders' budgets appeared constrained by factors such as more expensive petrol, parking fees and fines, and local body rates.

ASB chief economist Anthony Byett said rising costs were squeezing business margins nationally and the slower Auckland housing market was affecting people's spending.

While Wellington was attracting more tourists, the number of visitors to Auckland was down.

Also, the construction sector had come off a high in 2004. "That construction industry peaking - it's made quite a difference to the Auckland economy," said Byett.

Auckland Chamber of Commerce chief executive Michael Barnett said infrastructure problems, such as roading and skills shortages, were hampering the region's growth.

"Most of the surveys would indicate that somewhere between 40 per cent and 50 per cent of businesses in Auckland are having difficulty finding the right people with the right skills," he said.

Barnett said more needed to be done to address these sorts of issues.

"I think Auckland needs to take some steps to accelerate its economic development. It can't just keep growing and saying we're keeping pace with the rest of New Zealand - Auckland needs to look at itself as competing with Sydney and Melbourne, and Adelaide and Brisbane."

Auckland Issues Minister Judith Tizard agreed the Auckland economy had come off a "fairly furious" boil and the region was treading water.

"It's not that it's cold, it's that it has cooled down off a fast economic high."

But she was encouraged by strong employment.

She acknowledged there were challenges around skills development and making sure the economy was fuelled by "real growth".

Her own survey of Auckland businesses indicated retailing was significantly affected by the higher costs people were facing.

Building consents were also down in the more "speculative" area of apartments.

Improving worker skill levels was a focus of the immigration review but Tizard also wanted an emphasis on training young New Zealanders for "good long-term futures". There were desperate shortages of people in trades such as electricians and plumbers.

On developing Auckland's infrastructure, Tizard noted the Government's willingness to help but that Finance Minister Michael Cullen had spoken of Auckland's need to contribute as well.

"We're seeing some people saying that the development is going too fast in terms of the rates increases - so it's always a balance," she said.