Auckland economy expands but Labour MP claims NZ is becoming a them-and-us country

Construction helped to boost the Auckland economy by 2.6 per cent during the March year but unemployment is still high and wage growth remains stagnant.

Geoff Cooper, Auckland Council economist, today released his quarterly update for the three months to March, showing a combination of positive and negative indicators, but Labour MP Phil Twyford said Auckland's growth rates meant New Zealand was increasingly becoming a them-and-us country.

House prices were still rising fast in Auckland but falling elsewhere, Twyford said.

"It is more urgent than ever that Government intervenes decisively in the failed Auckland and Canterbury housing markets," he said.


"The current approach of tweaking the planning rules and hoping a broken market will fix itself has failed completely."

Cooper was more enthusiastic about Auckland.

"The construction sector was the main contributor to growth, with solid support from the manufacturing, finance and insurance, retail, and health care and social assistance sectors," he said. "The major drag on growth came from the property and business services sector, which had previously been a growth stalwart." Yet the March quarter jobless rate was 7.3 per cent, the same as a year earlier but well above the national rate of 5.7 per cent. Cooper said that reflected strong growth in jobs which had been offset by a rising supply of labour, each up 4.3 per cent.

More people are also now living in Auckland meaning the city intrinsically has more workers available.

Read the latest quarterly economic update here:

"A further pickup in net migration levels boosted labour supply, particularly amongst men aged 20 to 39, and the labour force participation rate rose to 69.4 per cent, its highest level since the December quarter of 2008."

Wage growth has slowed but migration boosts had helped to alleviate skills and labour shortages, particularly in the construction sector, Cooper said.

Retail spending was up 5.5 per cent higher on the same quarter last year and consumer confidence was at its highest level since the March 2005 quarter.

House prices remain a concern.

"The pace of decline in housing sales has accelerated in recent months," Cooper said. "House price growth has jumped around, but remains solid.

"It's likely that the median house price measure is being skewed by the lack of lower priced houses for sale, a result of the LVR restrictions.

"Given that sales activity has been declining through the first half of 2014, you would normally expect to see an accompanying moderation in house price growth."

Foreigners and non-Aucklanders were spending more on tourism.

"The tourism sector has benefited from an increasingly confident New Zealand household sector and a recovery in United States and European tourism, which has lifted spending per guest night," Cooper said.

"Domestic guest nights in the three months to April were 6.2 per cent higher than in same three months of 2013, while international guest nights were 2.9 per cent higher."

Others have noticed a rising gap between Auckland and the rest of the country, particularly on house prices. QV data out this week showed Auckland house values up 2.7 per cent in the past three months and 12.3 per cent year-on-year, yet prices fell in some regional areas.

Nationally, house values rose 8 per cent in the June year and 2.1 per cent in the past three months. Values in Wellington and Dunedin showed a downward trend.

Twyford, Labour's housing spokesman, said housing was dividing New Zealand into a two-track market - Auckland and Canterbury in one camp and the rest of the country in the other.

"QV's index shows many homeowners in the regions are facing declining equity in their properties, while in Auckland and Canterbury home ownership has become a distant dream," he said. "Looking at house prices over the last six years, it is clear that values in Auckland and Canterbury have increased dramatically, yet the rest of the country has been going backwards.

"Auckland house prices have gone up 30 per cent and Canterbury about 20 per cent when you adjust for inflation." Areas such as Tauranga and Wellington had flat-lined over that period but others had fallen sharply, including the Far North (-26 per cent), Southland (-17 per cent) and Waitomo (-33 per cent).

"The Government's failed housing policy is exacerbating this two-track housing market," Twyford said.

"Auckland and Canterbury are struggling to build their way out of acute housing shortages, and the Government's hands-off approach has seen housing accords signed but not a single new house built in the special housing areas a year after they were announced."

See the most recent charts of Auckland's economic activity here: