I read with interest Bernard Hickey's opinion piece 'City of cranes has a boom that's a bust' which identifies the challenge many economies face across the globe in terms of falling productivity growth.

In concluding, the article states that Auckland needs a 'big dose' of investment in infrastructure, people and technology, but that attention is also paid to wealth per capita which needs to improve. I endorse these comments but also assert that the issue is far more complex.

As American economist and Nobel Prize winner, Paul Krugman, famously said: "productivity isn't everything, but in the long run it is almost everything". To this end the slow growth in productivity is rightly a concern, not just for Auckland but for the global economy.

Accordingly, there has been considerable debate amongst economists, governments and global media on the reasons behind slow productivity growth.


As highlighted in Hickey's article there is no consensus on the reasons why, the extent to which slow growth will continue, nor the long term impacts of the lack of growth.

While productivity is not well understood, and even less so now that growth has been weak, there is general agreement that productivity is positively influenced by a range of factors including investment in infrastructure, people and technology as highlighted by Hickey.

However, other key drivers of productivity also include the rate of enterprise growth and formation, and the role of competition in driving efficiencies.

There are also other less tangible factors that influence economic growth and productivity gains including the existence and depth of social capital; the regulatory environment; the absorptive capacity of firms and the existing industrial structure of an economy.

The interactions between each of these factors are complex and it is dangerous to assume there is a single magic bullet solution.

However, when it comes to labour productivity there is some evidence to suggest that enterprise formation, investment in research and development, and skills development all have a positive impact on productivity growth.

These areas should all be priorities for Auckland and are reflective of the need for the city to build a strong culture of innovation and entrepreneurship.

Auckland, like many mayor cities across the globe, also experiences a 'productivity premium' in the CBD.


Turning more directly to the issue of infrastructure, it is important to acknowledge that alongside the highly visible commercial developments that are dominating the skyline of the CBD, there is also significant investment being made in the infrastructure required to support growth including major transport projects such as Waterview, public transport investment including major public transport improvement projects, such as the City Rail Link and the new bus network, the expansion and refurbishment of Auckland airport's international passenger terminal and the development of the Airport precinct.

The completion and subsequent impact of these projects on future productivity gains should not be underestimated, nor should the extensive programme of housing development to accommodate a growing labour pool, which will also support productivity gains.

Auckland, like many mayor cities across the globe, also experiences a 'productivity premium' in the CBD. This is unsurprising as the central city is the location where the assets of the innovation economy are concentrated, including major employers, tertiary and research capabilities, and skilled workers.

ATEED general manager of business, innovation and skills, Patrick McVeigh.
ATEED general manager of business, innovation and skills, Patrick McVeigh.

In the Auckland CBD, the productivity premium is estimated to be between 30 to 50 per cent higher than the rest of New Zealand.

As global real estate services firm, Jones Lang Lasalle (JLL), recently highlighted Auckland is a city with momentum and is increasingly recognised as a new world city with a healthy innovation ecosystem.

While there's no 'single magic bullet solution', undoubtedly there's more to be done and now is the time to embrace the opportunities that growth can unlock for Auckland.