Regional Economic Performance in New Zealand: How Does Auckland Compare?

Presented as New Zealand Treasury Working Paper 05/08

In this study we investigate Auckland's economic performance relative to other large cities in New Zealand, to medium-sized urban centres and to small towns and rural areas.

Measures of regional economic performance are not well developed in New Zealand and there is a relative lack of official data at the regional level. Previous measures developed by two non-governmental organisations have suggested that Auckland is "underperforming" relative to other regions in New Zealand. However, neither of these measures satisfactorily capture productivity performance by areas that are classified according to the density of economic activity that takes place within them.

We use data from the annual New Zealand Income Survey to examine hourly earnings and other measures of labour productivity and utilisation for a number of regional areas. Our results tell a fairly consistent story. Auckland and Wellington have the highest levels of productivity performance based on almost all measures of earnings. In particular, both have significantly higher average levels of labour income, and wage rates than the three other comparison areas. Auckland has also experienced stronger growth in wages, in particular for wage/salary workers, than other regions.

Our findings cast doubt on the hypothesis that Auckland has been a productivity underperformer within New Zealand. In fact, Auckland appears to be a relatively good performer and this is consistent with agglomeration economies being at work in New Zealand"s largest urban concentration. However, because we limited our investigations to within New Zealand we are not able to say how Auckland's productivity performance compares to innovative, high-skill cities in other countries. Given New Zealand's overall poorer performance in labour productivity and the rather modest wage rate growth that we find even for Auckland, it is unlikely to have been as good.