4. Evidence for Agglomeration in Auckland: The Macro Position
4.1 Introduction
This section looks at the macro evidence for agglomeration effects in Auckland, firstly from the perspective of Auckland's productivity performance and then in terms of possible constraints faced in Auckland.
4.2 Auckland's Productivity Performance
Some studies have suggested that Auckland is under-performing economically.48 However, a more recent study has cast some doubt on the hypothesis that Auckland is a productivity laggard. We briefly review these studies in order to gain some insights into what is happening in the Auckland context and attempt to reconcile the studies' findings with particular agglomeration mechanisms.
A study for the New Zealand Treasury has found that Auckland and Wellington, relative to other regions in New Zealand, have higher levels of productivity and have the highest level of growth in real hourly earnings (which is likely to reflect labour productivity).49 This questions earlier research by the New Zealand Institute of Economic Research and the National Bank, which found that Auckland was underperforming relative to other areas in New Zealand. Lewis & Stillman note: "Our key findings cast doubt on the hypothesis that Auckland has been a productivity underperformer within New Zealand".50
Neither the National Bank nor NZIER studies adequately captured "productivity performance by areas classified according to the density of economic activity that takes place within them".51 NZIER derived its estimates of labour productivity in each region by assuming that labour productivity is constant within each industry across all regions. However, this approach fails to capture the productivity advantages that arise in urban centres. The National Bank's methodology similarly masks critical productivity effects.52 For instance, their use of an aggregate measure, rather than a per worker measure, means that any growth in per capita activity is suppressed by population changes, or more likely in the Auckland context, shifts in labour force participation.53
In summary, the evidence in Lewis & Stillman suggests that Auckland's productivity performance has not been as poor as previously thought. Productivity benefits that accrue to employment density provide one possible reason for Auckland's relatively strong performance. However, there are obvious limits to the extent that such benefits can occur.
4.3 Accessibility Constraints
While Auckland is growing relatively better than other regions in New Zealand, evidence indicates that accessibility to the CBD is acting as a constraint. Auckland City's CBD is the largest employment centre in New Zealand and the hub of the Auckland economy with 72,540 employees accounting for:
- 13% of the region's employees
- 24% Auckland City's employees.
Agglomeration theory suggests that the CBD should be growing strongly. However, over the period from 2000 - 2004 employment in the CBD has grown by only 0.6% per annum. At the same time employment has grown by 2.8% per annum within Auckland City, and 3.6% per annum within the region. The key question is why such low growth is taking place in the CBD?
Transport constraints may provide part of the answer. Approximately 73,000 people enter the CBD between 7am and 9am each weekday. Of these:
- 44,000 people (60%) use a private car.
- 27,000 (37%) use passenger transport.
- 2,000 (3%) walk or cycle.
The Auckland City Council's Central Area Access Strategy shows that traffic entering the CBD increased 12% in the period 1986 - 1999. Importantly, the Strategy identifies that expanding the CBD road network is not an option and contains the target that there will be no growth in the number of private vehicles entering the CBD between 7am and 9am.
A Gravitas survey of the motivations for businesses locating within the CBD, identified the following key factors:54
- Image.
- A central location including easy access for staff, to/from clients.
- Proximity to clients, suppliers, and competitors.
- Access to supporting amenities.
However, the report also concluded that "possibly the biggest attractor to an out of CBD location is the access it provides and the ability to provide more parking at lower cost".55
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