Auckland’s economic outlook looks promising despite the speculation about a global recession emerging.
Auckland Council’s Chief Economist, David Norman outlines Auckland’s strong economic position and the facts that help insulate our city from risk.
Stories of impending economic doom are circulating, driven by the risk of recession in the US and Europe, and weaker growth in China, which was the unshakable nation that helped keep global economic growth above zero through the Global Financial Crisis (GFC) over 10 years ago.
What does this mean for Auckland?
Let’s start with the facts
Auckland is in an exceptionally strong economic position – here’s the evidence:
- Year on year GDP growth to June 2019 is estimated at 2.8 per cent
- Unemployment is 4.2 per cent, the lowest in a decade
- Employment is up 2.8 per cent year on year to June 2019
- Guest nights are up 2.8 per cent to year June 2019
- Annual net New Zealand migration remains around 50,000, down only 20 per cent from the peak two years ago
- 14,345 new dwellings have been consented, up 11 per cent, in 12 months to August 2019 – an increase of 43 per cent since the Unitary Plan came into effect two years ago and up 356 per cent since development bottomed out in August 2009
- 160,000 new jobs in construction and tourism, and a further 22,000 professional services jobs have been added in the last five years
- Strong growth in wages has boosted household incomes by 57 per cent in the last 10 years.
Chief Economist, David Norman is confident in Auckland’s economic outlook.
"These facts spell out a clear message. The Auckland region is in an exceptionally strong position with an outlook of continued growth."
But are global risks still a concern?
The trade war between the US and China and resulting tariffs are creating an impact on the Chinese economy (New Zealand’s largest trading partner) and they will look to find ways to trade more with other countries. This could mean cheaper imports for consumers here.
It could also mean less job growth in China, and with fewer pay rises and disposable income, less could be spent on premium New Zealand dairy products, holidays to New Zealand destinations or our tertiary education sector.
It may also mean less demand for overseas products to supply major infrastructure development in China, such as logs from New Zealand and coal from Australia.
So New Zealand could be affected in two ways; direct trade with China may fall, and indirect trade with other countries like Australia may fall as they trade less with China.
What is Auckland's outlook?
While Auckland is not immune from these global economic risks, our city and country have some buffers that help:
- We are starting from a position of strength. Our economy can weather the effects of slower growth or increases in unemployment
- Our banking and Reserve Bank system is more resilient than it was at the time of the Global Financial Crisis
- Our Reserve Bank is proactive, and has stated that in an environment of GDP growth under 3 per cent, it would expect to keep Official Cash Rate (OCR) low
- We have central government surpluses and reserves to spend if needed
- Only about one-seventh of Auckland’s economy is directly exposed to international trade.
“While a possible global recession matters to Auckland and New Zealand, we are well insulated from major economic risk.
"Auckland’s industry structure, a better banking regulatory regime, a proactive Reserve Bank and strong central government surpluses give us reason to be confident of a stable economy with ongoing growth", says David Norman.
Read the full report
Read the full Chief Economist Insight Paper - October 2019 here: Does the gathering global gloom matter?
