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Mayor Len Brown launches Auckland's economic development strategy calling for less property speculation and more focus on exporting high value goods

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Mayor Len Brown launches Auckland's economic development strategy calling for less property speculation and more focus on exporting high value goods
Auckland's Wynyard Quarter.

By Gareth Vaughan

The Auckland Council has launched an Economic Development Strategy for the city with Mayor Len Brown calling for less focus on property speculation and more focus on developing a high value export economy.

Described as a 10-year roadmap for Auckland, Brown says the strategy guides Auckland's economic transformation away from a domestically focused service economy, and towards a high-value export economy.

"We need to be less focused on things like property speculation and more focused on increasing our base of productive and tradable sectors and clusters, which can earn us overseas exchange, provide skilled jobs for all Aucklanders and add value to all New Zealand," says Brown.

Becoming export focused would allow Auckland’s economic growth to be driven by bigger, faster growing trading partner economies such as China, allowing Auckland companies to achieve economies of scale by selling into much larger overseas markets.

The report makes no mention of Auckland's bubbling housing market, where with a shortage of stock on the market and strong demand bolstered by immigration, the Auckland median house price reached a new record high of NZ$505,500 in August, according to the Real Estate Institute of New Zealand. Government valuer Quotable Value said this week residential property values in the wider Auckland area are now 6.5% above the 2007 market peak.

Under the heading Auckland's global advantages the report says Aucklanders can choose between a sophisticated urban lifestyle in the suburbs, or move a short distance to the countryside to live on a lifestyle block surrounded by farmland and native bush.

"Our communities are perceived as being safe and we have the lowest level of public sector corruption in the world, ranking first, ahead of Denmark, Finland, Sweden and Singapore. Perceptions about quality of life, public safety, housing affordability, cultural diversity, facilities for national and international events, and the natural environment are becoming increasingly important in economic decision making."

In April the Auckland Council was quick to dismiss the Productivity Commission's call for the immediate release of new land for residential development in the Auckland region with Deputy Mayor Penny Hulse saying Aucklanders did not want their city sprawling from Northland to Hamilton.

Three goals

The report says that after "comprehensive" analysis and feedback, three economic goals have been identified to drive the necessary "step change" required to meet Auckland’s vision.

These are:

  • An average annual increase of regional exports greater than 6%;
  • An average annual real gross domestic product (GDP) increase greater than 5%. And;
  • An average annual productivity growth greater than 2%.

Also cited is a target of ensuring there is the ongoing provision of planned and serviced capacity for ‘Group 1′ business land, including large lots, to meet five-yearly demand assessed by annual surveys.

Achieving the three "ambitious" targets would see Auckland’s economy improve 20 places in 20 years in current Organisation for Economic Cooperation and Development (OECD) gross domestic product per capita rankings.

"Obtaining these goals will mean a fundamental change in Auckland’s economy, which has had historical GDP annual growth rates of 2–3%. It will require the structure of Auckland’s economy to shift from being import-led to export-driven, to encourage growth in our significant service sectors (e.g. business and financial services, tourism, international education) as well as in our internationally competing industrial sectors (e.g. food and beverage processing, health technologies, specialised manufacturing), and significant improvement through growth in skills and labour market participation, innovation and access to capital," the report says.

To grow at the sort of rates targeted, Brown says Auckland requires a much stronger export focus whilst also maintaining its role in the domestic economy. Such an export focus needs to aim at developing and selling high value goods and services into high growth sectors like food technology into rapidly growing economies like China.

"To do this we need to fundamentally change the structure of the Auckland economy," says Brown (pictured below right). "The change needed in Auckland’s economic structure, so that high value exports make a much larger contribution to what we produce, is not a small task. We have already started putting the pieces together."

"For example, we are investing in a technology precinct in the Wynyard Quarter that aims to bring together technology firms, business start up incubators and research institutions together on a collaborating campus. This model brings the essential elements together in one place - ideas, product development, commercialisation and export expertise. This formula can and is being replicated in other sectors, e.g. food innovation, health services for export, and clean technologies," adds Brown.

Five priorities

The report identifies five priorities being to;

  • Grow a business-friendly and well-functioning city;
  • Develop an innovation hub of the Asia-Pacific rim;
  • Become internationally connected and export-driven;
  • Enhance investment in people to grow skills and a local workforce. And;
  • Develop a creative, vibrant international city.

The report notes that challenges Auckland faces in achieving the report's targets include its (and New Zealand's) geographic remoteness, small economy, and small scale of businesses, which combine to constrain productivity compared with many overseas cities. With Auckland’s businesses lacking a large domestic market, they often seek offshore growth at a relatively early stage of development increasing risk and costs.

"These challenges have had a fundamental impact on Auckland’s (and New Zealand’s) economic performance and have arguably meant that historically Auckland has underperformed relative to comparator cities. Auckland is ranked 69th out of 85 metropolitan regions in the OECD regions in terms of GDP per capita. Auckland is also vulnerable to intense international competition for ideas, talent and capital. Australian cities, for example, attract many thousands of young skilled New Zealanders each year and compete with us for immigrants from Europe and Asia," the report notes.

"Among other factors, this has affected Auckland’s productivity, which has contributed to our GDP per capita being less than Sydney’s (by 27%) and Melbourne’s (by 16%).If we do not compete successfully in the global marketplace, we risk not only failing to attract new resources, but losing the human and investment capital we already have."

Wanted: Skilled workers

Therefore to improve Auckland’s prosperity, more skilled workers are needed given the skills of the existing workforce are "not well aligned with aspirations to be a wealthy and liveable city." Auckland needs to look to immigrants and to upskill its youth.

"This is not an easy proposition, as the global workforce is more mobile and has more opportunities than at any other time in history. By filling critical labour shortages, immigrants are important in stimulating Auckland’s growth. Literacy and numeracy continue to be reported as a challenge in Auckland for individuals and firms. Youth unemployment is significant, demonstrated by an unemployment rate of 31% for those aged between 15 and 19 years."

Spending by Auckland firms on research and development as a percentage of regional GDP is less than a third of the OECD average, according to the report, with Auckland also having a low rate of patenting activity. Then there's a low number of firms using equity to fund innovation, with most relying on retained earnings and bank loans.

"Firms have cited this lack of equity capital as an inhibitor of growth and innovation. The shallowness of Auckland’s equity market is in part due to the reluctance of firms to use equity, the limited number of experienced investors, and the small number of attractive investments," the report says.

"A joined-up approach to deepen Auckland’s equity market is required, bringing together angel investors, venture capitalists, other financiers, and those in the business of commercialising innovation. Infrastructure Although there has been increased investment in Auckland’s infrastructure in recent years, under-investment has been a historical constraint on Auckland’s connectivity."

Secure energy & infrastructure needed, including the port

Auckland's high dependence on outside sources of energy, water and fuels is also noted, with ensuring a secure supply and resilient infrastructure for businesses posing a "significant challenge" for Auckland.

"Options for reducing our reliance on key external sources of energy, water and fuels need to be carefully evaluated. Connectivity is a crucial determinant of international competitiveness."

"This includes the physical (e.g. road and rail, seaports and airports) and electronic infrastructure (e.g. broadband and ICT) that are needed for businesses to operate effectively. Overseas firms that Auckland businesses are competing with have fast and efficient links within their city-region and to other cities and regions by broadband, rail, road and air, enabling cost-effective transfer of goods, services, technology, knowledge and people. A fast, affordable and safe integrated transport system is essential to any successful city. Three sets of vital connections must be maintained, developed and improved for Auckland to meet its economic aspirations."

Auckland Council, which owns Ports of Auckland, maintains that under all growth scenarios, Auckland will continue to need a major seaport.

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35 Comments

I must have missed something - since when was this core council business ?

Whats it going to cost me Len ?

 

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I don't understand how Len Brown can have the impression Aucklanders are obsessed with property speculation.

The Managing Editor, along with the Banking & Finance Editor, of this website, only spent a short time, wittering on about the price of the Managing Editors neighbours house today.

Come on Len .  Get real.  Stop exaggerating.

 

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Auckland needs more developers and more encouragement for them to boost supply.

 

You can't expect people to live in a city that doesn't provide houses.

 

The solution is the Crown disposing of the hundreds of acres of semi derelict state houses in the close in suburbs.  People want to live close to town, but they don't want to be in suburbs surrounded by bludgers paying the Crown $50pw to live in a dump on a three quarter million dollar section.

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Exactly right - Every 1/4 acre state house in GI, panmure, otahuhu, and roskill should be split into 3 sections - two of them sold on the open market, and a new state house built on the third.

Or just put the entire state housing stock onto the market, watch over valued house prices tumble, and pay off the deficit in one go.

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you seriously believe that?

regards

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I can see where you are coming from, Chris J, we have property developers trying to move into our area as well. Disgusting.

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Latest QV Stats.
Top 15 suburbs on average house value - enjoy :)
1          Herne Bay       $1,870,556
2          St Marys Bay  $1,474,944
3          Parnell             $1,323,000
4          Epsom             $1,152,056
5          Stanley Point   $1,121,833
6          Takapuna         $1,106,556
7          Remuera          $1,094,278
8          Mission Bay    $1,046,000
9          Ponsonby        $1,042,556
10        Devonport       $1,028,111
11        Westmere        $1,015,889
12        Freemans Bay $962,667
13        Mt Eden          $954,444
14        St Heliers        $940,389
15        Cambells Bay  $938,389

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I think it is astounding that there is almost no mention made of affordable housing in this strategy.

Prior to about 2004 Auckland's relative affordability was a big factor in attracting skilled migrants to the city. The city has lost that competitive advantage, largely due to overly restrictive planning policies. 

Economies in the big global cities such as NYC, Sydney etc can obviously still prosper without affordable housing as they have their own scale, momentum and global reach.

But small to mid size isolated cities like Auckland, I suspect, will really struggle to develop economically without more affordable housing options.  

Hugh P - your thoughts?  I know you are strongly of the view that Houston's affordable housing market is a big factor in the city's economic success

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Prior to about 2004 Auckland's relative affordability was a big factor in attracting skilled migrants to the city

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you mean the 2% of migrants..........?

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A message to Len Brown.

"You are not going to get skilled workers without having housing available that they can afford to live in. On the other hand, if they are prepared to live in rentals owned by largely absentee overseas owners, then so be it"

We get to the point that Len and his mates have caught the John Key disease which is:

How to be aspirational without any ideas on how to achieve the aspirations

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Was it only two days ago I predicted decades of pain for Auckland ratepayers? Welcome to your nightmare.

 

Well done, Gareth, for wading through this dreck and trying to make sense of it.

 

The following are the policy levers available to Auckland City to implement this vision:

 

1. Making available serviced industrial land

 

That is all.

 

Given that we have plenty of experience of councils trying this over the years (e.g. Dunedin City in the 80's) we know how this will pan out:

1. Auckland City will set up a ratepayer funded unit to implement the strategy

2. The staff of this unit will pick up their iPhone 5's and iPads and immediately fly somewhere to study something (anything)

3. In ten years someone will notice that nothing has changed and the unit will be disbanded

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Just remembered this is Len's second go at city transformation. In about 2001 Manukau City produced a strategy called "Tomorrow's Manukau" (?) aimed at transforming Manukau City. Anyone know how that turned out. He had ten years before Manukau City was disestablished.

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Ah yes it all sounds like Rodney District Councils 'Rodney in 2030' document which as far as planning goes was very light on any real actions and fairly heavy on wishes and dreams. As a piece of science fiction it was moderately entertaining reading, although I suspect it was originally penned entirely in Unicorn tears.

I can no longer find it but here is a summary which might seem eerily familiar to the drivel being spouted by Auckland City...
 

  • We will keep our country look and feel
  • We will not let our towns and villages sprawl
  • We will maintain our lifestyle and look after the environment
  • We will take care of ourselves while working with others
  • We will be able to make our living in Rodney
  • We will determine the future of our district.

 

So... how's that working for you Rodney?

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Yep that's a pretty standard Community Outcomes statement - there are still 70 odd of those LGA 2002-mandated pieces of tripe still floating around the country. BTW its very disappointing that LGA Amendment Bill does not abolish this rubbish.

 

"Tomorrow's Manuakau" was much more serious. They had convinced agencies such Education, Police and HEalth to help draft some targets and assign responsibilties. So it actually had an outside chance of doing some good. Even so, given the nature of public institutions, it probably didn't go anywhere.

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Five comments so far and none point out the obvious flaw.

 

I picked it listening to Morning Report.

 

"An average annual real gross domestic product (GDP) increase greater than 5%."

 

Not one media comment - yet - regarding the fact that no percentage growth whatever, can be maintained. And 5%?

 

Doubles in 14 years. Then doubles THAT in the next 14. Only happens off a low base, and not for long. Those who thought China's claimed growth rate could be maintained, were fooling themselves.

 

At least they mention the need to be energy-independent. Haha. No correlation to anything happening, of course. ThIs is as silly as the 'build more houses' nonsense. We have probably no time left, to put Local Authorities on a sustainable footing; even now we're probably too late.

 

Where do they get these wide-eyed wonders? Economics graduates, Is my guess. Voodoo Priests looking backwards at en-trails.....

 

 

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No sweat - it'll be smart stuff that requires no resources

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As long as they only buy virtual stuff with it, that'll work.

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We were waiting for you to pick up on the pdk bait.

It would clearly ruin your fun if we were to mention it.

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http://www.ft.com/intl/cms/s/0/be2ba05e-f8e0-11e1-b4ba-00144feabdc0.htm…

 

 

Kristov | September 10 8:20pm | 

Thing is, you can't "short" property. Well, you could sell and leaseback but doesn't really work for individuals unlike corporations.

Open a sunday paper in Singapore, Malaysia, Thailand, and they are FLOODED with ads for "posh" properties in London or expo's at 5 star hotels By the usual "bulge bracket" estate brokers. 

It's ridiculous. How could this end nicely?

 

 

Choice Anxiety | September 10 4:39pm |I understood that the Malaysian alliance of SP Setia Bhd, the Employees Provident Fund and Sime Darby Bhd was successful in its bid to develop the Battersea Power Station site because this triumvirate was able to fund itself; the consensus appears to be that other candidates were unable to get funding from UK, EU or US banks. The historically low interest rates do not appear to have tempted the developed world's banks to finance such a project. In this sense, easy money is of no real help other than to tempt banks to borrow at the short end to reinvest in longer-dated western government debt
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In this sense, easy money is of no real help other than to tempt banks to borrow at the short end to reinvest in longer-dated western government debt

 

Bollard's sole purpose in life was to facilitate this trade for the sale of excessive amounts of NZ government debt by the Key Government. The restrictive CPI covenants of the PTA were taken care of by numbers.

 

The real estate spivs climbed on the back of the arrangement with ministerial blessing.

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Please go ahead and enlighten us as to the best way to short the property market.

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I bet you cannot explain how to "Naked Short Sell" the Auckland property market just as Merrill Lynch and Goldman apparently managed elsewhere, according to this fascinating expose .

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Auckland city management is sounding more and more like a politburo issuing decrees to fix things which they have broken in the first place.

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All those quality of life mercer things are for bank personell (etc) on transfer. They aren't for the average Joe who struggles to afford a house.

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Well done PDK 70/5 = 14

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I realise Aucklands leadership has to be positive but this reminds me of someone who sets their sights on the Olympics when they don't (perhaps) have all the attributes (for example proximity to markets). It also smacks of no other plan than more economic growth ("it's what we do").

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Auckland's lifestyle has already gone done hill for the people at the bottom of the pyramid (despite Professor Spoonely saying the opposite). There should be an objective measure of well  offness other than GPD.

Where's Rod Oram?

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What plan's does China have for us?

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Wanted: Skilled workers

Therefore to improve Auckland’s prosperity, more skilled workers are needed given the skills of the existing workforce are "not well aligned with aspirations to be a wealthy and liveable city." Auckland needs to look to immigrants and to upskill its youth.

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that'll be a shoe-horn for property sales to Chinese?

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I am informed ( through the Christchurch Philippines community ) that a group of Filippino carpenters landed in Chch last month , to assist in the repairs & rebuild .

 

... if this is so , one can only surmise that not one Cantabrian worker is currently out of a job  .....

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Oh well , that's alright then ..... my bad .... silly moi , there I was thinking that we should look after our own , give jobs to citizens of NZ ....

 

..... silly Gummy !

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NZ is JohnKey and the boys' personal business. You just don't get it do you? It's about mates getting rich and stuff! NZ citizens be damned...

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A number of econometric models have indicated that immigration has favourable effects on the New Zealand economy. The most influential was that done by Poot, Nana and Philpott (1988) who found that immigration accelerates economic growth and reduces unemployment. However, such models have been criticised as the results are strongly influenced by the assumptions and parameter built in by the model makers (Chapple, Yeabsley, and Gorbey 1994). The limits of such models were illustrated by Peter (1993) who revealed that assumptions regarding economies of scale, labour force participation, spending and productivity of migrants are crucial to results. By changing his assumptions to equally plausible alternatives, Peter found he could reverse the findings on the benefit of migrants on the Australian economy. Poot et al.’s (1988) model was based on the assumptions of economies of scale and technological change allowing for 1.5% less inputs per unit of output. However, there is little evidence that New Zealand’s industries benefit from economies of scale. New Zealand’s biggest and most successful industries such as dairying, tourism, fisheries, do not rely on domestic economies of scale. Nor did their model consider any diseconomies of scale such as the infrastructural congestion caused by increased population density. This influential research is now twenty years old and in that time, the industries most likely to benefit from economies of scale ie: manufacturing have gone into decline as more production is located off-shore. Globalisation would also imply focusing on off-shore markets is a more logical approach of obtaining economies of scale given the size of the international market vis-à-vis an expanded domestic market. In this way, globalisation has actually decreased the rationale for the free flow of labour for countries like New Zealand. There is also little evidence to support claims of technological introduction. Research by the New Zealand Immigration Service shows that even among business immigrants, who might be most expected to introduce new technologies, it was found that that only 2% were introducing “any new skills or technology” into the country (NZIS 2002: 76). An inflow of migrants could encourage technical progress but it is dependent on the characteristics of the migrants (Barwell 2007). Highly skilled immigrants should be able to produce more output from complex machinery than those with lower skills, thereby encouraging companies to introduce capital-intensive technologies. Progress also occurs if the migrants can do innovative work in the R&D sector. Although low-skilled migrants are less likely to contribute to technical progress, they can have a positive impact on inflation, albeit through reducing wage growth. Neither are the arguments for assisting exports strong. Although immigration has a small effect on export growth, it has been found to have a greater effect on imports, as immigrants import products they are previously consumed in their country of birth, thereby having a negative effect on balance of payments (Bryant and Genc 2004). Another argument for immigration is that it increases diversity and thereby increases creativity and innovation. Scott Page(2007) has championed the benefits of diversity arguing that if an organisation has a diverse workforce it has a broader range of knowledge, heuristics and perspectives which increases the toolbox that a group can work with and solve problems. The debate has not been resolved. In a Treasury paper, Moody (2006:40) concludes that “overall, it is equivocal whether there is enough robust evidence to support the claim that immigration is always positive for per capita growth”. The Treasury paper concurs with the observations of the OECD which stated “there is not sufficient or detailed enough data on the behaviour of the New Zealand economy to give clear answers on the overall effects on per capita incomes of existing residents.” Helping to complicate the debate are the strongly held views on the subject. It has been noted that “a number of researchers in this emotive area had views pro or anti immigration, and that this had perhaps coloured their conclusions”(Chapple, Yeabsley, Gorbey and Poot: 1994). http://kauri.aut.ac.nz:8080/dspace/bitstream/.../clydesdale.GrowingPains.pd...

 

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An estate agent thoughtfully sent his customary bunch of flowers to a purchaser who has just moved in. Unfortunately, they arrived with a card saying ‘Rest in Peace’.
Furious, the recipient phoned the florist, who replied: “I’m really sorry for the mistake, Madam. But just think – there’s a funeral taking place today with some flowers on the coffin where the message reads: “We wish you happiness in your new home”.

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The main focus of New Zealand immigration policy has been on attracting human capital. However other arguments have been proposed for attracting immigrants including the desire to reach an ‘optimum population’. For example, Lowe (1997) analysed the availability of good quality soils and the average person’s resource use, and came to the conclusion that 4 million was the optimal population, a figure that has now been passed.  ..................................... and yet we have the Green Party saying:   Anti-immigration feeling has no place in the Green party Immigration and Population policies released today, Green MP Keith Locke says.   The Green Party policy is not based on prejudice, but an objective analysis of what level of migration is compatible with a sustainable New Zealand.
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YES Len, that was a wonderful piece of political BS that I have every read.....

 

I am suddenly filled with great pride and joy of being able to live in Auckland and see such wonderful leadership and foresight being propagated.

 

I am sure your development plan will be remembered until this Friday and everything else will the go back to normal.

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Another bill for the consultants at $140+/hr; 6months for 4-5 consultants to work on this documents..  ACC just wasted a few millions bucks! 

Keep the boys employed..

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While the transition of networks, IT systems is way over time and budget, and will be for yrs to come, due to beurocratic BS and nothing else....

And I have to fill out forms to be able to use Ef pos to pay for desposits in Resource consent, permit applications... how archic is that..

Len Browns visions are just a political pie in the sky piontless ...was going to say dreams... wafflings with no credablity, at further expense of the rate payer.

Hes now completely lost the plot.

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