By Bernard Hickey
Auckland feels like a boom town at the moment with shortages of houses, hotels, roads, schoolrooms and tradies dominating the conversations at barbecues, bars and on talk-back radio.
It seems like growth is all around and, strictly speaking, that's true. Auckland's population is growing at a rate of close to 200 people a day and all around town the signs of expansion are in the air - literally. The RLB Crane Index report found a record high 47 cranes on the skyline around Auckland in April, up 48% from six months earlier.
ANZ's estimate of regional growth rates in the March quarter found Auckland's GDP grew at an annualised rate of 3.7%, which was faster than the nationwide growth estimate of 2.6% and faster than either Christchurch at 0.6% or Wellington at 2.4%.
So surely any and all growth for Auckland is good?
It's certainly better than no growth or a recession, but the quality of the economic growth matters because sometimes growth for the sake of it doesn't actually make everyone richer in any sort of sustainable way.
This isn't just an Auckland problem either. All around the world policy-makers in Governments and central banks are scratching their heads over a strange phenomenon - falling productivity growth. Output per worker per hour is the most important determinant of wages and wealth in the long run. Unless productivity increases, workers and economies don't actually grow much in the long run. Growth can be pumped up in the short run by adding more workers (often migrants) and working longer hours, but new technology, training, management, systems and infrastructure are needed to make that growth sustainable.
Productivity growth across the developed world has sagged from around 2% per annum in the late 1990s to around 1% now. It helps explain why all sorts of stimulus from low interest rates and money printing haven't restarted the global economic engine and why interest rates have stayed surprisingly low for such a long time. There's all sorts of theories. Some think globalisation and increasing use of technology has shifted workers out of high productivity jobs in factories into low productivity and wage jobs in services industries such as hospitality and aged care, which has dragged down the average. Others think ageing populations and a lack of investment in new infrastructure, technology and education by governments and companies are to blame.
Whatever the reason, Auckland has quite a bad case of the productivity blues. The city has underperformed its own target of 2% growth in output per hour worked for a couple of decades. Output per hour has actually been flat to falling since 2012. Total GDP has grown in the city because of all the extra people working all those extra hours, but output per hour worked hasn't changed much, which means real wages have barely moved. They've certainly gone backwards once adjusted for housing costs, and more importantly, for useful leisure time.
This year's TomTom travel survey found Aucklanders spent an extra 158 hours or 20 working days a year travelling to work in 2015 because of congested traffic systems, which was 7% worse than it was in 2008.
Auckland may feel and look like a boom town, but quantity does not necessarily equal quality, and that's clear in the woeful productivity figures and in commuting times and in after-housing-cost disposable incomes.
Auckland needs a big dose of investment in its infrastructure, its people and its technology, but mostly it needs leaders and voters to think first about the wealth per capita of that growth rather than its sheer size. The phrase 'never mind the quality, feel the width' needs to be turned on its head.
A version of this article was also published in the Herald on Sunday. It is here with permission.