Economic and Labour Market Update - March 2010
1. Introduction
Auckland is on the cusp of change. Macro forces are moving into a more favourable condition, and the forthcoming local governance change is forcing a rethink about how the city operates. The economic impacts from both processes will be considerable, affecting what business gets done, and how they go about doing it. With changes imminent, the introspection process continues with businesses, communities and individuals considering the impacts to their modus operandi.
The Reserve Bank of New Zealand indicated a level of contentment with the prevailing economic climate of the country and left the official cash rate unchanged this month. However, business confidence in Auckland has stalled according to a Chamber of Commerce survey of companies. The focus in Auckland in the last month was diverted to the local level, with the hosting of a conference on community economic development. The micro and the macro economies meet in the tangible real economy where people are employed, businesses operate and households make decisions, and this month’s economic monitor reflects on this process. |
2. Macro climate
The New Zealand macro economy is under scrutiny by analysts, with commentators remaining cautious about the economic recovery.
Business confidence increased across the country, with the highest levels recorded since 1999 and many firms’ activity expectations have increased.1 In Auckland, the outlook is not so positive according to the Auckland Chamber of Commerce quarterly confidence survey. It found the number of business people expecting the economy to pick up has fallen from 58 per cent in September to 44 per cent this month. Concurrently, the number believing it will deteriorate has increased from 6 per cent to 12 per cent.2 The New Zealand Treasury was quite positive in its outlook, commenting that forward looking indicators are positive, especially for the manufacturing and construction sectors, and the exchange rate in recent months has been beneficial for exporters. The Treasury does note that some momentum, particularly in the household sector, may have been lost in the last few months.3 As a response to the global credit crisis and exposure to risk, it seems that households and businesses are determined to reduce their debt levels. Overall, NZIER cautioned of New Zealand’s disconnect with the global economic recovery, as they do not see a self-sustaining recovery in New Zealand.4 This could be redressed in part by the intention of the government to set up a productivity commission. Finance Minister, Bill English’s office said that it would support the goals of higher productivity growth across the economy and improvements in the quality of regulation.5 The use of monetary policy, as an economic stimulus, is still evident. The Reserve Bank left the official cash rate unchanged at 2.5 per cent in March. In early March, the New Zealand Treasury released a National Infrastructure Plan.6 It provides a summary of Government’s intentions regarding infrastructure. It pieces together current infrastructure planning, and reiterates the links between infrastructure and productivity, employment, reducing vulnerability; and reducing the income gap with Australia. The wider benefits of infrastructure provision are acknowledged, including access to services, social and environmental factors, which are a welcome departure if this rhetoric informs future decision making. |
3. Micro climate
From the macro to the micro, the Community Economic Development Conference held in Waitakere city in February presented some refreshing perspectives on grass-root activity both here in New Zealand and internationally. Themes such as ‘community anchors’, ‘social enterprise’, ‘community and social finance’, ‘social entrepreneurs’ amongst others were explored through a series of presentations and workshops. The role of community economic development within the forthcoming Auckland Council was interrogated, and some lessons learned from local governance change in Brisbane were shared. The discussions centred on the appropriate level of consultation and community involvement to ensure effective decision making, to avoid the pitfalls of apathy and non-participation in local governance – a cost to local democracy. The economic theory of public administration indicates that bureaucracies expand and contract for rationalisation purposes, as part of a cycle. A period of contraction could mean that resources dedicated to consultation are pared back. Interesting, in the United Kingdom community economic development has a current focus of asset transfer to community groups, for their strategic control and management.
4. Labour Market
Although the unemployment rate crept up to 8 per cent in Auckland for the last quarter of 2009, with under 25 year olds affected disproportionally to older workers, and unemployment relatively high among Maori and Pacific, work opportunities were improving in the Auckland region. The Department of Labour’s ‘Jobs Online’ monthly report indicated that the positive growth in job advertisements that began in mid 2009 is continuing.7 This indicates that employment prospects are generally improving. Skilled vacancies in Auckland increased in the three months to February 2010. In general the north island showed an increase in skilled vacancies, whereas the south island had a decrease in the last quarter (Table 1). A cursory look at one web-based job advertising site (snapshot for March 2010) shows that over half (53 per cent) the New Zealand jobs advertised were in the Auckland region.
Table 1: Skilled vacancies index
2010 | 2010 | |
| Auckland | ||
| Wellington | ||
| North Island - Other | ||
| Christchurch | ||
| South Island - Other | ||
| Nationwide |
5. Conclusion
February was a quiet month for new data pertaining to the Auckland economy. This does not detract from changes evident in the consideration of the regional economy. As Auckland emerges from the recession and enters another period of growth, a reflection on the business cycle is at the forefront of thinking, clearly with caution in order to mitigate future downturns in the economy. Effects on communities, and mitigation of adverse economic conditions were under discussion this month. Opportunities within the labour market are emerging, yet unemployment is real, especially for under 25 year olds, Maori and Pacific.
Prepared by Dr. Catherine Murray
1. National Bank Business Outlook Economics. February 2010.2. New Zealand Herald March 19th 2010.
3. New Zealand Treasury. Monthly Economic Indicators February 2010.
4. Shamubeel Eaqub NZIER March 2010 Quarterly Briefings.
5. Dominion Post 10th March 2010.Cautious Backing for Productivity Commission.
6. http://www.infrastructure.govt.nz/plan/mar2010.
7. http://www.dol.govt.nz/publications/jol/report/jobs-online-201002.pdf.
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