The Future Of Auckland.

Presentation to Auckland Regional Council: 29 October. 2008.

Keywords: Globalisation & Trade; Governance; Growth & Innovation;

Aucklanders sometimes talk about wanting to have a ‘world class city’. Since any city can be world class in its class, that is not a very ambitious goal. The issue is in which class does Auckland want to be? Today I set out two ambitions for Auckland. The first is as New Zealand’s premier gateway city; the second is as its premier global city.

The Premier Gateway City?

Auckland was not New Zealand’s first gateway to the world. That was the Bay of Islands. Nor is it New Zealand’s only gateway city; for instant were it not the capital, Wellington would be only a gateway city.

Auckland is the major gateway city with New Zealand’s largest port (the Ports of Auckland),and  its second largest port (Auckland International Airport). It is also has an important communications hub at Warkworth. One guesses the latter two roles will continue into the indefinite future, given the population in the north of the North Island, and the fact that Auckland is New Zealand’s major population centre closest to the Pacific.

However the dominance of the Port of Auckland is less certain. The obvious alternative contender is the Port of Tauranga, which is already New Zealand’s largest export port, and could well become its largest import port as communication links improve its locational competitiveness. I return to this possibility when I discuss what constitutes Auckland.

One of the characteristics of a gateway is that it is the first stop for migrants. Many stay there and do not move on, although their children may. This is already evident for the Auckland urban area, for two out of five of its residents are born overseas. Allow for their children born in New Zealand and the inflow of Maori from rural regions, and the multi-ethnicity of Auckland makes it a very different city from any other New Zealand one.

A crucial role of a New Zealand gateway is the exporting of the produce of the countryside. Auckland (and Tauranga and Whangarei) will remain important gateways even if the balance of resource production – from farms, fisheries, forests, mines, possibly oil – tips toward the south. However the rest of this paper, while recognising the central role of primary production in New Zealand’s future, is concerned about whether there is another leg to our economic development. If there is, Auckland has a critical role as a global city.

New Zealand’s First Global City
Gateway cities are headquarters city. The existence of a numerous corporate headquarters may be a defining feature of a global city. But they change the very character of the city.

1. Headquarters require specialist business, communications, design, financial and information services, so a cluster of specialist suppliers surround them.

2. Their workers have particular life style needs, so there has to be a rich supply of cultural institutions,. That includes not only opera, theatre and art galleries (and sporting venues and leisure facilities like beaches), but the global city will have business providing personal needs such as fashion design and quality restaurants – the city becomes a centre of commercial creativity.

3. Their workers will demand quality core education for their children and, while it is not inevitable, many of those children will go onto local tertiary institutions, which will also supply key workers for the businesses from the general population. In any case there will have to be quality universities because headquarters and their clustering businesses need them. The first global city is also likely to have the country’s premier tertiary health care facilities too.

Historically global cities have had a manufacturing base. It may not necessarily be large and growing in the future. There are forces which are shifting manufacturing offshore to low wage countries. The city’s growth will be in services.

In any case there is an ambiguity of what constitutes manufacturing. Global cities will have businesses which create design and prototype manufactures and services, and then move them elsewhere at the mass production stage. The activity arises because of that intensity of specialist services, and the supporting creative and educational activities.

What is going on here is that there is an increasing role for knowledge related activities, and – ironically as the world globalises – a premium associated with face to face activities. Despite globalisation, people remain important.

Economists talk about the ‘economics of agglomeration’, in which production costs in an urban area fall as size increases. The theory emphasise that the relevant externalities for the formation of business clusters include::
1. Mass production (the internal economies that are identical to scale economies at the firm’s level);
2. Availability of specialised input services;
3. Formation of highly specialised labour force and the production of new ideas, both based on the accumulation of human capital and face-to-face communications;
4. The existence of a modern infrastructure.

The infrastructure dimension is critical. Diseconomies of congestion can choke the economies of agglomeration. The economic history of New York is the tension between the countervailing forces in which congestion kept limiting the city’s growth and then some innovation – elevators for instance – enabled the city to be even larger. The next step may have been broadband.

The experience of New York reminds us that governance is critical too. If Auckland cannot get a system of government which is not dependent on squabbling parochial interests, it will not become a proper global city, because it is not large enough for the economies of agglomeration to outweigh poor governance. .

The effect of an headquarters city is to generate opportunities for other sorts of businesses, which are only tangentially connected to the headquarters activities. For example, if the biotechnology industry to succeed in New Zealand will require a significant activity in Auckland, because of the strong education and health service base, and some key specialist business services in finance and law. The industry needs a critical mass so there are those specialist services, and also so that biotech startup business can fit into the niches of the industry. That all requires a big urban centre.

The Boundaries of Auckland

There’s the rub. Is Auckland large enough to be a global city? Auckland is not large by international standards, which is why it has to do everything else better to make up for it not having the same cost-reducing economies of agglomeration. But it can also bulk itself by a wider definition of what constitutes Auckland. For instance, in the case of biotechnology Auckland is on the small side compared to its overseas competitors. Add Hamilton and the size is looking more competitive, especially given the Waikato University and Ruakura expertise.

That leads one to think of Auckland as being surrounded by a ring of urban centres – Hamilton, Rotorua, Tauranga and Whangarei – which are really a part of the same city when they are working together in global terms.

The issue is nicely illustrated in the tension between Ports of Auckland and Port of Tauranga. It may be that Tauranga will become the bigger gateway port for the North Island. That would, of course, require strong transport connections between Tauranga and Auckland. It also requires Auckland to think outside the narrow region. Outsiders are continually struck about how parochial Auckland is. Sometimes its concerns seem to be confined to the isthmus of Auckland, sometimes even only the CBD.

If Tauranga becomes the more important sea gateway, that does not mean there will be no role for Ports of Auckland. The proposed system of freight consolidating depots wants to use a port on the Manukau to give better access to the west North Island, and there will remain port activity in the Waitemata, including cruise ships. Instead of seeing this shift to Tauranga as a threat, Aucklanders might think what they could do with the port land released; they might well value the resulting reduction in freight congestion on their roads.

What Auckland needs is a vision that ‘what is good for New Zealand is good for Auckland’. The rest of New Zealand would reciprocate with ‘we need to make sure Auckland becomes a global city.’

Where do the boundaries of Auckland end? It depends a bit on the activity. The rule for just-in-time production may be overnight delivery. It wont be long before almost the whole of the North Island is in that range of Auckland. The Island needs a quality freight network – road and rail (shipping for slower freight). In the light of those two principles the previous paragraph enunciated, it means that the Transmission Gully is as important to Auckland as the Waterview Tunnel is to Wellington.

When it comes to people movement, the rule seems to be the comfortable day-return commute. Aside from the dreadful connection between the Auckland’s international airport and its CBD, that means that Christchurch business and professionals are already a part of the Auckland knowledge network and so, almost, is Dunedin.

The Alternative to Auckland as a Global City

However, Sydney is on the cusp of the day-return to Auckland, and we must contemplate the possibility that instead of Auckland being a global city surrounded by a ring of secondary cities which strengthen its size and effectiveness , it will be a secondary city to the Sydney hub (while remaining a gateway city for New Zealand).

No New Zealander can contemplated such an outcome with equanimity. But it is a possibility, especially if we tackle the future of Auckland with small mindedness, short-term thinking and parochialism.