Aucklanders' annual discretionary income falls $5000 in a decade - new report

Source: 1News

The annual discretionary income of Aucklanders has fallen nearly $5,000 in the last decade and Auckland is the only major city in Australasia to experience a drop in this income, a new report has found.

"New residential land under development in Auckland, New Zealand. Shortages of housing in the city means new subdivisions are quickly filled. Shortage of housing is also leading to high house prices. This is Kensington Park north of Auckland. Modern infill compact housing."

PwC's report 'Competitive Cities: A Decade of Shifting Fortunes', examines New Zealand cities' income and cost of living. 

It compares six New Zealand cities - Auckland, Hamilton, Tauranga, Wellington, Christchurch and Queenstown - to five Australian cities - Sydney, Melbourne, Brisbane, Perth and Adelaide.

The report found the money left over for Aucklanders after tax, housing, transport and other basics, fell $96 per week between 2008 and 2018. That's about 5.8 per cent of annual gross household income.

Wellington and Christchurch experienced weekly increases in discretionary income of $137 and $124 respectively, by combining high income growth with relatively low housing costs. 

"In contrast, the smaller cities of Hamilton and Tauranga have relied on lower basic expenditure, while Queenstown is playing a higher stakes game, with high incomes outstripping rapidly increasing house prices," the report said. 

By contrast, Auckland had rising housing, food and transport costs, coupled with sluggish income growth. 

"It is the only Australasian city in our sample to offer lower discretionary income today than a decade ago, declining by $96 per week."

From 2008 to 2018, Auckland household income has risen nine per cent, mortgage repayments have gone up 15 per cent, basic expenditure 34 per cent. Discretionary income has fallen $4975.

Auckland income growth sluggish, house prices rising

The report said while public focus has centred on housing costs of late, Auckland faces three headwinds simultaneously -  income growth for the median household is sluggish compared to other cities, basic expenditure is increasing faster in Auckland than elsewhere, and Auckland house prices have risen more than all cities in Australasia, with the possible exception of Sydney.

At the same time, median wages are not keeping pace with economic growth. Auckland has experienced strong economic growth since 2012, growing at an average of 2.9 per cent per annum, compared to 2.1 in the rest of New Zealand. 

Over the same period, wages grew at an average of 0.87 per cent per year compared to 2.1 percent in the rest of New Zealand,.

"Median wage growth in Auckland trails every other New Zealand Growth City, raising questions about who is benefiting most from Auckland’s growth. To a median household looking in, the Auckland proposition is grim," the report stated. 

"On a median household income, a bank may reasonably lend enough for a house priced at $467,000 (about 55 per cent of the median). This is enough to buy a house on the outskirts of the city or perhaps in a Supporting Growth Area such as Pokeno."

Mortgage payments have risen some 15 per cent for a new median household since 2008 in real terms, the report found. 

"With the exception of Sydney, no other city in our study experienced a meaningful increase. After deducting basic expenditures and these hypothetical housing costs, the median household is left with just $309 per week."

Nearly 25,00 leave Auckland between 2012 and 2016

Against this backdrop, a net 24,984 Aucklanders left New Zealand’s largest city between 2012 and 2016. That's enough to offset all natural growth - births minus deaths - in the city, the report found. 

"Auckland’s ambition will be stifled if these growth dynamics persist. Existing difficulties funding infrastructure for instance, are made more difficult in the face of falling relative wages, rising housing costs and higher basic expenditure." 

Auckland needs competitiveness agenda, NZ needs Cities Minister

The report recommended Auckland needs an Economic Competitiveness Agenda.

"Only when Auckland improves its economic standing, through faster income growth and lower living costs, will it be able to attract and keep the type of labour the city needs to compete internationally," the report said.

Under a heading 'The case for Australia strengthens', the report said the stand-out Australian performers are Perth, Brisbane and Adelaide. 

A new resident moving to one of these three cities is significantly better off today than ten years ago.

The report said New Zealand should follow the lead of Australia and create a Minister for Cities. 

"New Zealand needs a champion for the competitiveness of New Zealand cities, taking a holistic view of our urban areas and acting as a centralised channel of communication with strategically important cities."