14 May 2014

Boom benefits not spread evenly

4:09 pm on 14 May 2014

In the third article of a Budget 2014 series on inequality, Economics Correspondent Patrick O'Meara looks at the improved economies of Auckland and Christchurch, but finds that not all regions are enjoying better times.

An Auckland hospitality owner credits the 2011 Rugby World Cup for a more positive mood in the city's hospitality scene following the global financial crisis - but not all regions are enjoying better times.

Scott Brown credits the hosting of the 2011 Rugby World Cup for the change in mood in Auckland's hospitality scene following the global financial crisis.

"We found that multiple coffees, and higher priced wine were back in vogue".

But the Auckland hospitality owner said business had really picked up since the end of 2013.

"We felt the reins had come off ... with French champagne back in vogue, and the long lunches were starting to come back, and we didn't have to wait til Friday to have those, we could have those Monday, Tuesday, Wednesday".

An Auckland waterfront restaurant.

An Auckland waterfront restaurant. Photo: PHOTO NZ

Scott Brown is a co-owner in Hip Group, which owns and operates 14 eateries in Auckland and Waihi, and he's confident the good times are back in an industry known for its fickleness and thin margins.

"We've employed another 300 staff in the last 18 months ... and we wouldn't be doing that unless we felt that there was business demand there. In fact in the next 18 months we are going to be employing well over another 300 staff ... And on top of that we'll be investing close to 7 or 8 million dollars back into the new operations in the next 18 months as well."

Along with the rebuilding of earthquake-damaged Christchurch, Auckland's buoyant economy is one of the key drivers of the country's faster growth.

Indeed, the signs point to the economy strengthening further. Confidence among consumers and business remains sky-high, construction and manufacturing activity is expanding and growing demand from China is boosting the incomes of farmers. The Reserve Bank estimates the economy grew a faster-than-expected 3.5 percent in the March year.

Auckland's buoyant economy is one of the key drivers of New Zealand's growth.

Auckland's buoyant economy is one of the key drivers of New Zealand's growth. Photo: PHOTO NZ

But not all regions are enjoying better times.

Dunedin has copped its fair share of economic shocks in the last few years, including the loss of hundreds of jobs at New Zealand Post and Kiwirail's Hillside Workshops.

Debbie Gelling has been in her role as a social work supervisor at Family Works in Dunedin for 15 months, and she said, unfortunately, its business had picked up.

"In the last 12 months there's been a huge increase in people who are new to poverty ... there's a huge difficulty in getting work now, they may get casual work, but normally it's not enough to make ends meet."

The labour hire firm, AWF, says there's a shortage of labour in the main centres of Christchurch and Auckland.

Its chief executive Mike Huddleston said that pressure was not as intense in provinces like Northland, Hawke's Bay, and Wairarapa, where unemployment remained stubbornly above 8 percent.

"There are people out in those regions that are available for work."

Unemployment has remained above 8 percent in provinces such as Northland, Hawke's Bay and Wairarapa.

Unemployment has remained above 8 percent in provinces such as Northland, Hawke's Bay and Wairarapa. Photo: RNZ

Even in Auckland, Queen St busker Aaron Hendry said the new found prosperity had not been reflected in greater takings.

"Myself, my friends, financially we're struggling a bit. You still see a lot of people tightening their belts. It's a lot tougher for a lot of people."

Nevertheless, the Government's budget will reveal a healthier economy than forecast by the The Treasury last December, and reaffirm the operating balance will be in surplus in the June 2015 financial year.

Under the stewardship of Finance Minister, Bill English, the message of his previous six budgets has been one of restraint.

That's a message the business lobby group, Business New Zealand and its chief executive Phil O'Reilly wants to hear.

"The big story here is the macro story, the Government getting back to surplus and continuing restraint, lessening government spending as a proportion of GDP."

But Mr O'Reilly said developing skills and building a resilient economy were also important.

"The investment in skills, the investment in innovation, and the investment in making sure that that growth is as inclusive as possible."

Unions are sceptical, given unemployment has stalled at 6 percent, while wage growth continues to slow.

Council of Trade Unions president Helen Kelly said there were no signs workers were getting their fair share, even in the booming parts of the economy.

"(In) forestry and agriculture, we see wages on the decline, and they're paying some outrageous rates of pay very close to the minimum wage, so economic growth doesn't trickle down ... and we see the Government cutting employment rights to drive wages down."

Ms Kelly dismissed the Government's pre-budget announcements to boost apprenticeship numbers, and offer a $3000 relocation allowance to beneficiaries who were able to secure a job in Christchurch, as paltry.

She said the Government had underinvested in skills training, job creation, infrastructure and state housing and without it, the high growth, high wage economy dreamt about by successive administrations would remain just that - a dream.

Full coverage of the 2014 Budget

CTU president Helen Kelly said forestry and agriculture wages were on the decline.

CTU president Helen Kelly said forestry and agriculture wages were on the decline. Photo: PHOTO NZ