New Zealand cities struggling to compete with Australian cities

New PwC report reveals income and cost of living impacting ability to attract talent

New Zealand cities are becoming less competitive against Australian counterparts raising questions about their ability to attract skilled workers and alleviate the current labour shortage according to PwC’s latest report, Competitive Cities: A Decade of Shifting Fortunes.

The report highlights the challenges ahead for our urban areas using the lens of income and cost of living. It is the first release from PwC New Zealand’s Cities Institute.

Competitive Cities: A Decade of Shifting Fortunes compares six New Zealand cities (Auckland, Hamilton, Tauranga, Wellington, Christchurch and Queenstown) to Australia’s five main centres (Sydney, Melbourne, Brisbane, Perth and Adelaide). Key findings include:

  • A median household in Auckland could expect approximately $4,975 less in annual discretionary income from 2008 to 2018 – equal to 7% of after tax income.
  • The other five New Zealand cities examined experienced an increase of between $3,300 and $7,100.
  • In Australia, discretionary income in Melbourne and Sydney increased by $5,200 and $2,300 per year respectively between 2008 and 2018, compared to between $13,000 and $18,000 in Perth, Brisbane and Adelaide.

PwC Chief Economist, Geoff Cooper says, “Today’s skills shortage is among the worst recorded in the last four decades and has been steadily climbing since the financial crisis. If New Zealand is to attract the right kind of workers, it needs cities with a compelling proposition for people.

Our research shows that our cities are struggling to compete against the main centres in Australia. High house prices in New Zealand, sluggish income growth and higher transport and food expenditure are to blame.”

New Zealand’s smaller cities are most competitive

Hamilton, Tauranga, Wellington, Christchurch and Queenstown are now competing more strongly for talent in New Zealand. Key factors include:

  • Wellington and Christchurch have experienced weekly increases in discretionary income of $137 and $124 respectively through higher income growth and relatively low housing costs.
  • Alongside strong income growth and weaker house price growth than in other cities, basic expenditure cost increases have been relatively modest in Wellington.
  • In Christchurch, incomes have risen faster than in most other New Zealand cities but residents have faced significant increases in transport costs.
  • Hamilton is competing with other smaller cities for people spilling out of Auckland. While basic expenditure has risen, it remains competitive due to rising incomes and falling housing costs. 
  • Tauranga is also competing for people moving out of Auckland. Wage growth is second only to Christchurch but house prices have risen significantly.
  • In Queenstown, population growth is faster than any other New Zealand city. Living costs are high, and house prices are rising, but incomes are rising even faster.

“From an income and living costs perspective, New Zealand’s smaller cities have made significant gains in competitiveness over the decade. However, our research reveals they all face greater challenges than many Australian cities when it comes to housing costs and basic expenditure.

“In Auckland, the triple whammy of rising house prices, sluggish income growth and increasing costs for basic necessities is at its most extreme. As New Zealand’s largest and most internationally competitive city we need to find a way to position it as the go-to city for skilled workers.” says Cooper.

What can be done to improve competitiveness?

The report outlines three recommendations for improving the ability of New Zealand cities to attract talent:

  • Appoint a Minister for Cities to champion the competitiveness of New Zealand cities, and develop the evidence base of urbanisation in New Zealand, taking a comprehensive view of urban living costs. 
  • Initiate an Urban Statistics Rollout to better capture key statistics and data that can assist urban policy making.
  • Create an Economic Competitiveness Agenda for Auckland. This all-of-government strategy would help navigate the significant challenges New Zealand’s most internationally competitive city faces.

“Our report reveals the predicaments ahead for our cities but it is possible to future proof our urban areas. We need a greater focus on city ecosystems to fully understand the current situation and determine a sustainable way forward. We should follow Australia’s lead by creating a Minister for Cities who can provide a centralised channel of communication with strategically important urban areas as well as advise on urbanism in relation to key issues such as wellbeing, inequality and economic performance.

“Another pressing issue is lack of adequate urban data. While there have been improvements recently, more needs to be done to fully understand our cities, such as providing regular urban migration data and urban land value data that would be useful to policy makers. The Household Economic Survey could be expanded to all cities and there is a need for regular city-specific consumer price indices and quarterly GDP estimates.

“Finally, Auckland is facing a unique set of challenges. We propose creating an all-of-government Economic Competitiveness Agenda including concrete steps for lowering the cost curve of urban living, building broad-based wage growth, attracting the smartest minds and overcoming the labour shortage,” concludes Cooper.

Contact us

Louise Poppelwell

Communications Manager, PwC New Zealand

Tel: +64 21 149 5516

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