23 February 2025, 8:32 PM
Auckland’s economy faced a downturn in 2024, with key indicators showing a contraction driven by high interest rates and household debt pressures, according to the Auckland Council Chief Economist Unit’s latest Economic Quarterly report.However, easing monetary conditions and policy adjustments are expected to support a gradual recovery in 2025.The report highlights a 4.1% decline in real card spending in Auckland—more than double the national average drop of 1.9%—reflecting subdued consumer confidence.Additionally, employment in the region fell by 2.0%, with 20,000 job losses recorded across multiple sectors.The effects of high borrowing costs were evident throughout the economy, though recent Official Cash Rate (OCR) cuts from 4.25% to 3.75% signal a shift toward recovery.Housing Affordability and Population TrendsAuckland’s population grew in 2024, driven primarily by international migration.However, the city saw a net loss of approximately 10,000 residents to other regions, continuing a trend linked to housing affordability pressures.The median house price-to-income ratio stood at 7.5, significantly higher than the national figure of 6.4, making it challenging for many residents—especially skilled workers—to remain in the city.To combat these affordability issues, policy experts are calling for flexible land-use reforms to increase housing supply near employment hubs and transport infrastructure.The report also underscores the long-term importance of infrastructure pricing reforms to ensure sustainable urban development.Shifts in Productivity and Work PatternsAuckland remains the most productive region in New Zealand, but its GDP premium relative to the rest of the country is lagging behind global city benchmarks.Improving productivity remains a key focus for long-term economic growth.One notable shift is the rising prevalence of remote work.In 2023, 17.9% of Aucklanders worked remotely, compared to just 8.7% in 2018.While this trend has reduced commuting costs for workers, it has created challenges for businesses reliant on in-person customers, particularly in retail and hospitality sectors.Economic Outlook and Policy PrioritiesWith inflation easing to 2.2% CPI, businesses are showing cautious optimism, with 9% of firms expecting improved conditions in 2025.Lower interest rates are expected to stimulate demand, particularly in the housing sector.Residential construction is projected to rebound, with building consents forecasted to increase to 16,000–17,000 homes in 2025, up from 13,900 in 2024.Historical trends suggest a strong correlation between declining mortgage rates and increased construction activity, further supporting the outlook for economic recovery.The report recommends focusing on productivity-enhancing investments, land-use flexibility, and infrastructure pricing to address long-term structural challenges rather than reacting to short-term economic fluctuations.A Path to RecoveryAuckland’s economy struggled in 2024, with key challenges in employment, housing affordability, and productivity.However, with interest rate cuts, policy adjustments, and an improving business climate, 2025 offers a pathway to gradual economic recovery.Have a story to share from your neighbourhood? We’d love to hear from you! Send your news tips and stories to [email protected]