Accuracy of MartinJenkins economic “context” for their airport growth impact assessments questioned

The picture painted in MartinJenkins’ airport growth impact assessment Context Summary informing our community feedback is rosy, with 2018 median annual household income of $116,200 being quoted as 30% higher than the national figure.  It adds that this is growing 0.3% faster than the rest of the country each year.

From this, our Council and community might conclude our economy is performing well.  And that more of the same – expanding tourism and the airport – would be a reasonable approach to economic policy.

But is this what we experience as a community? Do the statistics being used present a real picture? And long-term, is focusing on an economy in the thrall of tourism wise policy for our community’s well-being? 

Getting this economic context right is vital because it is what’s shaping community and focus group feedback. This, in turn, will inform councillors’ decision whether to give QAC the right to expand our airport’s noise boundary. 

Questions over the accuracy of the context summary were drawn to our attention by former World Bank economist and long-time Queenstown resident Ralph Hanan, pointing to comparative economic profiles for Queenstown Lakes, Northland, Westland and Auckland regions. Links to these profiles are provided below. They were prepared by Infometrics, a leading New Zealand economic consultancy with 30+ years’ experience.

We Love Wakatipu’s commentary below is based on these profiles. We note that MartinJenkins also used Infometrics as a source for their statistics.  They just chose statistics that told a different, rosier picture than what most of our locals experience.

Using figures for individual average earnings – rather than joint household income – the four 2019 Infometrics profiles for Auckland, West Coast, Northland and Queenstown Lakes paint a very different picture.

These figures show Queenstown Lakes’ “average worker” earns $55,082, trailing behind Northland’s $55,318 and the West Coast’s $56,758 and 19% less than Auckland’s $68,259. Northland and West Coast are usually cited as among our poorer regions.

And even this figure will overstate the reality of many locals, as our economy is characterised by large disparity of income with many of our highest earners deriving significant income from investment and business outside of the district. 

Similarly, the Infometrics profiles show “productivity” (GDP per filled job) for Queenstown Lakes at $102,039, again below the other three regions.  West Coast’s productivity is more than 10% higher than ours, at $113,62.  Queenstown Lakes workers produce on average 23% less revenue per day than those in Auckland, Infometrics figures show.

MartinJenkins’ “context” summary instead shows GDP per capita, saying this has risen more than the New Zealand average over the past five years. But GDP per capita simply divides the district’s total GDP by its population. It does not distinguish between income generated from within the district versus that earned elsewhere.  It in effect covers up our local workers’ low earnings.

This problem of low productivity and earnings for people working in Queenstown Lakes is magnified by their substantially higher accommodation costs and other living expenses. Weekly rents in Queenstown Lakes average $650, far exceeding the West Coast’s $260 and Northland’s $380.  This pincer of low earnings and high living costs translates directly into less economic well-being for workers in our district.

The Infometrics data shown on the chart below highlights Queenstown Lakes’ dependence on tourism. The contribution tourism makes to the economy of Queenstown Lakes (55.6%) is much larger than Northland (7.6%), West Coast (14.9%) or Auckland (4%).

Connecting the dots here, we may conclude that the relatively poor economic performance of Queenstown Lakes District has something to do with tourism, on which our local economy is mostly based.  

This is supported by figures presented by Sir Paul Callaghan, founder of the MacDiarmid Institute, to the StrategyNZ conference in March 2011 (excuse the figures being dated, but the concept of comparative incomes remains).

He said tourism income is two thirds of New Zealand’s average: “The more tourism, the poorer we get. Tourism is great for employing unskilled people. It is absolutely not a route to prosperity.”

Screenshot from YouTube video of Sir Paul Callaghan’s presentation.

Now try to reconcile this discouraging data with the figures in the MartinJenkins summary.  The lowly paid, low productivity tourism economy described above is in stark contrast to the economic snapshot MartinJenkins provided.

There could be several explanations for this.  Household income doesn’t differentiate between income generated within the district versus that earned elsewhere, through investments or business. Large income disparity distorts this “average”. Many people come here after they have “made it” elsewhere, so are independently wealthy.

And how many minimum wage workers squeezed into rental housing, often hot bedding, are contributing to our district’s high “household income” rate?  One WLW members parents’ former four-bedroom home with previously two occupants now has 28 tenants… so even at the average income, that adds up to quite a lot for the household.

Interestingly, QLDC chose to use the “mean income” Infometrics figures rather than overall household income in its 2018 Ten Year Plan, acknowledging the 2016 Queenstown Lakes “mean income” was 15% lower than the mean for NZ.  Infometrics advised also that this gap was getting wider.  

More recently, Infometrics has reported that in 2018 the district’s economy grew at 4.6%, which appears robust.  However, the district’s population grew by 5.7% and employment by 7.1%.  So, the district’s growth was simply more people, working more hours, for less money.

Is creating more low-wage tourism jobs, by expanding Queenstown Airport’s air noise boundary to turbocharge tourism, Council’s best move to increase our district’s productivity and our residents’ income and well-being? The business sector might cite the importance of connectivity to attract talent, but how much more connection do these businesspeople need and at what cost to the wider community?

Ralph’s conclusion?

“Statistics can be made to show what the analysts and policy makers want them to show.  In my view, the data in the MartinJenkins handout do not provide a robust basis for assessing the performance of our Queenstown Lakes economy, its performance relative to other regions or our worker productivity.

I cannot vouch for the accuracy of the figures in either the MartinJenkins handout or the Infometrics profiles.  There is also the discrepancy of statistical measures presented, such as mean earnings from Infometrics and median annual household income.  We must be careful that our comparisons are apples with apples and not oranges.  And we should recognise that the Queenstown Lakes economy and demographic are quite different from the rest of New Zealand.  

I don’t know how the raw data were generated or how Infometrics went about their calculations.  It is reasonable to assume, however, that for its economic profiles, Infometrics has taken a common approach across regions to arrive at its GDP, “mean earnings”, and productivity figures.  Therefore, the data suggest that Queenstown Lakes is performing well below the level to which most of us aspire and expect.

It follows that our Council should carry out a more rigorous assessment of the district’s economic performance and derive the real value added (GDP) from those who are employed to produce the goods and services generated in our economy, rather than lumping them with the income of well-off residents derived from elsewhere.  Only with a robust analysis can we be confident that our Council will take decisions on how to shape our social and economic future, with more equitable outcomes.

Infometrics Auckland 2019 profile

Infometrics West Coast 2019 profile

Infometrics Northland 2019 profile

Infometrics Queenstown Lakes District 2019 profile

PS We Love Wakatipu pointed out the above issues to MartinJenkins at the February 28 focus group we took part in. The focus group leader said they would include this broader (in our eyes, more representative) perspective in their report back to Council. They did not commit to making their context summary more accurate in the interim, so public feedback continues to be misinformed.

We look forward to seeing a better informed, more rigorously analysed economic assessment from MartinJenkins in March and then May.

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