Industry snapshot for the Auckland region The Manufacturing Sector

Transcription

1 Industry snapshot for the Auckland region The Manufacturing Sector

2

3 Industry Snapshot for the Auckland Region The Manufacturing Sector October 2009 Prepared by Penelope Tevita Tuatagaloa Economic and Social Policy team Auckland Regional Council Tel: ISSN X 1

4 Contents Auckland Region Manufacturing Sector in a Nutshell 3 Introduction 4 Definition and data sources 4 Gross Regional Product 6 Employment 8 Value added per employee 10 Geographic Units 11 Sector profile 13 Exports 15 Manufacturing Sectors 17 Food product 17 Machinery and equipment 19 Transport equipment 20 Sector locations 21 Economic Projections to Conclusion 27 Appendix 1: Manufacturing Sector Economic Projections to 2031 GRP, Employment and SLQ 28 2

5 Auckland Region Manufacturing Sector in a Nutshell In 2008, Auckland s sector generated $6,781 million in gross regional product (GRP), or 36.3% of the national gross domestic product (GDP). This equates to 13.5% of GRP in Auckland, the second largest sector in terms of GRP contribution in the region behind property and business services. Over half of the sector s GRP in 2008 was contributed by: food, beverage and tobacco (with $1,705 million or 25.1%), machinery and equipment (with $1,233 million or 18.2%), and metal product (with $840 million or 12.4%). Auckland city contributed most of the region s GRP with $2,550 million (37.6%), followed closely by Manukau city with $2,015 million (29.7%). The sector was the largest employer in the region in 2008, employing 12.7% of the region s employee count (EC) or 82,010 workers. There were 8,288 geographic units (GU) in Auckland in 2008 representing 5.2% of total GUs in the region. The average number of employees per business in the region in 2008 was This compares to the average of all employees per business in the region of about The Auckland region is home to over a third of all employment and businesses (GUs) in New Zealand in Auckland city has the highest number of employees and businesses in the region in 2008 with 30,530 ECs (or 37.2%) and 2,675 GUs (or 32.3%). This is followed closely by Manukau city accounting for 29.7% of total employment and 20.9% of total businesses in the region. Food product was the main employer in the sector in 2008 with 14,060 ECs whilst machinery and equipment had the highest number of businesses in the region with 1,262 GUs. Manufacturing employment and business growth was static between 2000 and 2008 although interregional changes are evident. The outer areas of the region experienced growth, whilst it decreased in the CBD area. Employment and business performance also varied widely amongst the sectors. While the more traditional sectors witnessed a net decline, employment increased in the following sectors: food product, machinery and equipment, and fabricated metal product. Manufacturing companies exported $5,049 million worth of goods and services in This represents over half of all exports from the Auckland region. Manufacturing value added (VA) per employee in 2008 was $82,684. This compares to value added per employee for the region of $77,670. The future of is projected to be in high-value added products and services and in sectors of comparative advantage to the region namely marine, advanced materials and food and beverage. In 2031, the Auckland region is projected to remain the main centre of activity accounting for 38.4% of total GDP and 36.0% of all employment in New Zealand. are: The main growth sectors to 2031 machinery and equipment, food and beverage, rubber, plastics and other chemical, and transport equipment. 3

6 Introduction Manufacturers worldwide are in the process of transforming their operations to keep pace with rapidly increasing competition. Global engagement is requiring business to be lean, make use of global supply chains, become more capital intensive, and be innovative in order to remain competitive. Globalisation, increasing competition from China and the strong New Zealand dollar has heightened the need for in New Zealand to develop new methods and different approaches to address the challenges the sector faces. While these hurdles have shaken industry s perceptions of its future, remains crucial to the New Zealand economy going forward. The Auckland region is home to over one third of all employment and businesses in New Zealand in It is projected that the structure of Auckland s economy will remain relatively unchanged over the next 25 years and that the sector will continue to play a significant part in the Auckland region s economy. This report provides a comprehensive snapshot of the sector in the Auckland region in 2008 and projections to Defi nition and data sources According to Statistics NZ, : 1. Gross Domestic Product 1 This is taken from Infometrics national and regional quarterly GDP series from 1997 to 2008 in 1995/96 constant prices Employment and Geographic Units This is taken from Statistics New Zealand s Business Demography Survey 2000 to The survey is based on the Statistics New Zealand Longitudinal Business Frame (LBF) and gives an annual snapshot (as at February) of the structure and characteristics of New Zealand businesses. The series covers economically significant individual, private sector and public sector enterprises that are engaged in the production of goods and services in New Zealand. 3. Exports Data This is taken from Statistics New Zealand s Overseas Trade Exports Trade, Merchandise: Monthly Estimates of all Harmonised System Items from 1988 to Economic Projections to 2031 This is taken from the Economic Futures for the Auckland region report 3. The Economic Futures report provides economic projections for 48 industry sectors in the Auckland region to Each data source has varying degrees of sector detail, given the different approaches to classification. includes units mainly engaged in the physical or chemical transformation of materials, substances or components into new products (except agriculture and construction). The materials, substances or components transformed by units [under this classification] are raw materials that are products of agriculture, forestry, fishing and mining, or products of other units A range of data sources are used in this report. Each has its own merits. Where possible, the most appropriate data source was used: Gross Domestic Product is the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). This is also equal to the sum of the value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. Information on the methodology used to derive Gross Domestic Product can be found on the Infometrics website The Economic Futures for the Auckland region reports Part 1 and Part 2 can be found on nz/economy/economic-futures/economic-futures_home. cfm. Data for this report was taken from the Horizon 2013 scenario. This scenario represents the best interpretation of the likely economic future of the region. It considers past trends, and amends these to take into account planned and expected trends in the form of new policies, investments and changes in the region s environment. 4

7 Comparisons are possible however and the corresponding sectors across each of the data sources are presented in the following table. Table 1: Data sources and the corresponding sectors Gross Regional Product (Infometrics Ltd) Business Demography Survey (Statistics New Zealand) Horizon 2031 scenario (Economic Futures Model) 1. Food, beverage and tobacco 1. Food product 1. Food and beverage 2. Beverage and tobacco product 2. Textile and apparel 3. Textile, leather, clothing and footwear 2. Textile and apparel 3. Wood and paper product 4. Wood product 3. Wood product 5. Pulp, paper and converted paper product 4. Paper and paper product 4. Printing, publishing and recorded media 6. Printing 5. Printing, publishing and recorded media 5. Petroleum, chemical, plastic and rubber product 7. Petroleum and coal product 6. Petroleum and industrial chemical 8. Basic chemical and chemical product 7. Rubber, plastic and other chemical 9. Polymer product and rubber product 6. Non-metallic mineral products 10. Non-metallic mineral product 8. Non-metallic mineral product 7. Metal product 11. Primary metal and metal product 9. Basic metal 8. Machinery and equipment 9. Furniture and other 12. Fabricated metal product 13. Transport equipment 14. Machinery and equipment 15. Furniture and other 10. Sheet and fabricated metal product 11. Transport equipment 12. Machinery and equipment 13. Furniture and other Source: Infometrics Ltd, Statistics New Zealand Business Demography Survey and Horizon 2031, ARC

8 Gross Regional Product In 2008, a total of $18,703 million of activity as measured by GDP was produced in New Zealand. Thirty six percent of this total was produced in the Auckland region. As shown in Figure 1, the region produced nearly as much as the Rest of the North Island. In total, over 75% of total GDP is produced in the North Island, and the rest in the South Island. Manufacturing constitutes a large part of the Auckland economy. In 2008, the sector was the second largest contributor to the region s GRP with $6,781 million (after property and business services). The sector was also ranked second largest in NZ making up 13.8% of the country s GDP. Figure 1: Manufacturing GDP, New Zealand 2008 Rest of North Island: $7,443 million (39.8% of total) Auckland region: $6,781 million (36.3% of total) South Island: $4,480 million (24.0% of total) Source: Infometrics Ltd Note: Value added or GDP expressed in $1995/96 constant prices Figure 2: Industry and sectors GRP contribution (%), Auckland region 2008 Accommodation, Cafes and Restaurants 1.3% Cultural and Recreational Services 2.2% Government Administration and Defence 2.9% Construction 3.0% Education 3.3% Personal and Others 4.8% Health and Community Services 4.8% Transport and Storage 6.0% Electricity, Gas and Water Supply 0.8% Agriculture, Forestry, Fishing and Mining 0.8% Property and Business Services 22.7% Manufacturing 13.5% 3.6% Furniture and other 4.3% Textile and apparel 6.2% Non-metallic mineral products 8.1% Wood and paper product 10.3% Printing, publishing and recorded media 11.9% Petroleum, chemical, plastic and rubber product 12.4% Metal product 18.2% Machinery and equipment Retail Trade 6.3% Communication Services 8.7% Wholesale Trade 10.1% 25.1% Food, beverage and tobacco Finance and Insurance 8.9% Source: Infometrics Ltd 6

9 Three sectors are worth noting as together they made up over half of the total GRP in the region in These are: food, beverage and tobacco ($1,705 million), machinery and equipment ($1,233 million), and metal product ($840 million). Table 2: Territorial authorities Manufacturing GRP by territorial authority (TA), Auckland region 2008 Manufacturing GRP 2008 % Manufacturing GRP 2008 % Total GRP 2008 Rodney District $ % 14.1% North Shore City $ % 10.6% Waitakere City $ % 22.0% Auckland City $2, % 9.6% Manukau City $2, % 20.4% Papakura District $ % 28.1% Franklin District $ % 22.7% Auckland Region $6, % 13.5% Source: Infometrics Ltd Note: Value added or GRP expressed in $1995/96 million constant prices Figure 3: Manufacturing GRP by Territorial Authority (TA), Food, beverage and tobacco Machinery and equipment Metal product Petroleum, chemical, plastic and rubber product Printing, publishing and recorded media Wood and paper product Non-metallic mineral products Textile and apparel Furniture and other Source: Infometrics Ltd Note: Value added or GRP expressed in $1995/96 million constant prices 7

10 Employment In 2008, Auckland city contributed most of the region s GRP with $2,550 million. This however constituted only 9.6% of Auckland city s total GRP due to the diversity of economic activity and the dominance of the financial and business services sectors in this city. In 2008 the sector was the main employer in New Zealand with 243,560 employee counts 4, equivalent to 12.4% of total employment in the country. The Auckland region employed 33.7%, the rest of the North Island 37.7% and the South Island 28.6%. Trends 1997 to 2008 From 1997 to 2008, GDP produced in New Zealand increased by $2,475 million, an annual average increase of 1.3%. The region s GRP had also increased in absolute terms by $708 million. The region s GRP growth however was at a slower rate compared to the country as a whole with an annual average increase of about one percent per annum. Manufacturing was also the main employer in the Auckland region with 82,010 employees, making up 12.7% of total employment in the region in 2008 or 4.2% of total employment in New Zealand. Half of the employees were in: food product, machinery and equipment, and fabricated metal product. The growth in the region s GRP was driven by: Over two-thirds of employees were employed in Auckland and Manukau cities in food, beverage and tobacco (with an additional $491 million), machinery and equipment (with an increase of $198 million), non-metallic mineral products (with an increase of $128 million), and metal product (with an additional $120 million). Trends 2000 to 2008 From 2000 to 2008, employment in the sector nationally increased by 7,190 employees. The Auckland region however witnessed a reverse of this trend with employment recording a reduction of 760 employees. All the territorial authorities showed growth in their GRP with the exception of Auckland city, where GRP declined by $132 million. Manukau city recorded the biggest increase with an additional $388 million added to the region s GRP during this period. 4 Employee count is used in the Statistics New Zealand s Business Demography data, and is defined as a a head count of all salary and wage earners for the February reference month. 8

11 Table 3: Manufacturing sectors employment, Auckland region 2008 Manufacturing sectors EC 2008 % EC 2008 Annual average growth rate Absolute change Food product 14, % 1.4% 1,520 Machinery and equipment 11, % 1.1% 960 Fabricated metal product 10, % 0.5% 390 Polymer product and rubber product 6, % 0.2% 80 Textile, leather, clothing and footwear 5, % -3.6% -1,990 Transport equipment 5, % -0.8% -350 Printing 5, % -1.4% -620 Furniture and other 5, % -1.8% -820 Wood product 3, % 0.3% 90 Non-metallic mineral product 3, % 1.6% 400 Basic chemical and chemical product 3, % -1.4% -390 Beverage and tobacco product 3, % 2.4% 540 Primary metal and metal product 2, % -1.6% -380 Pulp, paper and converted paper product 2, % -1.5% -290 Petroleum and coal product % 6.6% 100 Total 82, % -0.1% -760 Source: Statistics New Zealand Business Demograhpy Survey Note: Employment is head count of all salary and wage earners as at February There was a reduction in employment in the traditional sectors, such as in: The biggest employment growth over the period 2000 to 2008 was in the following sectors: textile, leather, clothing and footwear, furniture and other, and printing. food product, machinery and equipment, and beverage and tobacco product. Figure 4 depicts the movement in employment for each of the territorial authorities from 2000 to The decline in employment in the region was largely driven by Auckland city who recorded a decline of 3,730 employees. All the other territorial authorities experienced increases in employment whereas Waitakere city saw no change to its employment count compared to

12 Figure 4: Manufacturing employment by territorial authority, 2000 to ,000 35,000 30,000 25,000 20,000 15,000 Auckland City Manukau City Waitakere City North Shore City Papakura District Franklin District Rodney District 10,000 5, Source: Statistics New Zealand, Business Demography Survey Note: Employment is a head count of all salary and wage earners as at February Value added per employee Interestingly, the Auckland region produced 36.3% of the total GDP in New Zealand in 2008 but in terms of employment is responsible for only 33.7% of total New Zealand employment. This is consistent with the notion of higher productivity 5 in Auckland compared to the rest of New Zealand, i.e. value added per worker in Auckland is higher than value added per worker elsewhere. The sector s value added per employee in 2008 was $82,684. This is compared to value added per employee for all sectors in Auckland of $77,670. Table 4 gives value added per employee for each of the sub-sectors. In some cases higher productivity levels reflect the high capital intensity of a sector. The results also show some of the more 5 This refers to labour productivity which is the ratio of (the real value of) output to the input of labour. Where possible, hours worked, rather than the numbers of employees, is used as the measure of labour input. Labour productivity should be interpreted very carefully if used as a measure of efficiency. In particular, it reflects more than just the efficiency or productivity of workers. Labour productivity is the ratio of output to labour input; and output is influenced by many factors that are outside of workers influence, including the nature and amount of capital equipment that is available, the introduction of new technologies, and management practices. labour intensive sectors such as textile and apparel, furniture and other and metal product. Table 4: Manufacturing sectors value added per employee, Auckland region 2008 Manufacturing sectors VA per EC Printing, publishing and recorded media $133,844 Non-metallic mineral products $125,051 Machinery and equipment $106,498 Wood and paper product $97,868 Food, beverage and tobacco $84,255 Petroleum, chemical, plastic and rubber product $80,787 Textile and apparel $48,793 Furniture and other $47,471 Metal product $46,396 Total $82,684 Source: Infometrics and Statistics New Zealand, Business Demography Survey. Note: VA is expressed in $1995/96 constant prices and EC is head count of all salary and wage earners as at February

13 Geographic Units There were 23,657 geographic units 6 in New Zealand, making up 4.7% of all geographic units in the country as at February 2008.These were distributed as follows: 35.0% were located in the Auckland region, 39.7% in the Rest of the North Island, and 25.3% in the South Island. In the Auckland region, the sector had the seventh highest number of businesses with 8,288 geographic units (representing 5.2% of total geographic units in the region). Half of these businesses are: machinery and equipment, fabricated metal product, furniture and other, and food product Similar to employment, Auckland city was home to most businesses in the region in 2008 (with 32.3% of the total). These however represented only 4.0% of all businesses in Auckland city a reflection of the diversity of economic activity in the city. Half of all businesses in the region were in Auckland and Manukau cities and 30% were in North Shore and Waitakere cities. The rest, 16.7% were scattered in the outer areas of the region. Table 5: Manufacturing employment and geographic units by territorial authority, 2008 Total Total all industry Manufacturing as a % of total Territorial authorities GU EC GU EC GU EC Rodney District 733 2,750 13,643 24, % 11.2% North Shore City 1,311 8,900 27,059 88, % 10.0% Waitakere City 1,184 9,040 15,542 48, % 18.5% Auckland City 2,675 30,530 66, , % 9.5% Manukau City 1,732 24,320 25, , % 18.7% Papakura District 357 3,560 4,448 16, % 22.1% Franklin District 296 3,560 6,232 15, % 22.9% Auckland Region 8,288 82, , , % 12.7% Source: Statistics New Zealand, Business Demography Survey. Note: Employment is a head count of all salary and wage earners as at February Geographic unit is a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base. 6 A geographic unit is used in the Statistics New Zealand s Business Demography data, and is defined as a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base. This is not the same as a count of enterprises, or companies. 11

14 Figure 5: Manufacturing sectors geographic units, Auckland region 2000 to Machinery and equipment Fabricated metal product Furniture and other Food product Textile, leather, clothing and footwear Printing Transport equipment Wood product Source: Statistics New Zealand, Business Demography Survey Note: Graph shows only sectors with more than 500 geographic units in Geographic unit is a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base. Trends 2000 to 2008 From 2000 to 2008, an additional 942 units were established in New Zealand. Similar to employment, the region however recorded a reduction of 200 businesses during this period. This was driven by Auckland city and North Shore city who recorded declines of 380 and 55 units respectively. Rodney district showed an increase in the number of units over this period with an additional 134 businesses established followed by Franklin district with 57 new businesses. The decline in businesses in the region during this period was largely driven by: furniture and other (down by 184 units), textile, leather, clothing and footwear (down by 138 units), fabricated metal product (a reduction of 72 units), and wood product and printing (down by 43 units each). Food product recorded the biggest absolute increase in units with an additional 204 businesses. This was followed by transport equipment with 36 additional businesses, non metallic mineral product with 24 businesses and machinery equipment with 19 businesses. The decline in the number of employment and businesses in Auckland city supports the notion of activities moving away from the CBD area to more affordable land in the southern or northern areas of the region or further out to other regions. This could be driven by changes in land use and possibly the impact of land prices in central city areas which is driving to the edge of urban areas. This is further supported by the strong growth in employment and businesses in the Waikato region during this period. From 2000 to 2008, the Waikato region increased its geographic units by 263 and employment by 2,920 ECs. 12

15 Sector profi le The sector in Auckland is largely dominated by small sized firms with less than 10 employees and a few large firms employing the bulk of the workers. According to Statistics New Zealand s Business Demography Survey as at February 2008: 79.1% of all businesses in the region had less than 10 employees, 19.4% had between 10 to 100 employees, and On average there were: about 2 employees per business for the less than 10 employees group, about 27 employees per business for the 10 to 100 employees group, and about 209 employees per business for the 100+ employees group. only 1.5% of businesses had more than 100 employees. The 128 businesses (1.5% of all businesses) that employ over 100 people however is responsible for 32.6% of employment in the region in Businesses with less than 10 employees (79.1% of total), accounted for 13.7% of employment in the sector and businesses with 10 to 100 employees employ the majority, accounting for 53.8% of total employment in It is interesting to note from Table 6, the profile of the machinery and equipment sector which shows many small scale specialised production businesses (over 1,000) with small number of employees (less than 10 ECs). Table 6: Manufacturing industry profile, Auckland region 2008 Manufacturing sectors Total no. of GU Geographic Units <10 EC EC 100+ EC Machinery and equipment 1,262 1, Fabricated metal product 1, Furniture and other 1, Food product Textile, leather, clothing and footwear Printing Transport equipment Wood product Polymer product and rubber product Non-metallic mineral product Source: Statistics New Zealand, Business Demography Survey Basic chemical and chemical product Beverage and tobacco product Primary metal and metal product Pulp, paper and converted paper product Petroleum and coal product Total GUs 8,288 6,554 1, Total ECs 81,984 11,199 44,075 26,710 Note: Employment is head count of all salary and wage earners as at February Geographic unit is a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base. 13

16 The average number of employees per business in the region increased slightly from 9.75 in 2000 to 9.89 in This compares to the average of all employees per business in the region of about 4.05 in This shows that businesses as expected are relatively larger compared to other sectors. than 30 employees per business on average. Smaller businesses include furniture and other and wood product. Within the region, Manukau city employed the most per business with an average of employees per business, followed by Auckland city with an average employees per business and Papakura district with 9.97 employees per business. The average number of employees per business for each of the sectors is given in Table 7. The large businesses are primary metal and metal product and pulp, paper and converted paper product with more Table 7: Manufacturing sectors geographic units, Auckland region 2008 Manufacturing sectors % GU 2008 Average number of ECs per GU Average annual increase in GUs between 2000 and 2008 Machinery and equipment 15.2% % Fabricated metal product 14.0% % Furniture and other 12.6% % Food product 11.3% % Textile, leather, clothing and footwear 10.2% % Printing 9.0% % Transport equipment 7.5% % Wood product 6.4% % Polymer product and rubber product 4.5% % Non-metallic mineral product 3.5% % Basic chemical and chemical product 2.4% % Beverage and tobacco product 1.3% % Primary metal and metal product 1.1% % Pulp, paper and converted paper product 0.9% % Petroleum and coal product 0.1% % Total (8,288 units) 100.0% % Source: Statistics New Zealand, Business Demography Survey. Note: Employment is head count of all salary and wage earners as at February Geographic unit is a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base. 14

17 Exports Goods and services exports from the Auckland region totalled $8,884 million in Over half of this (or $5,049 million) were manufactured products. The main export products making up half of total manufactured exports from the region in 2006 were from: food and beverage ($1,581 million or 31.3%), and machinery and equipment ($919 million or 18.2%). Given the lack of past regional export data, national exports is looked at here to determine the key export products from New Zealand. This analysis examines Statistics New Zealand s Overseas Trade Exports Monthly Estimates of all Harmonised System Items from 1988 to In 2007, the food and beverage sector was responsible for nearly half of all products exported from New Zealand. The sector also recorded the biggest absolute increase in exports from $1,431 million in 1988 to $16,357 million in This was largely driven by: dairy food with an increase of $6,623 million exports to total $7,101 million in 2007 (21.1% of total exports in 2007); meat and meat product with an additional $4,441 million exports to make up $5,149 million in 2007 (15.3% of total exports in 2007), and other food product with $3,272 million exports in 2007 or 9.7% of total exports (an increase of $3,037 million over 1988). This was largely driven by prepared fish and other food products. Figure 6: Industry and sector exports, Auckland region 2006 Finance and insurance 0.5% Forestry, logging and fishing 0.8% Agriculture 1.7% Cultural and recreational services 1.9% Retail trade 2.6% Business services 4.2% Accomodation, restaurants and bars 4.5% Wholesale trade 6.7% Personal and other community services 0.4% Education, health and community services 0.4% Mining,construction and electricity, gas and water supply 0.4% Property services 0.2% Central and local government administration 0.0% Manufacturing 56.8% Non-metallic mineral product 0.4% Printing, publishing &recorded media 0.6% 2.2% Furniture & other 2.3% Petroleum & industrial chemical 4.2% Wood product 5.0% Paper & paper product 6.0% Sheet & fabricated metal product 6.3% Rubber, plastic & other chemical 6.4% Transport equipment 8.4% Basic metal 8.6% Textile & apparel 18.2% Machinery & equipment Transport, storage and communication services 18.9% 31.3% Food and beverage Source: Horizon 2031, ARC

18 The transport equipment sector exports grew on average by 22.2% per annum over the 19 year period with an additional $1,091 million exported to a total of $1,116 million in This was largely driven by exports of pleasure and sporting boat and aircrafts and parts. Electronic, photographic and scientific equipment and appliance exports also grew strongly over this period from $101 million in 1988 to $2,292 million in This is equivalent to an annual average growth rate of 17.8%. These trends are depicted in Figure 7 for products with over $1 billion exports in Figure 7: Manufacturing sector exports ($ millions), New Zealand 1988 to Dairy product Meat and meat product Other food Electronic, photographic and scientific equipment and appliances Basic metal Rubber, plastic and other chemical product Horticulture and fruit growing Wood products Textile and apparel Industrial machinery Paper and paper product Transport equipment Source: Statistics New Zealand s Harmonised System Trade Data. Note: Includes only products with over $1 billion exports in As shown all products had less than $1 billion exports in

19 Manufacturing Sectors Manufacturing takes many forms and ranges from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods. Such finished goods may be used for other more complex products, such as household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users - the consumers. This section looks at three of the main sectors in the Auckland region including a spatial analysis of these sectors. Food product The food product sector experienced strong employment and business growth from 2000 to 2008 with an additional 1,520 employees and 204 businesses established in the region. Auckland city was the main location for the increase in employment with 610 new employees, followed by Waitakere city with 420 employees and North Shore city with 410 employees. All territorial authorities showed an increase in business growth with the most businesses established in Manukau city (56 additional units), followed by Auckland city with 52 new food product businesses. The two main food product sub-sectors in the region in 2008 were: Other food product 7 the main employer accounting for 31.2% of total employment. Forty eight percent of other food product were employed in Manukau city and 34% in Auckland city. Other food product expanded over the period 2000 to 2008, with an additional 560 employees and 62 new businesses. About 48% of these new businesses were established in Auckland city followed by North Shore with 13 Table 8: Food product employment and geographic unit by territorial authority, Auckland region 2000 and 2008 Employment Geographic units Territorial authorities % total % total 2008 Rodney District % % North Shore City 730 1, % % Waitakere City 960 1, % % Auckland City 4,640 5, % % Manukau City 4,570 4, % % Papakura District % % Franklin District % % Auckland Region 12,540 14, % % Source: Statistics New Zealand, Business Demography Survey Note: Employment is head count of all salary and wage earners as at February Geographic unit is a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base. 7 Includes potato, corn and other crisp, prepared animal and bird feed and other food product not elsewhere classified 17

20 new units. Other food product business had the second largest number of food product businesses (geographic units) in the region in 2008 with 193 businesses. The second largest employer, bakery product, accounted for 27.8% of total employment. One third of the employees were employed in Manukau city and one third in Auckland city. Bakery product recorded the biggest increase in employees and businesses during the period 2000 to 2008, with an additional 800 employees and 150 businesses. A third of these businesses were in Manukau city and the other one third in Auckland and Waitakere cities. Bakery product had the most businesses in the region (i.e. over half of all food product businesses in the region in 2008 or 555 bakery businesses). It is interesting to note that Manukau city recorded no change in its food product employees from 2000 to 2008 although it had the most food product businesses established during this period. This may be the result of the food product sector moving towards high value added food and beverage with labour efficiency gains achieved. Figure 8: Food product sub-sector employment, Auckland region 2008 Seafood Processing 3.3% Fruit and Vegetable Processing 5.7% Sugar and Confec onery Manufacturing 6.0% Grain Mill and Cereal Product Manufacturing 3.3% Oil and Fat Manufacturing 0.3% Other Food Product Manufacturing 31.2% Meat and Meat Product Manufacturing 15.2% Dairy Product Manufacturing 7.3% Bakery Product Manufacturing 27.8% Source: Statistics New Zealand, Business Demography Survey Note: Employment is head count of all salary and wage earners as at February

21 Machinery and equipment In 2008, the main employers in the machinery and equipment sector were: other machinery and equipment with 3,170 employees (27.4% of total), 39.1% were employed in Auckland city and 28.1% in Manukau city, professional and scientific equipment with 2,410 employees (20.8% of total), the majority (63.9%) were employed in Manukau city followed by North Shore city with 16.2%, and computer and electronic equipment with 1,610 employees (13.9% of total), about 78.9% were employed in Auckland city followed by North Shore city with 11.2%. Auckland city is home to over a third of all machinery and equipment businesses in This is followed by Manukau city with 21.8%, North Shore city with 16.0% and Waitakere city with 12.8%. The machinery and equipment sector increased its employment by 960 people over the period 2000 to 2008, driven largely by: professional and scientific equipment with an increase of 1,490 employees, and computer and electronic equipment with 450 additional employees. Domestic appliance saw a decline of 800 employees during this period. A total of 19 machinery and equipment businesses were established in the region in 2008 compared to Table 9: Machinery and equipment sub-sectors employment, Auckland region 2008 Sub-sectors Rodney North Shore Waitakere Auckland city Manukau Papakura Franklin Auckland Region Professional and scientifi c equipment ,410 Computer and electronic equipment ,610 Electrical equipment ,320 Domestic appliance ,186 Pump, compressor, heating and ventilation equipment Specialised machinery and equipment ,320 Other machinery and equipment ,170 Total 207 1, ,360 4, ,590 Source: Statistics New Zealand, Business Demography Survey Note: Employment is head count of all salary and wage earners as at February Lifting and material handling equipment and other machinery and equipment not elsewhere classified 19

22 Transport equipment Changes in business units were as follows: professional and scientific with 24 new businesses, computer and electronic equipment with 18 additonal businesses, specialised machinery and equipment with 13 new businesses. Those recording reductions included other machinery and equipment with 18 less businesses and electrical equipment reduced by 15 businesses. In transport equipment, 41.9% of total employment in 2008 was in boat building and repair services with over 45% of these located in Waitakere city. Boat building and repair services also showed strong growth over the period 2000 to 2008 with an additional 440 people employed during this period. The second largest employer in transport equipment in 2008 was aircraft and repair services. This sub-sector makes up 29.9% of total employment in transport equipment, with most (84%) located in the Manukau city. Total employment in the sector however declined by 180 employees from 2000 to A total of 36 transport equipment businesses were established in the region from 2000 to Table 10 gives the breakdown by sub-sector. As shown, 40 additional boat building and repairs businesses were established in the region over this period. Most of these additional businesses were established in Rodney district with 22 new boat building and repairs businesses followed closely by Waitakere city with 21. Table 10: Transport equipment employment and geographic units, Auckland region 2008 Sub-sectors Employment Geographic units % total % total 2008 Motor vehicle % % Motor vehicle body and trailer % % Automotive electrical component % % Other motor vehicle parts 1, % % Shipbuilding and repair services % % Boatbuilding and repair services 1,830 2, % % Railway rolling stock and repair services % % Aircraft and repair services 1,800 1, % % Other transport equipment % % Total 5,772 5, % % Source: Statistics New Zealand, Business Demography Survey Note: Employment is head count of all salary and wage earners as at February Geographic unit is a separate operating unit engaged in New Zealand in one, or predominately one, kind of economic activity from a single physical location or base 20

23 Figure 9: Sub-sector maps by employee count, Auckland region 2008 Sector locations Where these sectors are located is useful in order to identify the potential for sector growth and opportunities in specific areas. Figure 9 depicts the location of employees in the food product, machinery and equipment and transport equipment sectors in As shown, tends to be concentrated in certain parts of the region. Manukau city and the surrounding area is home to much of the food product sector. Manukau city is also the location for the proposed Food Innovation Centre which is expected to provide leading-edge research and commercialisation facilities to food manufacturers in the Auckland region. The transport equipment industry is largely based in the Waitakere area reinforcing the city and region s comparative advantage in the marine sector 9, while the advanced industry is largely located around the Tamaki area. This is also the location for the proposed New Zealand Innovation Centre with a specific focus on advanced materials and R&D. Food product Machinery and equipment Transport Source: Statistics New Zealand, Business Demography Survey Note: Employment is head count of all salary and wage earners as at February For a comprehensive snapshot of the marine sector refer to the ARC Marine Sector Report 2009.

24 Economic Projections to 2031 In 2031, Auckland is projected to remain the main centre of activity accounting for 38.4% of total GDP and 36.0% of all employment in New Zealand. Overall the sector is projected to: more than double its 2006 GRP contribution from $7,458 million to total $14,965 million in 2031(16.2% of Auckland s total GRP). This is more than the increase in GRP contribution from business services of $7,002 million; increase by an additional 32,362 full time equivalents jobs (FTEs) 10 to make up 123,145 total employment in 2031 (14.4% of total employment in the region); and Gross Regional Product Projections to the year 2031 indicate that the main source of GRP growth will be in high value added with most low-value high-volume activities expected to decline (i.e. will be relocated either out of the region for land intensive activity or out of the country). Taken together, machinery and equipment, food and beverage, rubber, plastics and other chemical and transport equipment are projected to account for over half of the GRP growth in the sector to more than double exports from $5,049 million in 2006 to $12,296 million in 2031 (58.1% of total exports in the region). Table 11: Manufacturing sector GRP, employment and export forecasts to 2031, Auckland region Base yr Projections Key indicators Manufacturing GRP $7,458 $8,646 $9,890 $14,965 Total industry GRP* $51,604 $58,131 $65,803 $92,525 % Total 14.5% 14.9% 15.0% 16.2% Manufacturing employment 90,783 96, , ,145 Total employment 603, , , ,364 % Total 15.0% 15.0% 14.7% 14.4% Manufacturing Exports $5,049 $6,140 $7,259 $12,296 Total exports $8,884 $10,608 $12,676 $21,164 % Total 56.8% 57.9% 57.3% 58.1% Manufacturing exports/ GRP 67.7% 71.0% 73.4% 82.2% Total exports/grp 17.2% 18.2% 19.3% 22.9% Source: Horizon 2031, ARC 2008 Note: GRP in $2004 million and employment in FTEs. * Excludes final demand 10 Employment projections to 2031 uses full time equivalent jobs defined as total hours worked divided by average annual hours worked in full-time jobs. This is different to employee count discussed earlier. 22

25 Figure 12: Projected GRP creation by sector, Auckland region 2006 to 2031 Machinery & equipment Food & beverage Rubber, plastic & other chemical Transport equipment Sheet & fabricated metal product Printing, publishing & recorded media Furniture & other Non-metallic mineral product Paper & paper product Basic metal Wood product Textile & apparel Petroleum & industrial chemical $1,997m (26.6%) $1,445m (19.2%) $1,016m (13.5%) $685m (9.1%) $648m (8.6%) $596m (7.9%) $241m (3.2%) $235m (3.1%) $210m (2.8%) $169m (2.3%) $107m (1.4) $99m (1.3%) $59m (0.8%) Source: Horizon 2031, ARC 2008 Note: GRP in $2004million The sectors that are projected to contribute to a substantial share of the region s GRP by 2031 are: Machinery and equipment This sector is projected to have the biggest absolute increase in GRP over the 25 years (2006 to 2031) with an additional $2 billion to total $2.93 billion in It is also projected to be the fastest growing sector with an annual year on year growth rate of 4.7%. The sector is projected to increase its proportion to total GRP from 12.5% in 2006 to 19.6% in 2031, maintaining it s position as the second largest sector. Innovation in ICT is projected to drive growth in this sector with high growth projected to come from medical and surgical equipment, professional and scientific equipment and photographic and optical goods. Food and beverage This sector is projected to remain the largest sector by 2031 with $2,946 million (an increase of $1,445 million over 2006). Most of this increase (or $743 million) is projected to come from the other food sub-sector which includes fruit and vegetable processing, grain mill and cereal product and bakery product. Vertical integration is expected between the food and beverage sectors. High growth is projected for both domestic as well as exports. The Food Innovation Centre proposed for Manukau city is expected to be available for the industry to use for large scale pilot plant runs to commercialise new products for the export and local market. This will provide leading-edge research and commercialisation facilities to food manufacturers in the Auckland region. Rubber, plastic and other chemical This sector is projected to increase its GRP by an additional $1.0 billion to total $1.92 billion in 2031, growing on average by 3.1% each year. The sector is projected to be the third largest, increasing its contribution to total GRP by 0.74 percentage points from 12.1% in Strong growth in this sector is projected to be largely driven by the development of advanced materials and plastics 11. The proposed New Zealand Innovation Centre which focuses on the theme of advanced materials drawing particularly on the R&D capabilities at the University of Auckland s Tamaki campus presents a promising path forward for the sector. Transport equipment This sector is projected to produce $1,127 million or 7.5% of total GRP in This is equivalent to an increase of $685 million over 2006, increasing the sector s contribution to total GRP from 5.9% in 2006 to 7.5 % in Growth in this sector is projected to be primarily driven by 11 See report Plastics New Zealand (2005) Plastics Led Growth: Growth Opportunities in the New Zealand Plastics Industry 23

26 Table 12: Manufacturing sector growth rates to 2031, Auckland region Annual average growth rate ( ) Manufacturing sector Increase/decrease in contribution to GRP (2006 and 2031) Grow faster than industry average Machinery and equipment Transport equipment Rubber, plastic and other chemical 7.08 percentage points 1.60 percentage points 0.74 percentage points Grow at similar level Food and beverage percentage points Grow at a slower rate Sheet and fabricated metal product Printing, publishing and recorded media Non-metallic mineral product Paper and paper product Furniture and other Wood product Petroleum and industrial chemical Basic metal Textile and apparel percentage points percentage points percentage points percentage points percentage points percentage points percentage points percentage points percentage points Source: Horizon 2031, ARC 2008 boat-building and repair services 12 underscoring the region s comparative advantage in the marine sector. Labour to capital substitution is projected with more sophisticated technology used in boat building. Employment changes By 2031, employment in the sector is projected to increase by an additional 32,362 FTEs. Of this increase: An additional 13,238 FTEs is forecast for machinery and equipment (annual average growth rate of 2.9%); 7,038 FTEs in other food (annual average growth rate of 2.4%); 4,450 FTEs in rubber, plastic and other chemical (annual average growth rate of 1.8%); 3,627 FTEs in sheet and fabricated metal production(annual average growth rate of 1.2%); and 2,632 FTEs in transport equipment (annual average growth rate of 1.4%). The following sectors are expected to experience declining employment requirements. Textile and apparel reduced by 1,080 FTEs (declining by an annual average of 0.6% each year); Basic metal down by 863 FTEs (declining by an annual average of 1.3% each year) Printing, publishing and recorded media down by 572 FTEs (declining by an annual average of 0.2% each year); Dairy product down by 204 FTEs (declining by an annual average of 1.0%); Paper and paper product reduced by 133 FTEs (declining by an annual average of 0.3%); and Petroleum and industrial chemical by 110 FTEs (declining by an annual average of 0.3%). 12 See report - New Zealand Marine Industry Survey Summary report. Market Economic Ltd. 24

27 Figure 13: Projected job creation by sub-sector, Auckland region 2006 to 2031 Machinery & equipment 13,238 (40.9%) Food & beverage 8,872 (27.4%) Rubber, plastic & other chemical Sheet & fabricated metal product Transport equipment Furniture & other Wood product Non-metallic mineral product Petroleum & industrial chemical Paper & paper product Printing, publishing & recorded media Basic metal Textile & apparel 4,450 (13.8%) 3,627 (11.2%) 2,632 (8.1%) 1,628 (5.0%) 486 (1.5%) 187 (0.6%) -110 (-0.3%) -133 (-0.4%) -572 (-1.8%) -863 (-2.7%) (-3.3%) Source: Horizon 2031, ARC 2008 Note: Employment in terms of FTEs. Value added per employee The sector is expected to increase its value added per FTE by $39,371 to $121,523 in This increase is largely driven by the sector increasing its value added contribution more than the increase in employment over the next 25 years. This reflects the notion that in the future will be driven by capital investment moving towards high value added products with labour efficiency gains expected. All manufacutirng sectors are also projected to have a higher value added per FTE in 2031 compared to The notable increases are projected to be in: basic metal, paper and paper product, non-metallic mineral product, and printing, publishing and other recorded media. Table 13: Manufacturing sector value added per employee, Auckland region 2006 and 2031 Manufacturing sectors Paper & paper product $155,968 $273,096 Basic metal $116,476 $238,874 Non-metallic mineral product $115,807 $182,644 Rubber, plastic & other chemical $115,582 $156,608 Printing, publishing & recorded media $74,206 $139,234 Food & beverage $103,282 $125,870 Transport equipment $67,594 $122,887 Petroleum & industrial chemical $76,384 $122,519 Machinery & equipment $73,638 $113,133 Sheet & fabricated metal product $76,052 $101,903 Wood product $57,946 $78,145 Textile & apparel $46,920 $70,780 Furniture & other $52,383 $69,227 Total Manufacturing $82,152 $121,523 Source: Horizon 2031, ARC 2008 Note: GRP in $2004million and employment in FTEs. 25