Infometrics' Andrew Whiteford sees a mighty challenge to reconcile the new lower migration policy with the new regional development policy, saying they could work against each other

By Andrew Whiteford*

The new government seeks to reduce migration from its record breaking highs. It also has a strong focus on regional development as many regions face declining population. However, it faces a mighty challenge to reconcile these two policies which could work against each other.

Strong migration has boosted the regions

The provinces have enjoyed a population bonanza over the last few years from high international migration into New Zealand. We consequently hear a lot less about “zombie towns’, a term coined to describe dying rural towns.

In the year to June 2017 when net migration topped 70,000, only five of the 66 territorial authorities across New Zealand experienced population decline. By comparison in 2012 when international net migration was negative 21 territorial authorities experienced a decline in population.

Most migrants to New Zealand choose to settle in the major centres but as net migration has ramped up over the last few years an increasing number have been settling in the regions. They are attracted by lower house prices, less congestion and country living.

Recent years of strong international migration have seen many struggling districts enjoy a resurgence in population. Ruapehu District had experienced 13 straight years of population decline but in 2017 enjoyed growth of 1.6%, supported by a big increase in international migration. Other districts showing a similar resurgence include Kawarau, Waitomo, Hauraki, South Waikato and Otorohanga.

Strong population growth has helped the regional economies keep pace with the combined economies of the major centres. Infometrics estimates that the combined economies of Auckland, Wellington, Christchurch and Hamilton grew at a similar rate to the rest of the regions combined over the year to June 2017.

The new governments will to reduce population growth is well founded

While the regions have enjoyed a population top-up over the past few years it is the major centres that have borne the brunt of record population growth. High net migration has seen the major centres struggle with congestion, overburdened infrastructure and skyrocketing house prices.

…as is the focus on regional development

While seeking to bring down international migration the new government also has a strong focus on regional development. A focus on the regions is crucial as up to two thirds of districts face declining or stagnating populations over the next 30 years. Districts with declining populations will struggle to fund the maintenance of their ageing infrastructure.

The core of the new administrations’ regional plan is the $1 billion-a-year Regional Development Fund which was established as part of the Labour-NZ First coalition agreement. While the details of this fund are scant the money will be spent on regional rail, planting trees, investigating the feasibility of moving Port of Auckland, and other large-scale capital projects.

…but are they mutually compatible?

These big projects should provide a stimulus to the regions. But reducing migration can potentially cut off a supply of much needed population growth and economic stimulus to the provinces. It is going to be a difficult path for the government to balance a slowdown of migrants and achieve the regional growth to which they aspire.


Andrew Whiteford the managing director and a senior economist at Infometrics, and is is responsible for Infometrics Regional Service. This is a re-post from the original here.

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28 Comments

decrease in population , increase in houses being built. Now thats a recipe for lower house prices.

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Equating population growth with economic progress is an illusion. We found that with the whole country so why would it be different for regions. Bigger population led to a bigger GDP sure, but on average none of us was any richer, so what's the benefit.
Lets go for a stable population goal. High income economy. And yes some places would depopulate and revert to nature. A good thing in my view.
And yet again we hear the 'zombie towns' remark. Has the author looked in Auckland for the zombie suburbs. Returning some of those to grass would be a great step.

Spot on. Taking a wrecking ball to existing houses and then rebuilding them would also increase GDP. In reality it's treading water at best - demographic and environmental suicide at worst.

Who's driven in on of the larger Regional Cities recently, and compared it with a similar journey as recently as 5 years ago? It's chaos in some places! What took 5 minutes to travel into or out of town now takes 30 on occasions. The feeder roads are becoming a mess, and The Regions can't afford to do anything about it. An increase of 50 minutes a day is not Productivity at its best....

Dont panic , I dont see immigration dropping anytime soon.

Winston is delusional if he thinks this can be stopped .

I wish we were told how many work and residence visas have been issued , BUT more importantly, how many of those migrants have not yet taken them up or arrived here , so we knew what was coming

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I think we are seeing a reverse of a pattern of flight of industry to Auckland. One aspect people overlook about 'affordable housing' is that it also limits the viability of a lot of industry. For instance, Auckland still has a large manufacturing base.

My long standing argument was the growth in Auckland over other regions was partially induced by accommodation supplements, which was meant to help workers but which I believe effectively subsidized employers, who weren't required to pay a viable wage.

However, the time frame for this type of structural change is relatively long, but I think we will see Auckland lose much industry in the next decade.

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It's a disgrace that we're subsidising rents, house prices and company wages through welfare. Ridiculous.

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Yep. All to prop up bank profits and stupid property prices based speculative gain. All good for core Nat voters I guess.

Well Rick I just feel like winding you up so I'll mention every cloud has a silver lining. The crazy importing of population and the welfare payments subsidising rents and the first home buyers various bonuses all conspire against young hard working families but do keep retired Auckland home-owners feeling good with our wealth expanding day by day without us actually doing any work. In fact I'd be too happy bother with this blog if I wasn't worrying about my 6 adult children and only the one living in France owns his own home.
Keep posting - the establishment will eventually see sense.

Fair enough! :)

I'd perhaps add to this too a healthy dose of Brian Rudman's "Woe is me, my house is worth millions!" opinion piece in the Herald today. Massive tax-free wealth gains are fair, but rates reflecting some of that wealth gain are horrible unfair, mean and nasty, and, and...someone else should pay, not Brian!

Apparently Auckland is a global city when it comes to what's fair and reasonable for house prices and low wages for young Kiwis, but emphatically not a global city when it comes to it requiring a reasonable income for homeowners to stay in their houses.

If rates were decided nationally rather than by local government boundary the places with high house prices would subsidise the zombie towns. My rates seem about right (comparing with what I paid in the UK) but I hate the way Auckland council wastes them. I might be unique but I would be happy to pay a little more so the small towns in NZ with decent houses about $150,000 had more cash to spend. If it only kept a few families in rural NZ it would save the government(taxpayers) in accommodation benefits.

That sounds like a good idea, Lapun.

I was checking rates (well, land tax) in Manhattan yesterday, out of interest. About $16,000 on a $2 million property, in a truly global city.

lol, Almost ALL of the accommodation Supplement goes to the beneficiaries and somewhat retired people ( not the workers !!) -

Do you have examples of the "Pattern" you are claiming to be happening , few names will be good to support your argument !!

Firstly, the accommodation supplement by nature and purpose goes to a wide number of workers.

I used to head an economic development agency and often followed up on firms that relocated to Auckland. Bear in mind that the accommodation supplement is $100 more for a $400 pw house in Auckland than say the Manawatu or Horowhenua (ie same rental gets bigger subsidy, although the nature of the house is different).

The result of this is that Auckland has a disproportion percentage of the NZ population. The only countries which are as dominated by one city as much as NZ are places such as Ireland, where Dublin is the capital as well.

I think it is a classic case of where well intended subsidies result in the wrong impacts.

Net internal migration between Auckland and the rest of New Zealand is out of Auckland. Repeat. Out of Auckland. There is no big drain in the direction of Auckland. That's contrary to the basic assumption many common taters here make.
Been repeated many times here on interest.co. and a it's basic fact to know for the discussion.. It's been that way for many years, slightly more move out of Auckland than too Auckland. It's the same in Australia as well. More people move out of Melbourne/Sydney than move there from the rest of Australia.
Plenty of jobs in the regions and more opportunities for the entrepreneur. Auckland might be better for the corporate factory office workers - but that's all.

Interested in the latest stats for that KH. Where can I find them ? I can find them for 2013 but nothing later ...

I suggest that you revisit your sources of information Sir... The Accommodation Supplement is only paid to Beneficiaries Not workers, neither by nature nor otherwise - end of that story.

Again you failed to demonstrate or bring out examples of industry or firms moving OUT of Auckland as you claimed !! All you said that firms used to move TO auckland for obvious reasons ( it is the economic HUB ) and it is where most firms find resources and workers ...
Its good to stick to facts rather than wishes

Are you sure of that?

"If you need help to pay your on-going costs of rent, board or the costs of owning a home, you may be able to get an Accommodation Supplement. You don't have to be on a benefit to get this payment."

https://www.workandincome.govt.nz/eligibility/living-expenses/housing.html

Edit:

"Can I get the Accommodation Supplement if I’m working?

If you’re on a low to middle income, you may be eligible for the Accommodation Supplement to help you with the cost of your rent, board or mortgage payments."

http://www.cab.org.nz/vat/money/ben/Pages/AccommodationSupport.aspx

Wrong. It can be paid to home owners and renters, workers and unemployed.

You can own a million dollar 'mansion' in Aucks and still get the supplement, but if you rent and save up $8,100 (or have other assets house ex) you don't. Asset test failed.

So its yet another cash grab by home owners to the detriment of non home owners.

WOW!, I didnt know that the Gov is that generous ...

I just hope Jacinda and Co. properly think though all the repercussions of an changes in policies before pressing any buttons.

But not forgetting the repercussions from not changing policy. Something National should get top marks for.

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Simple solution. You issue temporary work visas that are restricted to regional areas. If you want to move to Auckland afterwards, then you will need to apply for a new visa, and be a highly skilled worker not a farmhand looking to drive taxis.

What is a highly skilled worker - someone who has a degree or a plumber/electrician etc?

If someone comes in on a work visa issued for a specific position it is tied to a particular employer. A farmhand can only become a taxi driver if they are here on a one year work visa - e.g. backpacker etc, and work on a farm for a few months and then move away. If they come here on a visa to work a specific farm job they are tied to that employer.

.. a skilled worker is someone who can sell socks in a shopping mall.

He provides no evidence in the article that high immigration has directly led to population growth in the regions.
I'm sure it has had indirect influence, by pushing people out of Auckland due to house prices, traffic congestion etc.
but the article tends to imply direct influence.

It is going to be interesting to see what that Regional development fund actually is spent on. Moving the port of Auckland - a massive amount will be spent on consultants first and it will benefit Northland and will possibly take years before anything tangible happens.
Planting trees - 100million trees a year - well that includes the 50million already being planted by the private sector. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11946729
Regional rail - exporting regions already have a rail service. If they mean passenger rail...........

If the regions cant fund their infrastructure then they need to amalgamate. NZ has far too many regional & local government authorities for a population of 4.5m.