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Complex, misunderstood regional economies range from triumphant to troubled, says NZIER

Complex, misunderstood regional economies range from triumphant to troubled, says NZIER

Content supplied by NZIER

Once-prosperous New Zealand provinces are falling into the economic doldrums as politics and policies focus on the urban powerhouses of Auckland and Wellington.

“Regional considerations need greater prominence in the political and economic debate,” says New Zealand Institute of Economic Research (NZIER) principal economist Shamubeel Eaqub.

“As the country heads towards a general election, Auckland’s and Wellington’s views and needs are well-heard. But what about Taranaki, which has the highest GDP per capita in the country? What about Northland and Gisborne-Hawke’s Bay, which rank near the bottom on many economic measures?”

Eaqub and his colleague John Stephenson are authors of a new NZIER report, Regional Economies – shape, performance and drivers. The report, released on Saturday 12 July, is a stock-take of New Zealand’s regional economies. It warns future social and demographic trends – such as continued urbanisation and ageing populations – will favour complex, urban centres to the detriment of regional communities.

A typical Auckland family has an income of around $77,000 a year, compared to $60,000 in the Waikato and $47,000 in Northland. These gaps will widen if economic prosperity in provincial economies does not improve.

The interplay between regions and the main centres is complex. For example, proximity to Auckland can be a boon (as it has been for the Waikato) or bring limited benefit (as is the case for Northland). In terms of policy, each region has unique needs. While the Waikato requires innovative and effective transport policies, Northland urgently needs better outcomes from education, training and welfare.

Eaqub says measures of success must be fluid, depending on the aspirations, resources and capabilities of each province: “Every region can’t boom on every measure.”

Regional prosperity will be the focus of Local Government New Zealand’s annual conference on July 21 in Nelson. Eaqub is a keynote speaker and will be drawing on the new NZIER report and his upcoming book on regional economies, titled Growing Apart.

Eaqub says he will encourage conference attendees to better understand their regions. “The regional conversation can quickly turn into one of envy, blame or benign neglect. We are a deeply connected country needing to work together. But there are too many differences to apply the same solutions to different problems.”

You can download the Report here.

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15 Comments

... it might be argued that a typical family in Auckland needs a whole lot more than $ 77 000 p.a. to survive there , financially ... but that a family on just $ 45 000 p.a. in Northland , can live much happier there , with a heaping helping less stress than their JAFA cousies ....

 

Just a thought .... from one who loves the relaxed work/life balance of the Boondocks ...

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Good on the Naki - highest GDP per capita. But wait. How come their household income is below the average. All that oil, gas, dairy, iron sands and industry and sweet FA for the people. What's up with that. Time to start an independance movement?

Been hearing it all my life about Northland - huge potential, best overall climate, farmland, fisheries, forests, beaches, tourist magnet and so on. Still just cruising along with the lowest household income and a median individual income below $20K. As Gummy says though - who cares? Great place to live!

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That's the issue, Kiwidave. There are properous regions in this country but much of that prosperity isn't flowing through to Mainstreet.

 

I've just been on my own "knife and fork" tour of Westland and there was little evidence of an improvement in living standards from any other time time I have visited. This despite the apparent mining boom in recent years.

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Well, the iron sands are still sitting there. Pending an appeal. The small fishing industry keeps getting knocked back. Oil and Gas, my gut instinct is there needs to be a good strike soon. Fitzroy yachts shut down. I'm not too sure if other engineering outfits aren't struggling now with the high kiwi $. On the upside, dairy is long established here so not much gearing up to be done in developing that industry here. And the rain keeps falling at least at some point every year.

But once the oil and gas money run out, I'm sure as a region we'll be reaching our hand out a bit further.

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Solid Energy had a few of their new Land Cruisers parked on the main drag of Westport. At least that part looks good eh Hamish. :)

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Shamubeel is right on the button. 

Note how banks and Nats will chorus their denial of this truth. 

The regions and cities are going downhill just like the waipawas and tokoroas of the 80s

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I've been reading papers cited in

*/

NZIER INSIGHT

44/2014

Migrants increase our incomes

*/

http://ftp.iza.org/dp7325.pdf

 time series evidence across 22 OECD countries shows immigration lifts GDP per capita and decreases unemployment (Boubtane et al. 2012)5

Second, using our predictors to produce two-stage least-squares estimates of our main specification, we findthat the share of immigrants in the population has a significant and robust estimated effecton long-run income per capita. This effect is qualitatively large: a 10 percentage-point difference in the share of foreign born in the population, which is close to the standard deviation in our sample, is associated with differences in income per person by a factor close to 2. If we attach a causal interpretation to this coefficient it would imply that if Japan, with a foreign-born share below 1% in year 2000, adopted a degree of openness to immigration equal to that of the US (about 11% of foreign born in 2000) its long-run income per capita would double. 

....

What's more the author of the report uses modelling and makes assumptions reaching conclusions that are at odds with the considered current consensus (apparently)"

*/

"Since then [1990,s], New Zealand has had substantial gross and net immigration, which has been

relatively skill-focused by international standards. However, New Zealand’s economic

performance has not been transformed. Growth in GDP per capita has been relatively

lacklustre, with no progress in closing income gaps with the rest of the advanced world,

and productivity performance has been poor. It may be that initial expectations about the

potential positive net benefits of immigration were too high.

 

Based on a large body of new research evidence and practical experience, the consensus

among policymakers now is that other factors are more important for per capita growth

and productivity than migration and population growth. CGE modelling exercises for

Australia and New Zealand have been influential in reshaping expectations. "

*/

http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10

Migration and Macroeconomic

Performance in New Zealand:

Theory and Evidence

Julie Fry

New Zealand Treasury Working Paper 14/10

See 2.3

I find it hard to take the NZIER seriously.

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The neglect of provincial regions by govt., funding cuts to regional health boards, polytechs, schools etc may sway long term Nationsl voters to Labour purely as an anti Govt vote.  

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sway long term National voters to where?  The cunliffe insanity party.  I'm sorry, but they're just not an option

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What if you changed the exchange rates to current rates in figure 7, I bet we would be doing better then.

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Annnnndddd   Wairarapa/Masterton doesn't have a population (again) apparantly.

Please redo economic data, take into account the Grandparent Boomers dying and leaving freehold house to children (and parents being mortgage free)..... let see those living costs and disposables stack up  Mr "Guest"

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Is Waikato doing well ? I ask this because the close to 230 being laid off at NZ Post and Huttons may have another view.

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The number of job losses seems unusually small in 2014. If you know of others, let us know so we can keep our tally up to date.

 

But one of the features of the national economy, and the regional ones as well, has been the job resilience. This is best illustrated by New Zealand's amazing participation rate. Other countries would 'kill' to emulate that. We will get the next update of the total number of employed and unenemployed on August 6. But it is expected to continue the strong showing of jobs growth and jobless decline.

 

And this comes as we absorb high levels of migrants. Now is the easiest time to find a job in a very long time.

 

Most of the commentary these days is about job quality rather than a lack of job opportunity. The key seems to be targeting jobs in expanding rather than sunset industries. Certainly NZPost is one of those. The other remarkable feature of the NZ jobs market is the amazingly low unemployment levels for people 45 and older. Overseas, it is these age groups who have trouble, but not in NZ it seems. The jobless rates for those aged 45 to 65 are 4.0%, 3.3%, 3.6% and 3.5% for each of the 5 year bands. That is very low.

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