Mood of the Boardroom: We need to look beyond Auckland

Deloitte New Zealand Chief Executive Thomas Pippos speaking at the Mood of the Boardroom breakfast event at the Langham Hotel, Auckland. 11 September 2014 New Zealand Herald photograph by Jason Oxenh

New measures are needed to boost regional growth, writes Thomas Pippos

Regional economic development, now defined as everything outside Auckland, has become the new vogue topic from both an economic and political perspective; consistent with answers to the Mood of the Boardroom survey.

Fuelled in part by the outcome of the Northland by-election, and more generally by the juggernaut that is Auckland (played out almost daily in the media around residential property prices), it's not a topic that is likely to go away anytime soon.

Consistent with this, the overwhelming majority of respondents to the survey saw New Zealand's success as also materially predicated upon the success of the regions and metropolitan areas outside of Auckland; with only approximately 6 per cent believing this wasn't the case. The comments reinforced this sentiment, including one respondent who said, "Experience in Europe, UK, Canada, USA shows how strong small centres become strong larger centres making the country a more dynamic place."

The fact that this is an "and" issue, where Auckland still remains critically important and different, was conveyed by the comment "New Zealand's prosperity is built on the productive capacity of the nation's local economies and the sustainable use of natural resources and human and financial capital. New Zealand is not all about Auckland but when a third of the population lives there it has to be treated differently from other regions."

As is often the case, solving problems is more complicated than identifying them. Respondents were broadly neutral as to the anticipated success the changes in the point system dealing with new migrants would have to spur investment and growth in the regions; and there was overwhelming scepticism that this would take the pressure off Auckland. Unsurprisingly, the overwhelming majority believed any change in the points system needed to require migrants to live in the stated region for at least three or five years to have any real effect.

Notwithstanding the policy challenges special economic zones create, less than a quarter (24 per cent) of the respondents were dismissive of them, which was somewhat surprising and potentially reflects a greater openness to consider solutions to what is now seen a material issue. Over 80 per cent of respondents took the opportunity to implicitly vent their frustration with the Resource Management Act (RMA) by suggesting such zones should have fast-track planning consents for new projects. Almost two-thirds (63 per cent) also believed relaxed Overseas Investment Office (OIO) criteria should be prevalent in such zones and over 70 per cent that rating relief should also exist.

The policy challenges with such initiatives, particularly in relation to tax, still loomed high as there was no consensus view as to whether local and central government should look to appropriately share GST and income tax revenues to be suitably incentivised on this issue. But respondents seemed quite open to considering this as part of a solution, recognising that to date there has been effectively no discussion on this matter.

To the extent that that the importance of this topic wasn't already clear, around 70 per cent of the respondents felt that that regional economic development outside of Auckland needed to be a focus and priority of the current and successive governments; or put another way, only around 6 per cent thought it shouldn't be a focus or priority. Positively for the current Government, respondents also felt that they were visible on this topic albeit that less than 7 per cent felt that they were much more than that. This is a clear indication that respondents are looking for that vacuum to be filled by either a greater understanding of what the Government and its agencies are doing, or by stepping up initiatives in this area. One respondent did take the opportunity to vocalise that the Government "has no cohesive strategy other than election year bribes."

Looking at this issue through another lens, opposition parties were not seen to be any further advanced on the issue, with one respondent also commenting "lots of talk but no policy." The upshot is that this provides an opportunity for a discernible point of difference to be developed.

Turning back to problem identification, respondents were clear that lack of authentic points of differentiation across regions, and fragmentation of local government leadership were real impediments to moving the dial on what is becoming a page one initiative to move the country forward, and take some of the pressure off Auckland; particularly the fragmentation challenge.

Central government's role intuitively therefore also includes ensuring local government plays its part in this issue; which due to fragmentation, is a considerably greater challenge outside of Auckland than within it.

Relevant also when considering the survey results is the natural Auckland bias of the respondents which would likely extenuate the result in favour of the magnitude and importance of the issue if a whole of NZ lens was applied.

In closing, considering Northland and what is happening in Auckland, these issues aren't going away any time soon and are likely to become even more pronounced with the passage of time, both economically and politically.