Urban focus puts regions in doldrums

Auckland and Wellington are complex economies and have the highest concentrations of highly educated people. Photo / NZ Herald

Political and policy focus on urban powerhouses a risk to other regions: experts

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

"Regional considerations need greater prominence in the political and economic debate," said NZIER principal economist Shamubeel Eaqub.

"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."

Eaqub and his colleague John Stephenson are authors of a report released today analysing regional disparities in economic performance.

They divide the country into three broad types of regional economies: One is Auckland and Wellington, which are complex economies with the highest concentrations of highly educated people working in well-paying sectors.

They rank third and second respectively in terms of gross domestic product per capita, but at the bottom of the class at 12th and 11th respectively for growth in GDP per capita over the 2000s.

Three distinctively resource-based economies: Taranaki, the upper South Island and Southland, have concentrated exposures to natural commodities and international commodity prices.

Taranaki with its combination of hydrocarbons and dairy is the best-performing region for the level and growth of GDP per capita. But that has not translated into higher household incomes, which are around the national average.

The remaining seven regions are driven most by common national factors affecting the whole country, such as exchange rates, interest rates and global economic conditions. Northland, Gisborne-Hawke's Bay and Manawatu/Whanganui are the laggards.

Regions are in effect in competition with one another, Eaqub and Stephenson say. "Good economic performance attracts investment and workers from other regions. This result does not mean that if one region grows another will shrink. It does mean that the economic prospects in a region are limited by the extent to which there are better prospects elsewhere."

Many regions face demographic challenges as the population ages, nationally and globally.

"There will be greater demand for services such as healthcare and aged care that need to be provided locally," the NZIER economists say. "Young populations are shrinking in many of New Zealand regions already."

Ageing rich economies will be crying out for labour, both skilled and unskilled and young New Zealanders will consider job opportunities not just in New Zealand, but overseas.

"Ageing will have profoundly varied impacts across regions. For example, movement of older people has been towards Northland, Bay of Plenty, Waikato and Marlborough. Few older people move to Auckland, Wellington or Otago. But those looking for work do."