Growing pains: What makes a region thrive or dive

by Virginia Larson / 05 December, 2016

When it comes to boosting the success of the regions, is there anything central or local government can really do?

Tauranga and Whakatane were New Zealand’s fastest-growing towns between 1926 and 2006. Kiwis, it seems, follow the sun. A long-term analysis by economists from Motu consulting group and Auckland University found that sunshine hours were one of four main factors driving the growth and decline of 56 New Zealand towns, along with the quality of the local agricultural land, educational levels and proximity to our biggest city, Auckland (all but one of their “top 10” towns were in the upper North Island).

But while Whakatane’s growth began stalling in the second half of last century – the district’s population decreased by around 600 between the 2006 and 2013 census – Tauranga’s population is still on the rise, expected to reach almost a quarter of a million by 2065. It’s currently 124,600 – nudging Dunedin for the title of fifth-largest city.

Through the 2000s, the growth centre of the South Island, outside Christchurch, has been the Queenstown-Lakes region. In the 2013 census, its growth was second only to Selwyn, which was boosted by Christchurch’s quake overflow. Growth predictions in the Queenstown Lakes District Council’s long-term plan have the resident population ticking up from 28,440 in 2011 to 35,905 in 2021.

Its success comes at a cost, however. In February, the median house price in Queenstown was $798,500 – 10.31 times the median local income ($77,454). This puts it ahead of central Auckland in what housing think-tank Demographia calls the “severely unaffordable” bracket. It regards a “median multiple” of three times or less as a good marker for housing affordability, a figure that would tip many New Zealand centres into unaffordable zones. Tauranga, for instance, has a median household income of $79,902 and median house price of $444,000, which gives it a median multiple of 5.51.

There’s little doubt Auckland and Queenstown-Lakes are in the grips of a housing bubble, fuelled by speculation. But more gently rising house prices relative to incomes are also a good indicator of cities people want to live in – offering employment opportunities, and attractive amenities and climate.

Governments of all stripes have proclaimed their commitment to regional development, although enthusiasm for picking winners in the provinces has wound down considerably since Rob Muldoon’s ambitious, country-wide Think Big projects. Central government now has fewer regional development policy instruments to play with; the shift to MMP has also reduced the importance of winning certain electorates, although it was hard to ignore the whiff of pork-barrel politics last year when National promised to upgrade 10 one-way bridges in Northland ahead of the byelection.

Today, regional development policies could, at best, be described as cautious collaboration between central and local government. In February, Economic Minister Steven Joyce announced a wage subsidy scheme for the Buller District, matching Development West Coast’s $300,000 contribution.

Treasury invariably reports that it is near impossible to measure how much GDP growth is gained from this kind of central government investment (it also advised that a policy aimed at attracting more migrants to regional centres – by offering them more points toward approval of their residency requests – would achieve nothing.)

Former NZIER chief economist Shamubeel Eaqub drew attention to the regions’ economic challenges in his 2014 book Growing Apart: Regional Prosperity in New Zealand. He criticised an economic focus that remains fixed on national issues, ignoring the gulf between prosperous and poverty-blighted regions. Slow-growing regions (generally those that don’t have a main city) suffer, he says, because their young adults leave and the region ages faster than the nation. Additionally, a lack of scale means that key services are more expensive, of more limited range and often of poorer quality.

But it was his description of “zombie towns” – the likes of Murupara, Kaikohe and Moerewa, with fast declining populations and massive infrastructure deficits – that got backs up; Eaqub also refused to blame New Zealand’s megalopolis, Auckland, for the regions’ woes. Crimping Auckland’s growth wasn’t the answer, he wrote: “[That growth] won’t turn up in Northland – it will turn up in Sydney or Singapore.”

Eaqub admits writing the book threw up more questions than answers, but it was also a call for regions to build on their capabilities – and for government to help “where there is a credible chance that the cost of investments will be more than repaid by future benefits”.

This article originally appeared in the April 2016 issue of North&South.

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