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Regional Development

Regional Economic Performance

Final Report

5. Regional Highlights

Final Report

New Zealand Institute of Economic Research

[ Originally Published on 01 Nov 2005 ]

5.1 Introduction

In each regional economic profile we provide a brief commentary on the key differences between the regional economy and the national economy and how this affects regional growth. We include comments on:

The size of the regional economy and its share of the national economy.
Nominal GDP per capita in each region compared to the national average. This provides a snapshot of the relative economic well-being of each region.
Regional economic growth over the past four years, relative to national GDP growth. This indicates whether each region's growth has been more or less dynamic than national economic growth.
Real GDP per capita growth between 1998 and 2003 compared to the national average. This shows how well each region's economy has performed over this period after adjusting for population growth differentials.
The region's industrial structure and how this affects regional growth. In order to get some impression of each region's industrial comparative advantage, a chart is provided that shows how "important" various sectors are to the regional economy in terms of the GDP they produce, relative to the New Zealand economy as a whole.
Having presented some economic activity and industrial structure indicators at the regional level, other macroeconomic indicators of interest that may help to explain the region's growth performance are then noted. These indicators include labour force data, business creation and destruction, productivity, economic development and tourism. The aim of discussing such indicators is to try to consider why a region may or may not be growing faster than the national average, and what types of constraints exist in each regional economy.

Any GDP data comparing regional against nationwide levels (i.e. at any one point in time) uses nominal GDP data. This is GDP measured at the prices of the day. Any growth comparisons (i.e. across time) use real GDP, which is adjusted to remove inflationary effects.

It should be noted that due to a lack of official regional GDP data, our analysis uses NZIER's estimates of regional GDP. This data is only available as far back as the year to March 1998. As a result, our analysis of regional GDP trends is only relatively short term in nature. We cannot consider long term trends and there will be a degree of cyclicality in the data. However, this is not a major concern, as the overall aim of this report is to consider each region's economic performance and structure relative to the national average. That is, we are less concerned with the level of economic activity in any one region (which could be affected by the economic cycle) than we are in the relative performance of that region when compared to the New Zealand economy as a whole. Note that some regions are more sensitive to changes in some national economic variables (such as the trade weighted exchange rate) than are others. This should be kept in mind when interpreting the results in this section.

In the scatter plots for each regional profile, FBT refers to food, beverages and tobacco; other services refers to health and community services, personal services, education and "other" services; the trade and tourism sector refers to wholesale and retail trade, accommodation, cafes and restaurants; business services refers to finance, insurance and property services; utilities / construction refers to gas, water and electricity supply and construction.

5.2 A Note on Industry Structure and Regional Comparative Advantage

In the regional profiles that follow, much of the focus is on differences in regional industry structure. The reason for this is that one way of explaining why a region may have performed better (worse) than the national economy is that its industrial structure may be heavily weighted towards fast-growing (slow-growing) sectors. These variations in regional industrial structure are primarily due to differences in regions' comparative advantage. For example, a region with an abundance of fertile land and suitable climatic conditions is likely to have a comparative advantage in agriculture and its associated downstream processing functions (such as Northland). A region with a stunning natural landscape (such as Otago) is likely to have a comparative advantage in tourism. Regions with a concentration of population are more likely to have a comparative advantage in the services sectors that cater for these people and their workplaces (such as Auckland and Wellington).

In the regional profiles that follow, we are by no means casting aspersions on any region if it, for example, has a relatively low share of its regional industry structure in slow-growing sectors. This is often dictated by the resources that it has available (i.e. its comparative advantage). We are not suggesting that regions should try to "ignore" their comparative advantage and focus on sectors in which it may not have adequate land, labour or capital resources to succeed.¹⁹ A key for future regional growth policies will be in "exploiting" each region's comparative advantage in a manner that lifts productivity and hence overall growth.

5.3 Northland Economic Profile

Economic Indicators for Northland

The Northland economy accounted for 2.9% of total economic activity in New Zealand in the year to March 2004. Northland's regional GDP in the same year was $4.0 billion.
Northland's per capita nominal GDP was $26,600 in the year to March 2003, compared to a national figure of $32,100. Northland has the lowest per capita GDP of the twelve regions covered by NZIER's regional economic dataset.
Northland's economic growth between March 2000 and 2004 averaged 1.2%. Over the same period the national economy grew at an average of 3.5%.
Northland's per capita real GDP grew at an average of 2.0% between March 1998 and 2003, below the New Zealand growth rate of 2.3%.

Northland's Industry Profile

Figure 20 compares Northland's regional economic structure to that of the New Zealand economy.

Figure 20 Northland's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, business services) indicates that the industry accounts for a smaller proportion of Northland's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as agriculture) indicates that an industry is more "important" to the Northland region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²⁰ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Northland's economy is highly reliant on natural resources and agriculture, relative to the New Zealand economy. These are both relatively slow-growing sectors at a national level.
Northland is under-represented, relative to the New Zealand economy as a whole, in the business services, food, beverage and tobacco manufacturing (labelled FBT in the chart) and transport and communications sectors. These have all been high growth sectors at a national level in recent years.
This relative reliance on slow-growing sectors explains in part why the Northland economy has grown more slowly than other regions in New Zealand in recent years.

Other Regional Highlights

Northland's unemployment rate averaged 6.0% in the year to June 2004. This is the highest regional unemployment rate in New Zealand. This, combined with a very low labour force participation rate, suggests that Northland has adequate labour resources, but that they may not be suitably skilled for the region's industrial structure. Between 1996 and 2001, nearly 3,300 more 15-24 year olds left the region than arrived.
Labour productivity (real GDP per employee) in Northland has not grown between 2000 and 2004. Nationwide, labour productivity growth has averaged 0.9% per year over this period.
Northland spends a below-average amount on economic development relative to its GDP ($890 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). This may partly explain why Northland's enterprise creation rate is not high.
Northland is not a significant destination for overseas investment, accounting for just 0.9% of total overseas investment in New Zealand between 1999 and 2003. This is far lower than its share of New Zealand's GDP.
Nearly 320,000 overseas visitors travelled to Northland in 2003. This is equivalent to 17% of the total number of international visitors to New Zealand visiting Northland.

5.4 Auckland Economic Profile

Economic Indicators for Auckland

The Auckland economy accounted for 31.0% of total economic activity in New Zealand in the year to March 2004. Its regional GDP in the same year was $42.3 billion.
Auckland's per capita nominal GDP was $30,750 in the year to March 2003, compared to a national figure of $32,100.
Auckland's economic growth between March 2000 and 2004 averaged 3.1%. Over the same period the national economy grew at an average of 3.5%.
Auckland's per capita real GDP grew at an average of 1.1% between March 1998 and 2003, below the New Zealand growth rate of 2.3%.

Auckland's Industry Profile

Figure 21 compares Auckland's regional economic structure to that of the New Zealand economy.

Figure 21 Auckland's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, government) indicates that the industry accounts for a smaller proportion of Auckland's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as business services) indicates that an industry is more "important" to the Auckland region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²¹ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Auckland's economy is highly reliant on business services, relative to the New Zealand economy. This is a relatively fast-growing sector at a national level. Auckland is under-represented, relative to the New Zealand economy as a whole, in slower-growing sectors such as agriculture, natural resources and government.
Auckland's industrial structure along with its rapid population growth has boosted average economic growth above 3%. Despite this, Auckland has grown more slowly than the New Zealand economy as a whole.

Other Regional Highlights

Auckland's unemployment rate averaged 3.9% in the year to June 2004. This compares with a national average unemployment of 4.3% over the same period. This low unemployment rate, along with a labour force participation rate that matches the national average, indicates that a shortage of labour may be a significant constraint on growth going forward. It is interesting to note that while Auckland had a net gain of 7,500 15-24 year olds between 1996 and 2001, it had a net loss of 8,000 people over the age of 45 years old.
Auckland has one of the most highly skilled regional labour forces in New Zealand. Only 19% of Auckland's over 15 year olds have no qualifications, compared to a national average of 24%.
Labour productivity (real GDP per employee) in Auckland grew by 1.0% per year between 2000 and 2004. Nationwide, labour productivity growth averaged 0.9% per year over this period.
Auckland's has a very high enterprise creation and destruction rate. This suggests that Auckland's entrepreneurs appear to be relatively risk-favourable and have adequate access to seed capital. This may explain why Auckland spends a below-average amount on economic development relative to its GDP ($720 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP).
Auckland accounted for 12.3% of total overseas investment in New Zealand between 1999 and 2003. This is far lower than its share of New Zealand's GDP. Little of this investment was in land.
1.36 million overseas visitors travelled to Auckland in 2003, representing over 70% of all people arriving in New Zealand. This is not surprising, given the arrival of most tourists at Auckland airport.

5.5 Waikato Economic Profile

Economic Indicators for Waikato

The Waikato economy accounted for 8.9% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $12.2 billion.
Waikato's per capita nominal GDP was $31,100 in the year March 2003, compared to a national figure of $32,100.
Waikato's economic growth between March 2000 and 2004 averaged 2.5%. Over the same period the national economy grew at an average of 3.5%.
Waikato's per capita real GDP grew at an average of 1.8% between March 1998 and 2003, below the New Zealand growth rate of 2.3%.

Waikato's Industry Profile

Figure 22 compares Waikato's regional economic structure to that of the New Zealand economy.

Figure 22 Waikato's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, transport and communication) indicates that the industry accounts for a smaller proportion of Waikato's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as agriculture) indicates that an industry is more "important" to the Waikato region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²² The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Waikato's economy is highly reliant on agriculture, both in an absolute sense and relative to the New Zealand economy. This is a relatively slow-growing sector at a national level. For the rest of its industries, the Waikato is very similar to the New Zealand economy as a whole. However, it is somewhat under-represented in the nationally fast-growing business services, trade and tourism and transport and communications sectors.
This relative reliance on the agriculture sector explains in part why the Waikato economy has grown more slowly than other regions in New Zealand in recent years.

Other Regional Highlights

Waikato's unemployment rate has averaged 3.6% over the year to June 2004. This is the third lowest regional unemployment rate in New Zealand. The region also has a high labour force participation rate relative to the rest of New Zealand. Waikato experienced a net internal migration loss of 1,300 15-24 year olds in the 1996-2001 period, but gained overall, due to net inflows of those over 25 years old. This indicates that the existing workforce is getting squeezed in terms of capacity, especially for junior positions.
Labour productivity (real GDP per employee) in the Waikato grew at a below-average 0.5% per year between 2000 and 2004. Nationwide, labour productivity growth averaged 0.9% per year over this period.
The Waikato region spends well below the average amount on economic development relative to its GDP ($680 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). Indeed, only the Gisborne-Hawke's Bay region spends less relative to its GDP. Despite this, Waikato's enterprise creation and destruction is not significantly different to that of New Zealand as whole.
Waikato accounted for 2.4% of total overseas investment in New Zealand between 1999 and 2003, below its share of national GDP. A large proportion of this investment was in land sales.
Nearly 485,000 overseas visitors travelled to Waikato in 2003, equivalent to one in four overseas tourists coming to New Zealand visiting the region.

5.6 Bay of Plenty Economic Profile

Economic Indicators for Bay of Plenty

The Bay of Plenty economy accounted for 5.5% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $7.5 billion.
Bay of Plenty's per capita nominal GDP was $28,500 in the year to March 2003, compared to a national figure of $32,100. This is the second lowest per capita GDP of the twelve regions covered by NZIER's regional economic dataset.
Bay of Plenty's economic growth between March 2000 and 2004 averaged 2.1%. Over the same period the national economy grew at an average of 3.5%.
Bay of Plenty's per capita real GDP grew at an average of 2.3% between March 1998 and 2003, matching the New Zealand growth rate of 2.3%.

Bay of Plenty's Industry Profile

Figure 23 compares Bay of Plenty's regional economic structure to that of the New Zealand economy.

Figure 23 Bay of Plenty's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, transport and communication) indicates that the industry accounts for a smaller proportion of Bay of Plenty's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as natural resources) indicates that an industry is more "important" to the Bay of Plenty region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²³ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Bay of Plenty's economy is highly reliant on natural resources and agriculture, relative to the New Zealand economy. These are both relatively slow-growing sectors at a national level.
Bay of Plenty is under-represented, relative to the New Zealand economy as a whole, in the business services, food, beverage and tobacco manufacturing (labelled FBT in the chart), transport and communications and government sectors. Apart from the latter, these have all been high growth sectors at a national level in recent years.
This relative reliance on slow-growing sectors explains in part why the Bay of Plenty economy has grown more slowly than other regions in New Zealand in recent years.

Other Regional Highlights

Bay of Plenty's unemployment rate averaged 5.6% over the year to June 2004. This is the second highest regional unemployment rate in New Zealand behind Northland. The Bay of Plenty also has a lower than average labour force participation rate, suggesting that there is a significant pool of unused or unsuitable labour (relative to the industry structure) in the region. This may be partly due to the fact that the region has a relatively high proportion of unqualified workers.
The Bay of Plenty region has experienced strong net internal migration gains in recent years, with over 8,600 more people entering the region between 1996 and 2001 from within New Zealand than have left. Around 60% of this net gain was over the age of 45.
Labour productivity (real GDP per employee) in the Bay of Plenty grew at 1.0% per year between 2000 and 2004, slightly above the nationwide, labour productivity growth of 0.9% per year over this period.
Bay of Plenty spends a relatively large amount on economic development relative to its GDP ($1,580 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). This may have contributed to the region's high rate of business creation, which is second only to Auckland's rate.
The Bay of Plenty / Coromandel region is the most significant destination for overseas investment of the regions covered by the Overseas Investment Commission's regional data set, accounting for over 20% of total overseas investment in New Zealand between 1999 and 2003.
Over 645,000 overseas visitors travelled to Bay of Plenty in 2003, equivalent to one in three tourists coming to New Zealand visiting the region.

5.7 Gisborne-Hawke's Bay Economic Profile

Economic Indicators for Gisborne-Hawke's Bay

The Gisborne-Hawke's Bay economy accounted for 4.6% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $6.3 billion.
Gisborne-Hawke's Bay's per capita nominal GDP was $26,600 in the year to March 2003, compared to a national figure of $30,600.
Gisborne-Hawke's Bay's economic growth between March 2000 and 2004 averaged 3.0%. Over the same period the national economy grew at an average of 3.5%.
Gisborne-Hawke's Bay's per capita real GDP grew at an average of 3.5% between March 1998 and 2003, well above the New Zealand growth rate of 2.3%.

Gisborne-Hawke's Bay's Industry Profile

Figure 24 compares Gisborne-Hawke's Bay's regional economic structure to that of the New Zealand economy.

Figure 24 Gisborne-Hawke's Bay's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, other manufacturing) indicates that the industry accounts for a smaller proportion of Gisborne-Hawke's Bay's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as food, beverage and tobacco [FBT] manufacturing) indicates that an industry is more "important" to the Gisborne-Hawke's Bay region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²⁴ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Gisborne-Hawke's Bay's economy is highly reliant on agriculture and its associated downstream processing industries, relative to the New Zealand economy. While agriculture is a slow-growing sector at a national level, the FBT manufacturing sector has performed much more strongly.
Gisborne-Hawke's Bay is mildly under-represented, relative to the New Zealand economy as a whole, in most services sectors. Business services is a particularly small sector for the region, relative to the rest of the country.
Despite the prominence of the fast-growing FBT manufacturing sector in the region, Gisborne-Hawke's Bay's reliance on relatively slow growth sectors such as agriculture and natural resources explains in part why its overall economic growth rate has lagged behind the New Zealand economy as a whole. Slow or negative population growth has also slowed overall regional growth. However, the Gisborne-Hawke's Bay's per capita GDP growth rate has been very strong, suggesting that income levels for those remaining in the region have also grown strongly.

Other Regional Highlights

Gisborne-Hawke's Bay's unemployment rate averaged 5.1% over the year to June 2004. This is the third highest regional unemployment rate in New Zealand. This, combined with a low labour force participation rate and a relatively high proportion of its population being unqualified, suggests that Gisborne-Hawke's Bay has a sizeable pool of labour resources available, but that they may not be suitably skilled for the region's industrial structure.
Labour productivity (real GDP per employee) in Gisborne-Hawke's Bay grew at an average of 1.2% between 2000 and 2004. This is the third highest productivity growth of the twelve regions covered by NZIER's regional economic dataset. Nationwide, labour productivity growth averaged 0.9% per year over this period.
Gisborne-Hawke's Bay spends the lowest amount on economic development relative to its GDP ($680 per $million of GDP) of any of New Zealand's regions, compared to New Zealand as a whole ($1,100 per $million of GDP). This may explain why Gisborne-Hawke's Bay's enterprise creation rate is not high.
Gisborne-Hawke's Bay accounted for 5% of total overseas investment in New Zealand between 1999 and 2003, similar to its share of national GDP. Most of this overseas investment was in land - the region accounted for over 19% of nationwide land sales to overseas investors over this period.
Nearly 210,000 overseas visitors travelled to Gisborne-Hawke's Bay in 2003, equivalent to one out of every nine tourists coming to New Zealand visiting the region.

5.8 Taranaki Economic Profile

Economic Indicators for Taranaki

The Taranaki economy accounted for 2.6% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $3.6 billion.
Taranaki's per capita nominal GDP was $33,100 in the year to March 2003, compared to a national figure of $32,100.
Taranaki's economic growth between March 2000 and 2004 averaged 3.1%. Over the same period the national economy grew at an average of 3.5%.
Taranaki's per capita real GDP grew at an average of 4.0% between March 1998 and 2003, the second highest of the regions covered by NZIER's regional economic estimates, and well above the New Zealand growth rate of 2.3%.

Taranaki's Industry Profile

Figure 25 compares Taranaki's regional economic structure to that of the New Zealand economy.

Figure 25 Taranaki's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, business services) indicates that the industry accounts for a smaller proportion of Taranaki's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as agriculture) indicates that an industry is more "important" to the Taranaki region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²⁵ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Taranaki's economy is highly reliant on natural resources (including offshore oil and gas fields) and agriculture, relative to the New Zealand economy. These are both relatively slow-growing sectors at a national level. The faster-growing FBT manufacturing sector is well represented.
Taranaki is under-represented, relative to the New Zealand economy as a whole, in the business services, trade and tourism and transport and communications sectors. These have all been high growth sectors at a national level in recent years.
Despite the rapid growth of the national FBT manufacturing sector, Taranaki's relative reliance on the primary sector and its relative lack of services sectors partly explains why the Taranaki economy has grown slightly more slowly than other regions in New Zealand in recent years.

Other Regional Highlights

Taranaki's unemployment rate has averaged 4.5% over the year to June 2004. The region's unemployment rate and its labour force participation rate are very similar to the New Zealand economy as a whole. A relatively high proportion of the region's adult population has no formal qualifications (31.0%, compared to the national average of 23.7%).
Labour productivity (real GDP per employee) in Taranaki has grown by 0.5% per year on average between 2000 and 2004. This is below nationwide labour productivity growth that averaged 0.9% per year over this period.
Taranaki spends a below-average amount on economic development relative to its GDP ($950 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). This may explain why Taranaki's enterprise creation rate is not high, relative to other regions.
Taranaki attracts a substantial amount of overseas investment due to its endowment of natural resources. It accounted for 17.6% of total overseas investment in New Zealand between 1999 and 2003.²⁶ This is well above the region's share of national GDP.
86,400 overseas visitors travelled to Taranaki in 2003, equivalent to just one in twenty foreign tourists coming to New Zealand visiting the region.

5.9 Manawatu-Wanganui Economic Profile

Economic Indicators for Manawatu-Wanganui

The Manawatu-Wanganui economy accounted for 5.3% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $7.3 billion.
Manawatu-Wanganui's per capita nominal GDP was $29,900 in the year to March 2003, compared to a national figure of $32,100.
Manawatu-Wanganui's economic growth between March 2000 and 2004 averaged 5.1%. Over the same period the national economy grew at an average of 3.5%. The region's per capita real GDP grew at an average of 4.6% between March 1998 and 2003, double the New Zealand growth rate of 2.3%. This performance represents the strongest overall regional economic and per capita growth rates of the twelve regions covered by NZIER's economic data set.

Manawatu-Wanganui's Industry Profile

Figure 20 compares Manawatu-Wanganui's regional economic structure to that of the New Zealand economy.

Figure 26 Manawatu-Wanganui's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, business services) indicates that the industry accounts for a smaller proportion of Manawatu-Wanganui's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as trade and tourism) indicates that an industry is more "important" to the Manawatu-Wanganui region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²⁷ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Manawatu-Wanganui's economy is highly reliant on agriculture and other services (which includes education), relative to the New Zealand economy. The government sector (including defence) is well represented due to the presence of the Ohakea airbase and the Linton Army Camp.
Manawatu-Wanganui is under-represented, relative to the New Zealand economy as a whole, in the business services, transport and communications and utilities / construction sectors.
The Manawatu-Wanganui economy's relative reliance on the fast-growing trade and tourism and other services sectors (as well as education), has resulting in it growing more rapidly than other regions in New Zealand in recent years.

Other Regional Highlights

Manawatu-Wanganui's unemployment rate averaged 4.8% over the year to June 2004, relative to 4.3% for the national economy. The region's labour force participation rate is very low, relative to New Zealand as a whole. This indicates that there is a relatively large pool of labour available in the region that is at present being unused. The labour force in the region is relatively transient due to Palmerston North's abundance of tertiary education institutions. Between 1996 and 2001 over 4,200 more 25-44 year olds left the region than arrived.
Labour productivity (real GDP per employee) in Manawatu-Wanganui grew at 0.6% per year between 2000 and 2004. Nationwide, labour productivity growth has averaged 0.9% per year over this period.
Manawatu-Wanganui spends far more than the national average on economic development relative to its GDP ($1,600 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). Despite this expenditure, its business creation and destruction rates are amongst the lowest in the country.
The Manawatu region accounted for 2.4% of total overseas investment in New Zealand between 1999 and 2003.²⁸ Land sales to overseas investors accounted for less than half of this amount.
Over 190,400 overseas visitors travelled to Manawatu-Wanganui in 2003, equivalent to one in ten tourists coming to New Zealand visiting the region.

5.10 Wellington Economic Profile

Economic Indicators for Wellington

The Wellington economy accounted for 12.8% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $17.5 billion.
Wellington's per capita nominal GDP was $36,700 in the year to March 2003, compared to a national figure of $32,100. This is the highest per capita GDP of the twelve regions covered by NZIER's regional economic dataset.
Wellington's economic growth between March 2000 and 2004 averaged 3.9%. Over the same period the national economy grew at an average of 3.5%. Despite this strong overall growth performance Wellington's per capita real GDP grew at an average of 1.6% between March 1998 and 2003, well below the New Zealand growth rate of 2.3%.

Wellington's Industry Profile

Figure 27 compares Wellington's regional economic structure to that of the New Zealand economy.

Figure 27 Wellington's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, agriculture) indicates that the industry accounts for a smaller proportion of Wellington's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as government) indicates that an industry is more "important" to the Wellington region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.²⁹ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Wellington's economy is highly reliant on the government sector. The business services sector that interacts with government departments is also a major industry both in absolute terms and relative to the New Zealand economy as a whole.
Wellington is under-represented in the primary and manufacturing sectors compared to the national economy.
Despite its reliance on the slow-growing government sector, the regional economy has performed relatively well due to the heavy weighting of the fast-growing business services sector in its industrial composition.

Other Regional Highlights

Wellington's unemployment rate has averaged 4.9% over the year to June 2004. This is higher than the national average. The Wellington region's labour force participation rate is the second highest of the regions covered in this study, and its working age population has the lowest proportion of unqualified workers in New Zealand.
This relatively highly qualified workforce has resulted in labour productivity (real GDP per employee) in Wellington growing at an average of 1.5% per year between 2000 and 2004. Only Southland's labour productivity has been higher over this period. In comparison, nationwide labour productivity growth has averaged 0.9% per year.
Wellington spends a large amount on economic development relative to its GDP ($1,670 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). This may help to explain why Wellington's enterprise creation rate is very high, relative to other regions in New Zealand.
Wellington accounted for 4.3% of total overseas investment in New Zealand between 1999 and 2003, lower than its share of national GDP. Land sales accounted for a tiny proportion of this investment.
Over 550,000 overseas visitors travelled to Wellington in 2003, equivalent to 29% of tourists coming to New Zealand entering the region.

5.11 Upper South Island Economic Profile

Economic Indicators for Upper South Island

GDP data is not estimated for the separate regional councils for Nelson, Marlborough, Tasman and West Coast. They are combined (for technical reasons) into a composite region named the Upper South Island.³⁰
The Upper South Island economy accounted for 4.4% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $6.0 billion.
The Upper South Island's per capita nominal GDP was $35,800 in the year to March 2003, compared to a national figure of $32,100. This is the second highest per capita GDP of the twelve regions covered by NZIER's regional economic dataset.
The Upper South Island's economic growth between March 2000 and 2004 averaged 2.2%. Over the same period the national economy grew at an average of 3.5%.
The Upper South Island's per capita real GDP grew at just 0.7% per year between March 1998 and 2003, below the New Zealand growth rate of 2.3%. This represents the slowest regional per capita real GDP growth rate of the twelve regions covered by the NZIER dataset.

Upper South Island's Industry Profile

Figure 28 compares the Upper South Island's regional economic structure to that of the New Zealand economy.

Figure 28 Upper South Island's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, business services) indicates that the industry accounts for a smaller proportion of Upper South Island's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as natural resources) indicates that an industry is more "important" to the Upper South Island region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.³¹ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
The Upper South Island's economy is highly reliant on primary production (agriculture and natural resources), relative to the New Zealand economy. These are both relatively slow-growing sectors at a national level. However, the food, beverage and tobacco manufacturing sector is also an important regional industry, and this sector is fast-growing at a national level.
The Upper South Island is under-represented, relative to the New Zealand economy as a whole, in the various services sectors, and particularly so in business services. These have all been high growth sectors at a national level in recent years.
This relative reliance on the slow-growing primary sectors explains in part why the Upper South Island economy has grown more slowly than other regions in New Zealand in recent years.

Other Regional Highlights

Upper South Island's unemployment rate averaged 3.3% over the year to June 2004, the second lowest regional unemployment of the twelve regions covered by Statistics New Zealand's Household Labour Force Survey. The nationwide unemployment rate averaged 4.3% in the year to June 2004.
Between 1996 and 2001, nearly 1,100 more people arrived in the Upper South Island region from other New Zealand regions than departed. However, this net internal migration gain varied substantially between the four regional councils that form this composite Upper South island region. The West Coast region had a net loss of over 2,150 people, whilst the Tasman region gained over 2,500. Across the Upper South Island as a whole, the region tended to attract those over 25 years old, whilst those in the 15-24 years old age bracket showed a greater tendency to leave the region.
Labour productivity (real GDP per employee) in Upper South Island grew at an average of 0.6% between 2000 and 2004. Nationwide, labour productivity growth averaged 0.9% per year over this period.
The Upper South Island spends a below-average amount on economic development relative to its GDP ($740 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). Despite this relatively low expenditure, the region's enterprise creation rate is similar to the national average.
The Nelson / Marlborough / Tasman combined region attracted 5.6% of total overseas investment in New Zealand between 1999 and 2003, higher than its share of national GDP. The West Coast accounted for just 0.4% of total overseas investment.
Over 950,000 overseas visitors travelled to Upper South Island in 2003, equivalent to one out of every two international tourists coming to New Zealand visiting the region. The West Coast (420,000 overseas visitors) was the most popular tourist destination of the four regional councils in this composite Upper South Island region, with the Tasman region attracting 75,000, Nelson attracting 260,000 and Marlborough attracting 200,000 visitors.

5.12 Canterbury Economic Profile

Economic Indicators for Canterbury

The Canterbury economy accounted for 14.6% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $19.9 billion.
Canterbury's per capita nominal GDP was $35,650 in the year to March 2003, compared to a national figure of $32,100.
Canterbury's economic growth between March 2000 and 2004 averaged 4.8%, making the Canterbury the second fastest growing region of those covered by NZIER's regional economic dataset. Over the same period the national economy grew at an average of 3.5%.
Canterbury's per capita real GDP grew at an average of 3.7% between March 1998 and 2003, well above the New Zealand growth rate of 2.3%.

Canterbury's Industry Profile

Figure 29 compares Canterbury's regional economic structure to that of the New Zealand economy.

Figure 29 Canterbury's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, business services) indicates that the industry accounts for a smaller proportion of Canterbury's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as other manufacturing) indicates that an industry is more "important" to the Canterbury region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.³² The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Canterbury's economy is highly reliant on its various manufacturing sectors, relative to the New Zealand economy. Whilst food, beverage and tobacco manufacturing is a fast-growing sector, other manufacturing is less dynamic. The Canterbury region is also relatively dependent on trade and tourism and other services, which are both fast-growing sectors.
Canterbury is under-represented, relative to the New Zealand economy as a whole, in the business services, agriculture, natural resources and government sectors. Apart from business services, these are all relatively slow-growing sectors at the national level.
This relative reliance on faster-growing sectors and an industrial structure that relies less heavily on slow-growing sectors explain in part why the Canterbury economy has grown rapidly in recent years.

Other Regional Highlights

Canterbury's unemployment rate averaged 4.1% over the year to June 2004, compared to a national rate of 4.3%. The region's labour force participation rate is the highest in New Zealand, suggesting that the vast majority of able and willing workers are actively employed. This is reflected in the relatively high GDP per capita in the region. It also indicates that any additional economic growth will have to stem from population growth or labour and capital productivity gains.
Population growth over recent years has been aided by net migration inflows from other parts of New Zealand. Between 1996 and 2001, nearly 8,800 more people entered the Canterbury region on a permanent basis than left it.
Labour productivity (real GDP per employee) in Canterbury grew at an average of 0.8% between 2000 and 2004. Nationwide, labour productivity growth averaged 0.9% per year over this period.
Canterbury spends an above-average amount on economic development relative to its GDP ($1,300 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). Despite this expenditure, the region's enterprise creation and destruction rates are not vastly different to the national averages.
Canterbury accounted for 5.9% of total overseas investment in New Zealand between 1999 and 2003, with most of this being in the form of land sales. This is lower than its share of national GDP.
Over 800,000 overseas visitors travelled to Canterbury in 2003, equivalent to over 40% of the total number of overseas tourists visiting New Zealand travelling to Canterbury.

5.13 Otago Economic Profile

Economic Indicators for Otago

The Otago economy accounted for 4.8% of total economic activity in New Zealand in the year to March 2004.
Its regional GDP in the same year was $6.6 billion.
Otago's per capita nominal GDP was $31,300 in the year to March 2003, compared to a national figure of $32,100.
Otago's economic growth between March 2000 and 2004 averaged 3.8%. Over the same period the national economy grew at an average of 3.5%.
Otago's per capita real GDP grew at an average of 1.8% between March 1998 and 2003, below the New Zealand growth rate of 2.3%.

Otago's Industry Profile

Figure 30 compares Otago's regional economic structure to that of the New Zealand economy.

Figure 30 Otago's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, other manufacturing) indicates that the industry accounts for a smaller proportion of Otago's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as food, beverage and tobacco manufacturing) indicates that an industry is more "important" to the Otago region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.³³ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Otago's economy is highly reliant on agriculture and its downstream manufacturing sectors, relative to the New Zealand economy. The region is also heavily reliant on trade and tourism and other services as a result of the presence of popular tourist destinations such as Queenstown and Wanaka in the region, as well as the presence of Otago University.
Otago is under-represented, relative to the New Zealand economy as a whole, in the business services, transport and communications and other manufacturing sectors.
The Otago economy is therefore more dependent on fast-growing sectors (trade and tourism, other services, food, beverages and tobacco manufacturing) than it is on the slower-growing primary sector. As a result, the region's overall economic growth performance has been strong, relative to the New Zealand economy as a whole.

Other Regional Highlights

Otago's unemployment rate averaged 5.1% over the year to June 2004. The national rate averaged 4.3% over the same period. The region also had a labour force participation rate which is well below the national average. This is likely to be affected by the high student population associated with Otago University. One issue that the region faces is retaining workers in the 25-44 years old age bracket. Between 1996 and 2001, the Otago region suffered a net loss of over 3,200 people of this age to other regions in New Zealand. Whilst the region did attract a net gain of nearly 4,100 more people in the 15-24 age bracket over the same period, it may be that those leaving are better suited to the region's industrial profile and are thus a significant loss.
Labour productivity (real GDP per employee) in Otago grew at an average of 1.0% between 2000 and 2004. Nationwide, labour productivity growth averaged 0.9% per year over this period.
Otago spends the highest amount on economic development relative to its GDP ($2000 per $million of GDP) of any of the regions covered by the LGNZ / Deloittes survey of economic development spending - almost twice as much as the national average of $1,100 per $million of GDP.
Otago accounted for 5.9% of total overseas investment in New Zealand between 1999 and 2003, the majority of which was for purchases of land. This is higher than its share of national GDP.
Over 673,000 overseas visitors travelled to Otago in 2003, indicating that one in every three overseas tourists visiting New Zealand travel to Otago.

5.14 Southland Economic Profile

Economic Indicators for Southland

The Southland economy accounted for 2.5% of total economic activity in New Zealand in the year to March 2004, making it the smallest region of the twelve covered by NZIER's regional economic dataset.
Its regional GDP in the same year was $3.5 billion.
Southland's per capita nominal GDP was $33,700 in the year to March 2003, compared to a national figure of $32,100.
Southland's economic growth between March 2000 and 2004 averaged 3.8%. Over the same period the national economy grew at an average of 3.5%.
Southland's per capita real GDP grew at an average of 1.9% between March 1998 and 2003, below the New Zealand growth rate of 2.3%.

Southland's Industry Profile

Figure 31 compares Southland's regional economic structure to that of the New Zealand economy.

Figure 31 Southland's Industry Profile

Shares of nominal national GDP (y-axis) and regional GDP (x-axis), averaged across March years 2000-2004
Source: NZIER

Any scatter plot to the left of the 45 degree dashed line (for example, transport and communication) indicates that the industry accounts for a smaller proportion of Southland's GDP than it does at a national level. Conversely, any plot to the right of the dashed line (such as agriculture) indicates that an industry is more "important" to the Southland region than it is to the New Zealand economy as a whole.
The square scatter plots are industries that are fast-growing at a national level.³⁴ The black diamond scatter plots are industries that are slow-growing at a national level. Fast-growing regions tend to have a high proportion of their regional economies focused on fast-growing sectors.
Southland's economy is highly reliant on agriculture and its associated primary processing sectors (labelled FBT manufacturing) both in an absolute sense and relative to the New Zealand economy. The region is under-represented in the various services sectors.
Despite Southland's reliance on the relatively slow-growing primary sector (agriculture and natural resources), the sheer weight of the region's fast-growing food, beverage and tobacco manufacturing sector has resulted in its overall growth performance being relatively strong.

Other Regional Highlights

Southland's unemployment rate averaged 3.1% over the year to June 2004. This is the lowest regional unemployment rate in New Zealand and compared to a nationwide average of 4.3%. This, combined with a relatively high labour force participation rate, suggests that a lack of available labour in Southland could be a significant constraint on growth in the future. The high utilisation of labour is reflected in above average GDP per capita.
Labour shortages have been worsened by a net outflow of population to other New Zealand regions. Between 1996 and 2001 Southland experienced a net internal migration loss of 5,400 people. Nearly half of this loss was in the 15-24 years old age bracket. Given the fact that nearly a third of Southland's working age population have no formal qualifications (compared to 23.7% nationwide), any remaining labour resources may not be adequately skilled to satisfy labour demand.
Labour productivity (real GDP per employee) in Southland grew at the fastest rate in New Zealand between 2000 and 2004 - at an average of 1.7% per year, compared to nationwide average labour productivity growth of 0.9% per year over this period. So Southland's workforce, while small and with relatively little scope for expansion, has demonstrated impressive efficiency gains in recent years.
Southland spends an above-average amount on economic development relative to its GDP ($1,240 per $million of GDP), compared to New Zealand as a whole ($1,100 per $million of GDP). Despite this, Southland has a fairly low rate of enterprise creation.
Southland is not a significant destination for overseas investment, accounting for just 0.9% of total overseas investment in New Zealand between 1999 and 2003, lower than its share of national GDP. Despite this, Southland accounted for over a fifth of total overseas investment in land sales in New Zealand (in terms of hectares) over this period.
Nearly 308,000 overseas visitors travelled to Southland in 2003, equivalent to 16% of all overseas tourists visiting New Zealand.

¹⁹In some respects this discussion is similar to the one which has been taking place in policy circles at the national level. There has been a push towards making New Zealand a more IT-intensive "knowledge" economy, as countries that have displayed rapid growth in recent years have had a strong focus on developing, using and exporting technology-intensive products and services. The question is: should New Zealand try to emulate these countries, or should it focus more on the sectors in which it has a comparative advantage (agriculture, forestry, food processing, etc), even if these are not rapid world growth markets? NZIER's opinion is that we cannot ignore our comparative advantage in the primary sector. The key to future growth will be applying technological advances to our existing industry structure in order to lift productivity (see NZIER Report and Working Papers - 1998 to 2003 [external link] and Farming in New Zealand - The State of Play and Key Issues for the Backbone of the New Zealand Economy [external link] for more information).

²⁰We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²¹We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²²We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²³We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²⁴We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²⁵We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²⁶Note that the Overseas Investment Commission's regional aggregation means that this proportion is actually for the Taranaki-Wanganui region. However, it is reasonable to assume that the vast majority of this investment is destined for Taranaki.

²⁷We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

²⁸Note that the Overseas Investment Commission's regional aggregation looks at Manawatu separately from Wanganui.

²⁹We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

³⁰The Household Labour Force Survey sectoral employment data from Statistics New Zealand upon which NZIER's regional economic analysis is based is only provided at this level of regional aggregation.

³¹We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

³²We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

³³We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

³⁴We define a fast-growing industry as growing faster than the New Zealand economy as a whole over the 2000-2004 period.

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Printed: 04/04/2008

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