Yes, from Wool to Weta. But, NO, to zombie towns

Monday October 06, 2014 Dr Ganesh Nana

Yes, from Wool to Weta. But, NO, to zombie towns


The suggestion that many parts of heartland New Zealand could become so-called ‘zombie towns’, has rightly stirred considerable commentary.


Bluntly, New Zealand cannot afford for its heartland to close down. It would be a high-risk economic development strategy that will undoubtedly lead to a less viable and less resilient New Zealand economy; with much worse outcomes and lower well-being for a large majority of the NZ population.


However, the attention-seeking nature of the zombie headline risks hiding a fundamental tension between metropolitan and heartland New Zealand that we (whether we be people, business entrepreneurs, policy makers or officials) ignore at our peril.


This critical tension must be confronted openly and honestly. There is an inherent contradiction in New Zealand’s demographic and employment factors on the one hand and economic realities on the other. In particular, demographic and employment factors increasingly attract people to larger cities and urban areas. But the core, and inconvenient, truth is that much of New Zealand’s economic incomes derive from resource-based activities located in these depopulating heartland areas.


Yes, the NZ economy has diversified – from Wool to Weta, as Sir Paul Callaghan wrote so eloquently a few years ago. But, despite that diversification, a sizable proportion of our export income (nearly half) continues to be derived from the land and the associated resource base. This proportion is well over half if you believe that most of our tourism revenues accrue from our land-based endowments.


Composition of New Zealand export earnings


Composition of New Zealand export earnings


The physical and social infrastructures in these heartland areas are progressively being eroded as their population shrinks and they can no longer afford to continue such expensive investments. Whether these are in local roads and other transport networks; schools, polytechnics and other training institutions; hospitals and health centres; sports and community facilities; and water, drainage and sewerage systems; population decline does not bode well for the maintenance (let alone improvement) of these core infrastructure imperatives. And the decline of such infrastructure inevitably makes economic and business activities in these areas less attractive, less productive, and less profitable. Once established, such a vicious cycle of decline can be extremely difficult to reverse.


Also critical to acknowledge in considering these matters is the effect shrinking regional services will have on growing disparities within New Zealand. While some may justify reduction in regional services on the grounds of shrinking populations, the impact on particular population sub-groups cannot be ignored.


In particular, for example, will be the impact on Māori. The Statistics New Zealand population ‘medium assumptions’ projection scenario indicates that across 15 of 16 of NZ’s regions (i.e. excluding Auckland) the number of non-Māori children (i.e. 0-15 years olds) will decline, but the number of Māori tamariki will increase. A similar observation holds for the 40-64 year old age group. Any progressive ‘rundown’ of heartland New Zealand will negatively impact Māori disproportionately more than other population groups.


In such a circumstance, the consequences for society and community are too bleak to ponder.


But what would be the economic justification for New Zealand to continue investing in the heartland alive? Well, there are about 1 million New Zealanders residing in the heartland, with over 140,000 businesses, close to 420,000 full-time equivalent jobs, and over $40 billion in annual GDP. Taking these out of the New Zealand equation would leave a significant hole to fill in our economic landscape. The numbers are even starker if we concentrate on the tradable sector activities – i.e. the export earning or internationally competing sectors. Over 26% of the nation’s tradable sector GDP and employment is directly located in the heartland areas.


It is for these (and other) reasons that the argument for continued investment in a revitalised heartland cannot be ignored. And such investments must be seen as integral components of a New Zealand economic development strategy that acknowledges where our comparative advantage lies. Yes, I agree we need to ‘move up the value chain’, as the policy jargon implores. But, the policy jargon must also understand that the value chain begins somewhere – and in New Zealand’s instance that beginning is predominantly on, or close to, the land.


Abandoning the investments made by previous generations in heartland New Zealand would be a short-sighted indictment of the current generation of New Zealand leaders, policy makers and officials and their collective lack of strategy and vision, or of any coherent economic development framework.


So, let’s turn away from the zombie headlines and turn towards confronting these challenges. We need to commit as a nation to maintaining, investing, revitalising, and growing these heartland areas for the benefit of all New Zealanders – whether we reside in the metropolises or in the provinces.