Our capital city is losing its mojo

Celia Wade-Brown

Wellington’s decline in public sector jobs helped contribute to a 16-year high in city’s unemployment rate in the December quarter, stoking concerns the local economy will continue suffer as the lid comes down on the state sector.

Unemployment in the capital rose to 7.3 percent, in the three months ended Dec. 31, up from 6 percent in the prior quarter, according to Statistics New Zealand’s household labour force survey. The dole queue grew in Wellington while nationally the jobless rate fell to a 21-month low of 6.3 percent, ranking it behind Northland and Bay of Plenty.

Wellington accounts for 40 percent of all full-time workers on the state payroll, according to the Public Service Association. Public sector jobs in Wellington fell 3.7 percent to 18,300 last year, the PSA’s figures show.

Nationally, public sector employment dropped 2.2 percent to 43,595 in the year ended June 30 following a decline of 0.3 percent in 2010, according to the State Services Commission. The decreases follow eight years of gains in the taxpayer-funded workforce.

“The reality is Wellington as a city and as a region is heavily reliant on government services and that is declining,” said Nigel Kirkpatrick, chief executive at the city’s regional economic development agency, Grow Wellington. “Wellington can’t rely forever on being a government town.”

“We might see more of a decline in the coming years as the government sector decreases,” Kirkpatrick said.

Wellingtonian workers are already gloomier than the average kiwi despite their compact little city of 365,000, according to the most recent census figures. The city winning plaudits from the Lonely Planet guide as the world’s ‘coolest little capital,’ with big-city smarts like nightlife, arts, café culture and global performers such as Weta Digital and Peter Jackson’s Wingnut Films.

Employment confidence in the Wellington region sank to 98.3 in the fourth quarter, based on the Westpac McDermott Miller Employment Confidence Index, where a reading of 100 separates pessimists from optimists. That’s down from 106.3 a year earlier and ranks the city below Southland, Canterbury, Auckland, Gisborne/Hawkes Bay, Nelson/Marlborough/Westland, Waikato and Otago.

The average house price in Wellington fell 0.5 percent to $385,000 in January from December, while the national median price was steady at $355,000.

In Auckland, the median price fell 2.8 percent to $471,000 though workers in New Zealand’s biggest city are more optimistic than those in Wellington, with a reading of 101.7 on the Westpac McDermott Miller employment index.

“What we are seeing is a drift away from the city towards Auckland,” said Steve Edwards, economist at ANZ New Zealand. “The government is a big player when it comes to Wellington and that will determine what the overall trend will be. On the whole this migration away from Wellington is constraining its potential.”

The lack of diversity and concentration in the government sector means taxpayers provide much of the lifeblood of the windy city. Economic activity fell 0.2 percent in Wellington in the third quarter last year and was down 0.4 percent from a year earlier. Nationally, economic activity rose 0.2 percent for an annual gain of 0.8 percent.

Further bad news may loom for Wellington. The Treasury’s second annual administrative & support services benchmarking report, released this week, shows the government could save $250 million annually by merging administrative and support functions. It singled out the cost of information and communications technology services for dramatic reductions.

The National government has cut more than 2,500 public sector roles since coming to power in 2008, according to Fairfax Media, and is heeding John key’s administration calls to extend efficiencies.

“The chronic lack of innovation in our public sector has led to declining efficiency, poorer services and a loss of value for taxpayers,” said Alastair Boult, director of government advisory services for accounting firm Grant Thornton New Zealand.

“We need public sector management that creates and supports innovation processes and we also need a culture that tolerates failure, encourages creativity and embraces new ideas,” he said in a report titled: ‘Innovation in Government: getting our mojo back’.

“We can get our mojo back but it requires urgency and commitment,” Boult said. “There is a policy and leadership gap in the marketplace which the government needs to fill urgently.”

Grow Wellington’s Kirkpatrick says the city needs to focus on attracting and retaining innovative businesses outside the public sector. Kirkpatrick stressed the importance of investing in infrastructure, manufacturing and information technology - industries that are all contributing above the national average.

“It would be naïve to say it will happen tomorrow but manufacturing is an area which is quite switched on – tech companies are starting to come into their own too,” he said.

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14 Comments & Questions

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Public sector have a long way to go in cutting staff,over paid for the amount of work they dont do.please get a move on ASAP.

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What a completely stupid and useless comment that was.

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Wellington has more pleasant happy people per capita because more workers there have probably never had much competition or had to work as hard as they do in Auckkers. As a oldie now, it might be worth my while returning to a population practising more civility.

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Time to look at moving back room service functions out of the big cities. Usually in today's world there is no need for these sorts of functions to be anywhere in particular. We struggle with people migrating to the big centres for work - we need to provide endless money in building physical infrastructure, and housing which ends up being in the premium pricing bracket. With modern technology and communication facilities coming on line these functions can be moved to smaller centres and so we can spread our population more rather than concentrating it in a few areas.

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Time to look at moving back room service functions out of the big cities. Usually in today's world there is no need for these sorts of functions to be anywhere in particular. We struggle with people migrating to the big centres for work - we need to provide endless money in building physical infrastructure, and housing which ends up being in the premium pricing bracket. With modern technology and communication facilities coming on line these functions can be moved to smaller centres and so we can spread our population more rather than concentrating it in a few areas.

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Makes sense to me.

This has so many advantages, including:

1. More regional employment,
2. Lower cost salaries/wages reflective of the lower housing costs in the regions.
3. Lower rental/occupancy costs of accommodation.
4. Spreading growth/tax payer $$$ round the country instead of concentrating this in Wellington creating an unnecessary boom/bust business cycle.
5. The spread of resources throughout the regions would enhance the chances of continued operations in the event of a major disaster.
The only think I think that would be stopping this logic is the invested interests of the politicians and businesses that would otherwise benefit from large infrastructure development; including the banks.
Accordingly, I dont see this happening anytime soon.

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Nigel Kirkpatrick has got it right. Exposure to the commercial world could be the making of Wellington.

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The decline in Wellington will be of huge benefit for the rest of New Zealand. The capital city has only grown from the extortion of money from business throughout NZ.

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With communication methods nowadays we do not need a concentration of taxes in one place. Government agencies that we actually need can have their headquarters spread throughout NZ and return tax dollars to the areas that generate them.

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Couldn't agree more!

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All good comments, with the advances in communication technology there is absolutely no reason why most Gov. dep'ts have to be in Wellington. They could and should be placed all around NZ. Think of the rent saved for starters!

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The Education Review by State Services commission, PM Dept etc, found 40% of new money since 2003 produced ''questionable ouput'. That is about $4 billion per year with much of it spent in Wellington. When is the Education Department going under the knife? The government could do well to divert some to Police as back-room and education to prevent crime. At least that will keep a few education wasters off the dole.

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Wellington will only survive if it diversifies it's population base.It needs to import people from abroad with the skills and enthusiasm needed to give it a spark off in a new direction cause the local inhabitants haven't a clue.It's no surprise Auckland is doing so well just look at how diverse and colorful the place is.
Being reliant on one one sector is always a disaster and Wellington needs to diversify now.

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Such bitterness and spite... Money Money Money. That's all that matters eh? What a bunch of Bankers. The quicker the disesases of the rich take you out the better.

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