NZ has zombie towns that need to close — economist

"Places like Northland look more like Timor and if we look at places like Orakei in Auckland it’s more like Switzerland" - Eaqub on The Nation

LATEST: ASK ME ANYTHING: Shamubeel Eaqub

 

RAW DATA: The Nation transcript: Lisa Owen interviews NZIER principal economist Shamubeel Eaqub about his new book Growing Apart

 

Lisa Owen: Your book points out there is this huge range of incomes from region to region and you compare some of them to overseas countries, some have the dubious honour of being compared to Greece. Talk me through some of those examples.

Shamubeel Eaqub: Yeah I think in a way we have so much conversation in New Zealand about New Zealand but when you scratch beneath the surface we’re really different. Places like Northland look more like Timor and if we look at places like Orakei in Auckland it’s more like Switzerland, incredibly rich. And those divergences are not new but the gaps are growing.

So why are they so different?

They are very different because they have very different economies, it’s very complex you know. I look at Northland, it’s not benefiting from the growth in Auckland but Waikato is. I look at what’s happening in terms of education outcomes in places like Northland or the levels of poverty that’s entrenched. And you know there’s poverty trap, the lack of opportunity that’s really coming through. In many ways it’s those big global trends that we can’t stop; urbanisation in trend for a hundred years, technological change, globalisation, heavy manufacturing moving overseas. All of those things are going to be compounded by aging population as well. In places like Gisborne, your home town, you know aging is such a massive issue, there are no new families being created it’s mostly people living on their own.

We’ll come to some of that later but I want to know, so you think some of our regions are in real trouble.

I think so. So you know we’ve got low incomes, declining or flat populations and quite often we see very few economic opportunities to engage with jobs and those kinds of things.

So broadly, which ones specifically do you think are in trouble?

Well you know, we look at places like Northland, the East Cape, bits of the central North Island looking really, really weak. Places like Manawatu, Whanganui, at the regional council level they’ve lost nearly 9-percent of their jobs over the last 7 years. These are really troubling times for some of these regions because we don’t necessarily have the levers to pull to stop that from happening.

So what can we do about it then? Because you discuss in this book that cities, areas with a hundred-thousand people or more they do better. Is it just that we need to filter more people into these areas or what is it?

I think you know there’s a whole bunch of things here but not every region can succeed on every measure. We have to decide what does prosperity mean and in many ways I think we’ve lost sight of the fact that what we’re trying to do with economic policy is to create opportunities for New Zealanders. And increasingly we talk about GDP or employment growth on a national level and we forget that there is this big divergence. Economic outcomes are being decided by poverty, where kids are not getting enough education, the outcomes are not good enough, that welfare is not lifting them out of poverty. You know it’s good to have a welfare safety net but is it the poverty alleviation that we’re looking for? How do we help people to have better outcomes in their life not just about will they stay trapped in those regions.

When you talked before about the fact that there aren’t many people going into some of these regions and we need new young immigrants, but most of them come and they go to Auckland. So do we need a policy like Winston Peters suggests that sends these immigrants out into the regions and makes them stay there for 5 years or so?

As an immigrant I can tell you forcing people to go to places where there are no jobs is not a good idea. We have to get people to engage with the economy and by and large people do come for that. And Southland I think has a great example where you know Southland is benefiting from immigration, where population growth is mildly positive after years of decline mainly because the dairy sector is desperately, desperately crying out for workers. But at the same time it’s a massive issue right. You know it’s a very homogenous community; they’ve suddenly got this very confronting change with all these groups of people coming in with different cultures, different backgrounds and different preferences. We have to manage that. So with immigration policy I think that it’s more about, I know it sounds really awkward but assimilation, help people integrate into community. We can’t lose that fabric of community that’s so important for small regional towns that sort of holds them together. And immigration can be helpful in filling some of those gaps but it’s not going to be the solution.

So if people are still going to keep coming into Auckland, there’s always this ongoing debate about the fact that Auckland is too big, a third of the population live here where as in other countries, like Paris 20-percent of the population, in London 20-percent of the population. Do we need to sort of jam a lid on Auckland?

Absolutely not, that would be the worst possible thing we could do. Auckland is our only hope as the big city, the big urban centre that’s going to be the powerhouse of our economy. If we shackle Auckland, it’s not going to turn up in Northland or Waikato, it’s going to turn up in Sydney, Singapore and other places.

So businesses will go overseas?

Absolutely

Rather than be pushed into the provinces?

So the growth in Auckland is going to happen. Whether we allow it to happen in a good way is the question. What’s happening in Auckland is completely different from the rest of New Zealand, in many ways Auckland is our only big city and at one and a half million it’s actually not that big. Even Sydney across the ditch is four and a half million.

But even you in the past have said that the provinces or smaller cities are suffering because of the likes of property speculation in Auckland. And this week we see that Auckland is having massive problems with rates not covering the work that needs to be done, the need for public transport. So what’s that, growth at any cost?

It’s not growth at any cost I think it’s just bad management that’s led us to these issues in Auckland. We need to be far more flexible with our Auckland economy. We know that the future of the global economy is increasingly towards cities, half of the global economy now lives in global populations and cities, 80-percent of global GDP created in cities. So you know to say that we’re going to stop it from happening in the cities is not good enough. So we need to have much better policies on land supply, on easing of congestion, transport, allowing people to live close to work. All of those things are absolutely critical. You know Auckland is that really exciting place where you’ve got this real concentration of skilled people doing really cool thing. You know I think there’s this weird envy in New Zealand where somehow Auckland is stealing resources from New Zealand. I don’t think it is. It’s competing at a different scale and it’s helping all of New Zealand but what’s happening in the rest of New Zealand is not really connected into that. You know it’s not benefiting to the same extent that Auckland is.

So can the Government do anything about that with the regions? Can you create a boom by plonking industry into a region?

I don’t think we can. We’ve tried that with Think Big, you know we’ve got white elephants all around the country. The difficult part of writing this book was we couldn’t come to a solution.

Hang on but are they white elephants because you think about something like Tiwai smelter, I know it’s the centre of controversy now but for decades it’s employed people.

Absolutely and what happens when it closes? And what happens with the big dams? And what happens with the – Phil was telling me about this money printing operation in Whangarei, is that really the best place to be printing money? So we’ve got all these quirky little things we’ve done on the back of it. And for me it’s more about pulling back from the place and saying will the people of that place have an opportunity. And I think the way that we have to do that is much better outcomes in terms of education and that that has to be an absolutely critical link and the thing has to be about welfare policies that do much more in terms of alleviating poverty because -

None of those are quick fixes though, they’re generational thing.

Absolutely generational things, you know this gap in regional economies in New Zealand that’s been developing over a hundred years. If we are looking for a quick solution to this very complex problem it’s not going to work.

So if there are no quick solution as you point out then, is there irreversible decline in some town some towns, does someone need to close the door and switch the light off in certain cities and say ‘it’s a lost cause’?

It’s horrible to say but yes we have zombie towns and some of them do have to close. And you know it’s going to be devastating for those communities but it will be better for New Zealand if we target our resources in places that have some hope of growing and creating prosperity.

So which towns would you flick the switch on?

I don’t have any specific names but I’m sure we could find some around the north.

Come on, you name Gisborne as an underperformer, you name areas of Northland

Yep

Whanganui is another one that you name. So if you are saying there are some places we should give up on, be honest and tell me which ones.

I really, I honestly don’t know. But you know I think about some of those small towns in the central North Island where populations are declining and they’ve got this massive infrastructure deficit that they’re going to have to replace. And you’re like would you really invest hundreds of millions of dollars for a declining population. The answer might be no.

Thank you so much for joining me this morning.


LATEST: ASK ME ANYTHING: Shamubeel Eaqub


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