Mining can help revive struggling rural economies

Mining can help revive struggling rural economies
• Rural regions and their manufacturing-based economies are shrinking
• Decline at odds with high mineral endowment in rural areas
• RMA and lack of incentives are major hurdles to resource development

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Wellington (28 November 2014): The minerals sector can help revive New Zealand’s struggling rural economies, but only if the government reduces the complexity of the Resource Management Act and creates financial incentives for local government.

This is a key finding of Poverty of Wealth: Why Minerals Need to be Part of the Rural Economy, the latest report produced by public policy think tank, The New Zealand Initiative.

The report examined the economic landscape in New Zealand, and found that unlike the thriving urban centres with large service sectors, rural regions were struggling as heartland industries, such as timber milling and meat processing, were exposed to global competition.

Official figures show Auckland, Wellington and Christchurch saw their economies grow by 3.3%, 1.5% and 6% respectively in the year ending March 2013, while half of the rural economies shrank over the same period, and a further two saw growth stall. Similarly, job creation since 2008 has been concentrated in the regions with large urban centres.

The rural decline is at odds with the mineral resources that are found in the provinces, which are largely under-explored and under-utilised. Onshore, New Zealand is a country believed to be rich in gold and silver, coal, industrial metals and non-metallic minerals. Offshore the oil and gas estate has the potential to make a significant contribution to the economy.

“It is bitterly ironic that the rural regions, as rich as they are in natural resources, are trapped in a cycle of economic decline and poverty,” said Jason Krupp, a Research Fellow at the Initiative, and author of the report.

“And yet attempts to encourage mining, an activity that has proven to make long-term contributions to regional economic development, is often avoided by local councils because of the cost, complexity and legal troubles imposed on them by the RMA. The issues with the RMA have been thoroughly detailed by the Ministry for the Environment and the Productivity Commission.”

The report showed that while resource extraction had the potential to incur negative macroeconomic and environmental effects, the world class nature of New Zealand’s institutional setting were sufficiently robust to offset or mitigate these effects.

“The environment is a large part of our culture and identity, and we are not advocating for it to be dug up and sold whole, but there is potential to loosen the policy settings to allow for greater economic development in the regions” said Mr Krupp.

“There is no reason why New Zealand cannot achieve a better balance around extractive industries, in the same way that other developed countries have done. These are minerals that are largely owned by New Zealanders through the Crown, so why shouldn’t they get the benefit of them?”

This report is the first in a two part series. The second report, which will contain specific policy recommendations, will be released in early 2015.

Jason Krupp is a Research Fellow at The New Zealand Initiative, and has published reports on housing affordability and the impact of the planning ideology of cities. He is also a regular contributor to many of New Zealand’s leading media titles.

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About the New Zealand Initiative
The New Zealand Initiative is an evidence-based think tank and research institute, which is supported by a membership organisation that counts some of the country’s leading visionaries, business leaders and political thinkers among its ranks.

Our members are committed to developing policies to make New Zealand a better country for all its citizens. We believe all New Zealanders deserve a world-class education system, affordable housing, a healthy environment, sound public finances and a stable currency.

The New Zealand Initiative pursues this goal by participating in public life, and making a contribution to public discussions.

For more information visit www.nzinitiative.org.nz

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