Population growth driving development outside Auck

“Population growth driving development outside Auckland”, say BERL forecasters

BERL’s latest quarterly assessment of prospects for the New Zealand economy takes a lot of confidence from the population growth which is now driving economic growth and broad social development across seven of the twelve regions in the country. The population growth has created 50,000 new jobs in the year ending September 2003 in construction, machinery (including appliances) and the social services. There was further job growth in retail and personal services, for a very high total increase of 61,000 in employment.

The BERL forecast of continuing population growth will see total employment pass the 2 million mark in September 2005, exactly a quarter of a million more than six years earlier in September 1999.’ This should give sufficient time to see the tradable (export) sector through the present Grim Reaper episode on the exchange rate carousel, so that it can yet again resume expansion in 2006, albeit from a smaller base.

The regions where the Household Labour Force Survey showed strongest growth in their Working Age Population, 15 years and over, were Manawatu-Wanganui, Taranaki, Wellington and Southland, growing by 4% to 5.3%. Then Otago, Canterbury and Gisborne-Hawkes Bay grew by about 3% making up a good spread of growth, all outside the ‘northern triangle’. The regional development strategies appear to be bearing fruit in these regions, and perhaps the gridlock is finally beginning to bite in Auckland.

These HLFS population figures indicate that the perception that all migrants arrive in Auckland and stay in Auckland must be wide of the mark at present. The other pointer to some stimulus out in the regions is the school rolls for July 1 2003 released this week. These figures showed that total school rolls of students from age 5 to age 14 years were up by about 8,700 on those a year before.

“The view of the regions looking forward to 2004 and 2005 is much rosier than the declines way back in the rear-vision mirror!” say BERL

Summary (from December 2003 BERL Forecasts) follow.

THE PICTURE - DECEMBER 2003

Employment growth continues to be the wave which sees NZ surfing at heights not seen for many a year. The September quarter saw the 20th consecutive quarter of job creation - with employment expanding at an annual rate of 42,200 or 2.35%pa over the past five years. Over the same period, non-residential investment has also expanded at remarkable rates - at well over 4.5%pa.

Together, this additional capacity has enabled NZ growth to proceed in a sustained and non-inflationary manner.

The key to this period has undoubtedly been population-driven economic activity. The retail trade and building industries have been amongst the first to prosper in such a buoyant environment, as incomes and spending expand. Other service sectors (eg. recreation, sport, leisure, education and health) have also experienced increased activity and employment.

We forecast GDP growth to average 2.6% in the year to March 2004 - with noticeable contributions from non-housing investment and consumption spending. Our forecast of net migration remaining positive (at 25,000 for the year to June 2004 and 20,000 the following June year) sets the foundation for continuing growth in activity with GDP rising 3.6% in the March 2005 year and 3.5% the next year.

The primary muddle factor is an apparent lack of recognition of the key role of population as the driver of NZ’s economic development. This is reflected in the current round of Education Ministry School Reviews which appear to have little relationship to the Economic Development Strategy of the appropriate region(s). This disjuncture, if not recognised and rectified early, will only make the various regional development initiatives more difficult to succeed.

Tradable sector distress continues - best reflected in the forestry industry - but the significant number of positives buys sufficient time for the export sector to - yet again - re-juggle its activities following another ride on the exchange rate carousel.

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