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New Zealand

New Zealand is one of our inclusive productivity case studies for Our Economy 2023. This case study takes a national view with particular focus on the regions of Wellington, Northland and Canterbury over the specified time period. 

HomeOur Economy 2023Our Economy 2023: New Zealand

Overview

New Zealand and its population of 5.1 million[1] adopted a varied approach towards economic development from 2008 to 2018, shaped by developing international relations and unforeseen market shocks. New Zealand’s trade partnership with China was a key driver of economic performance with $21.5bn in exports to and $16.3bn of imports from China as of December 2021[2] 

The country has also been subject to an extended period of economic turbulence. The global recession in 2008 and the subsequent Canterbury earthquakes of 2010/11 led to a sequence of economic strategies each with changing priorities.

Similar to the North East, New Zealand has experienced outward migration of its large youth population, resulting from high levels of inflation (6.9%)[3]. 1,800 people aged 18 to 24 left in the year ending March 2022 due to rising cost of living, negative figures not seen since the earthquakes[4]. 

Despite this the country saw strong ecnomic growth across our key indicators. As a result we selected it as one of our case studies, taking a national view with particular focus on the regions of Wellington, Northland and Canterbury over the specified time period. 

  1. ^ OECD (2023) Selected indicators for New Zealand. Available here
  2. ^ New Zealand Foreign Affairs & Trade (2023) Key facts on New Zealand-China trade. Available here
  3. ^ Guardian (2022) More people leaving New Zealand than entering as young flee high cost of living. Available here
  4. ^ Independent (2022) Young people leaving New Zealand in droves amid worsening cost of living. Available here
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Performance on key indicators

New Zealand saw very strong economic performance across our key indicators between 2008 and 2018. GDP per head in New Zealand was above the level in North East England in 2008 and rose considerably faster in the period to 2018. 

The economic activity rate was also higher at the start of the period and saw a higher increase, with New Zealand seeing an increase of 3% while the North East only saw an increase of 1%.

While comparable OECD is not available for household disposable income, the data from Stats New Zealand shows household disposable income increased by 42% between 2008 and 2018 too. This suggests economic growth translated into higher standards of living.

The data comparing the North East and New Zealand across these three indicators can be seen below.

17%

Between 2008 and 2018, GDP per head rose by 17% in New Zealand, compared with an increase of 4% in North East England

Policy priorities 

The regions of New Zealand hold substantial autonomy afforded to them through the country's Local Government Acts. Subnational government responsibilities were redefined and autonomy increased through the 2002 Act, before its amendment in 2014 added additional clarity on regional and territorial authority responsibilities. Regional councils monitor aspects such as resource management, public transport and air and water quality whilst Municipal authorities are responsible for areas including community and economic development, local regulations and tourism[1]. 

Despite being one of the richest countries by the early 20th century, New Zealand’s performance relative to other global developed nations declined from 1914 to the 1980s. Contributing factors such as commodity price shocks in the 1960s, and weakened links with its main trading partner (the UK) and energy shocks in the 1970s, led to market-oriented policy reform between 1984 and 1991. Income grew as a result, however inequality and housing market imbalances followed[2].

As a result, subsequent inclusive productivity policy priorities centred on diversifying its economy through new knowledge-based enterprises and the use of knowledge intensive services. Promoting inclusiveness, addressing skills shortages and better positioning Māori communities to build and leverage off their collective resources, knowledge, skills and leadership capability were also ambitions[3].  

Regional approaches reflect this. Early strategies such as Wellington 2012 and Northland 2016 have focused on investment and sector specialisation while more recent strategies such as Canterbury 2017 and Christchurch 2018 have targeted the lowering of NEET levels and improving pathways to employment to negate the rise in educational inequalities. Between 2008 and 2018, the proportion of 18 to 24 year olds in Canterbury who were not in education, employment or training (NEET) fluctuated, with a low of 10% in 2008 and a high of 17% in 2011. In 2018, 13% of 18 to 24 year olds were NEET.

  1. ^ OECD (2016) New Zealand profile. Available here
  2. ^ Resolution Foundation (2023) New Zealand: Lessons on economic reform from a distant relative. Available here
  3. ^ AERU, Lincoln University (2009) Economic strategy issues for the New Zealand region in the global economy. Available here

Selected regional strategies

Focused on sustainable growth increasing inward migration of businesses and skilled migrants/students, while building on existing connections and initiatives to grow the regions skills and education base. The strategy also aimed to utilise existing investment networks to maximise businesses investment opportunities while attracting further international investment. 

Policy approaches to this effect included the identification of investment opportunities in particular markets and sectors, including targeting specific talent and businesses in Wellington. The area also sought to take an approach that built on the region’s inherent advantages, such as design and innovation-led manufacturing while promoting the area to sectors the region would like to grow such as science and technology. This was directed in conjunction with the development of academic and research partnerships with business to increase routes to employment[1]

  1. ^ Greater Wellington Regional Council (2012) Wellington Regional Strategy 2012 — growing a sustainable economy. Available here

Likely attributable to the northward migration of skills, Northland largely adopted an infrastructure-based approach. The plan aims to ensure region-wide digital infrastructure is available to support key industries and develop its specialised manufacturing and industry sectors. 

Having identified key areas of manufacturing capability that were a strong platform for growth, Northland aimed to increase the proportion of GDP derived from high value manufacturing and services that support key industries as well as sustaining annual GDP and employment growth from specialised manufacturing. Community engagement specifically with Māori communities was also a key priority, with focus on retaining and engaging the Māori youth cohort and reinforcing the government’s commitment to raising Māori economic performance[1]. 

  1. ^ Northland Regional Council (2016) Tai Tokerau Northland Economic Action Plan. Available here

The development strategy highlights the ‘digital divide’ between urban and rural areas and outlines specific strategies to ensure the region retains and attracts an appropriately skilled and educated workforce. The strategy aimed to support youth transition to the workplace through strengthening education organisations and businesses and completing an educational blueprint for new, modified courses. Specific attention was attributed to the attraction of international students and leveraging government support to employ initiatives to increase community cohesion. The increased levels of inward migration were recognised by regional governments as a solution to meet rising skills needs  and necessary to counter the outmigration resulting from the earthquake crises[1].

  1. ^ Canterbury Mayoral Forum (2017) Canterbury Regional Economic Development Strategy 2017-2019. Available here

What has changed since 2008 

New Zealand has experienced strong growth with an economic turnaround largely considered as a major public policy success[1]. With rising productivity and growing GDP[2]  it is expected to maintain a moderately prosperous society over the foreseeable future. 

The strategy implementation since 2008 has allowed the enabling of a flexible open economy and facilitated the reallocation of resource across sectors with a readiness to combat market shocks. Beyond the key economic indicators highlighted above, jobs density has increased in our focus regions while the rate of NEETs has decreased.

However, the Social Investment Policy approach adopted between 2008 and 2017 also resulted in the downplaying of policies with societal benefits in favour of those evidencing fiscal outcomes. As a result the country has experienced a rise in educational inequality and housing market imbalances.

As highlighted by The Economy 2030 Enquiry the lesson for UK and international comparators in New Zealand’s policy approach is that economic progress and sustainably high wellbeing are not synonymous. The negative wellbeing implications of housing and education inequalaties are often larger for certain ethnic groups and in the case of New Zealand particularly within the Māori community[3].

In Northland, which had a focus on supporting Maori youth into employment, youth unemployment has fluctuated between 2008 and 2018, and has continued to do so since although on a downward trajectory.

Similarly, in Canterbury the main city of Christchurch has lost some ground compared to New Zealand’s national economy. Population and economic power has grown more slowly than Auckland reducing Christchurch’s the ‘pull factor’ to business, talent and investment. However, the city remains successful in achieving economic growth without losing focus on social wellbeing and inclusion.

  1. ^ Michael Mintrom, Madeline Thomas (2019) New Zealand’s Economic Turnaround: How Public Policy Innovation Catalysed Economic Growth. Available here
  2. ^ Macrotrends (2023) New Zealand Economic Growth 1960-2023. Available here
  3. ^ Resolution Foundation (2023) New Zealand: Lessons on economic reform from a distant relative. Available here

Caveats and conclusions

There are some caveats that may limit the ability of the North East to learn from New Zealand. In contrast to the demographics of the North East, New Zealand has a young and quickly growing population that contributes to its economic performance. The nation is also geographically isolated which influences trade and migration patterns.

It is important to note that particularly in Canterbury, the lack of attention to skills and educational policies until 2017/18 is also likely as a result of the earthquakes of 2010/11. Subsequent policies shifted to prioritising infrastructure and rebuilding in the aftermath and may have overlooked inclusive aspects of growth to address immediate priorities. 

Overall, the economic performance of New Zealand in this period shows that internationalisation and focussed regional strategies can lead to economic growth, even in difficult circumstances such as outward youth migration and responding to natural disasters. However, it also shows that this can lead to greater inequalities in areas such as housing which can affect some groups more than others. Balancing this needs to be part of any inclusive growth strategy.

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