BOOK EXTRACT: Shamubeel Eaqub's Growing Apart

Book Extract

Growing Apart Regional Prosperity in New Zealand by Shamubeel Eaqub

Shamubeel Eaqub is one of New Zealand's best-known commentators on economic issues, contrarian or otherwise, a regular media contributor and speaker at conferences and events.

His day job is as a macroeconomist and principal economist at the NZ Institute of Economic Research (NZIER), an independent economic consultancy. At NZIER, he forecasts the economy, provides macroeconomic advice to NZIER’s members, and works as a consultant. 

Now a Wellingtonian, he was born in Bangladesh  and immigrated to New Zealand with his family after three years in Samoa. He grew up in Lincoln, Canterbury and attended Lincoln High School and Lincoln University. He graduated with a bachelor of commerce with honours in economics. He is also a qualified chartered financial analyst.

He worked at Statistics New Zealand and ANZ Bank in Wellington and Melbourne after graduating from university and was later the New Zealand economist and financial analyst covering the property sector for Goldman Sachs JBWere.

Mr Eaqub is a member of the CFA Institute, the Institute of Directors and NZ Asian Leaders. He has co-authored a book, titled The New Zealand Economy: An Introduction aimed at high school students. His skills have helped him widen NZIER's market presence. For example, he recently helped a Middle East client establish an investment and broking firm in Sri Lanka. 

Chapter 4: Voting with their feet

People are voting with their feet. Many parts of New Zealand cannot provide the job opportunities, incomes and lifestyles that people aspire to, especially the highly skilled and educated. Young people from the provinces are more likely to leave (particularly for overseas) than those from large urban centres. Some regions are now faced with ageing populations whose total growth is slowing or declining. This can become a vicious and accelerating cycle, with declining populations and economic performance pulling each other downward.

LEAVING, AGEING AND ARRIVING

New Zealand’s population is growing unevenly. While national population growth has averaged 1 per cent per year over the past decade, many provinces have barely grown and some are in decline (see Figure 4.1). New Zealand families have also become smaller over time and we are living much longer. The number of people over sixty-five is growing by over 4 per cent a year as baby boomers move out of work and into retirement. Our landscape is populated with an increasingly concentrated, urbanised and ageing population.

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The national picture of ageing, however, is moderated by immigration. Immigration moderates the impact of ageing, because immigrants tend to be relatively young – often in the peak of their working life. This is in part because New Zealand’s immigration rules favour younger and skilled people. It is also because young people are often most able to take the risk of moving to a new place and starting a new life. This also helps to offset the loss of young Kiwis who tend to emigrate to Australia and the United Kingdom (although some may return later in life).

We need to seriously consider reducing the impact of ageing with immigration by bringing young people to New Zealand. Immigration is already adding young people to some places. The main beneficiary is Auckland – it benefits from being the economic capital where there is a greater likelihood of jobs and economic opportunities. Some provinces are also benefiting from immigration. The best examples are Taranaki and Southland. These two regions have had economic booms: the oil and gas sector has created an economic boom in Taranaki; Southland has had a multi-decade boom in dairy farming. A lack of sufficient numbers of suitably qualified people means many firms and farms have relied on migrants to plug the gap.

Southland’s story is hopeful yet cautionary. In the century up to 1996 the region’s population growth averaged around 2 per cent a year. Since then, the population has often been flat or declining. The machinations of life go on. There are births and deaths. Young people continue to go to other regions and overseas. Recently, however, this appears to have turned due to immigration (see Figure 4.2). The big difference has been how many migrants have come in. This has been enough to help tip the balance – shifting Southland from a shrinking population to mild growth.

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The need for migrants in Southland, both from other countries and other regions, is strong. There is a considerable base of dairy farms, processing, transport and related services. The farms are highly productive and contribute much to the regional and national economy. The economic evidence on immigration is positive. It is mutually positive for the migrant and the community they have migrated to – there is shared value.

At the same time, there is a need for caution. Many of our provinces are perceived as ethnically and culturally homogenous. A sudden influx of people from other places, with different cultures, tastes and preferences can be confronting. If not handled with care, immigration can lead to poor outcomes – with a loss of social cohesion and trust among the community.

But New Zealand has a long history of migration and societal change. We are accepting of and adaptable to change. Assimilation can have negative connotations, but it need not be. Multiculturalism and integration can coexist. As a first-generation migrant I can speak from personal experience and for my compatriots. We retain a strong sense of our roots, but our outlook is undoubtedly Kiwi.

Economist Paul Collier in his book Exodus argues that we need to talk about immigration openly. Not through the lenses of envy and racism, but a reasoned and deliberate discussion on why we want immigration, how many people we want and what kind of people we want. Having a clearly articulated strategy on population, whatever that may be, would create a common base from which to work. In addition, we need to have good systems in place, not just to bring in the people to New Zealand, but to help them settle into wider New Zealand, and integrate into society and the economy.

The refugee programme is a good example. It has a process to house, educate, train and integrate refugees into New Zealand society. Many refugees come to New Zealand with traumatic pasts and in desperate need of this programme. Migrants who come through work visas, residence permits and student visas (some of whom stay on) have no systematic framework to ‘settle’ them. If migrants are to be attracted to the provinces to take up job opportunities, we will need to have a comprehensive system in place to help and welcome them into the communities. In this way we can help to smooth the transition to a more ethnically diverse provincial population.

REVERSAL OF DECLINE IS POSSIBLE

Some places have reversed decades of population and economic decline. It is not common, but it happens. Chicago is a good example of a city that faced a declining population in the 1970s and 1980s. Since 1990 Chicago has grown by offering a dense city core while still remaining affordable and pleasant, according to Edward Glaeser in his book Triumph of the City. Some caution is needed in making a direct comparison with Chicago – it is larger than our biggest regions with a population of 2.7 million. Nevertheless, Chicago’s experience has significant lessons for New Zealand.

Chicago worked hard at being a good place to live, whereas many New Zealand cities already offer a high quality of life. In Invercargill, families rate quality of life as the most important reason for living there. Low congestion and access to the great outdoors are major draw-cards.

Chicago also worked to become affordable for people and businesses, by encouraging construction of new buildings to provide a compelling lower-cost alternative to Manhattan. Chicago gives developers a lot of flexibility so that there are plenty of new offices to house workers and plenty of homes for them to live in – and the costs of these are typically a third lower than in Manhattan. Such solutions are, of course, specific to Chicago and not easily replicated elsewhere. The immediate challenge in New Zealand is to reassess prospects and barriers to economic growth through a regional lens. Tight urban planning, for example, can hamper developments in New Zealand cities of the sort achieved so successfully in Chicago.

Chicago has reimagined itself into a destination for innovative and dynamic businesses and people. Proposing such a transition for parts of New Zealand to becoming viable second-tier commercial centres (after Auckland) would be a positive thing. Housing in Auckland is of course very expensive. The median price in early 2014 was $600,000 in Auckland according to the Real Estate Institute of New Zealand (REINZ), but only $345,000 in Waikato. After accounting for mortgage payments household incomes would be much the same for a typical family – $730 per week in Auckland and $720 in Waikato. An opportunity exists for places like Hamilton to become both affordable destinations and competitive sites for new business. Not every region can be Auckland, nor should they be. Having other successful second-tier cities and regions would boost New Zealand’s resilience and allow more parts of the country to share in the nation’s economic prosperity.

Copyright © 2014 Shamubeel Eaqub

Extract from Eaqub, Shamubeel, Growing Apart: Regional Prosperity in New Zealand, 2014, Bridget Williams Books, Wellington, Chapter 4, pp.60–67. Available to purchase here