By Bernard Hickey
It was delivered quietly and delicately, but it still felt like a kick in the guts to the leaders of regional New Zealand.
Waikato University demographer Natalie Jackson's presentation about ageing to Local Government New Zealand's annual conference in Hamilton this week was a detailed and sobering look into the future that mayors, councillors and planners perhaps weren't expecting.
You could almost hear the sharp intakes of breath and the sideways glances as it dawned on them they would be battling to collect rates and pay for services for an ageing and often declining base of ratepayers for the length of their natural lives and beyond.
Jackson detailed what ageing would do to the structure and size of their communities in the decades to come, including how many provincial towns and cities would become 'top heavy' with pensioners, few working age people and even fewer children. She described how an ageing population and both internal and external migration would mean almost every Territorial Local Authority (TLAs) outside of Auckland and Christchurch would not only see their populations age dramatically, but that many would be declining by the middle of the century.
The chart below shows which areas have more than 100% of their population growth coming from the 65 over age group. The reddest areas have the most ageing populations.
"Populations are ageing and that is bringing us towards the end of the age of growth," Jackson told the conference.
"You may not need to deal with it today, but you must put it on the agenda," she said.
Already, more than a third of New Zealands TLAs have experienced population declines since 1996, including the likes of Ruepehu, Wairoa and South Waikato. Jackson explained how outside of Auckland, all of the population growth that will come over the next 20 years will come from the age groups over 65.
That also means that these regions will see their younger populations fall. In Auckland just over a third of the growth is coming in the pensioner age groups as it attracts more migrants and its browner population has a higher birth rate. Len Brown was the only mayor at the conference able to sit back and relax somewhat about his region's demographic outlook.
The implications of the skewed nature of the population changes in New Zealand are profound and not just for town, city and district councils. They will have to plan to collect the same or more rates from a smaller number of working age people. Many more of their ratepayers will be on fixed incomes. Many of the councils will have to pay for for the same number of roads, maintain the same length of water pipes and sewers, and mow the same number of sports fields, but have fewer ratepayers to pay for them.
For residents of these shrinking towns and cities, the implications are just as profound, and not just because their towns be greyer and less populated. The ageing of the population means it will be much harder for retirees and estates to sell their houses for anything like they price they paid, or expect to receive.
Jackson gave the example of the skewed population of Buller where by 2031 the bulk of the population will be in the 'decumulation' age groups over 65. By then that cohort will be downsizing to free up their retirement savings embedded in their houses and moving into retirement homes, while a much smaller group of 'accumulators' from 25-64 will be gearing up to buy those homes.
"Who will buy those houses?" she asked.
This problem is a national one, with the ratio switching from 3.4 elderly 'decumulators' for every 10 younger 'accumulators' in 2006, to 7.6 elderly 'sellers' for every 10 younger 'buyers' by 2031. But the intensity of this switch to decumulation grows the further away from Auckland you get.
Jackson raised the spectres of Detroit and some of the provincial areas of Japan, where the depopulation and ageing had caused a spiral of decline. Japan is the most advanced of the ageing developed countries. Some Japanese city councils have declared areas unsupported, with water pipes and sewage systems being decommissioned.
Later in the conference Otorohonga Mayor Dale Williams asked Prime Minister John Key about what central government could do to soften the blow of regional contraction, including perhaps relocating government departments to the regions, as has been done in the likes of Canada.
Key said the government was thinking about regional development again, but later downplayed the prospects of relocating departments.
What was clear from the exchange and the conference was that the debate has yet to really start.
It needs to, and fast, because as Jackson said in closing to a room full of aged and concerned mayors: 'we're all closer to the walking frame than the pram'.
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This article was first published by the Herald on Sunday. It is used here with permission.
31 Comments
The technological changes we will see over the next 30 years or so will be incredible. An aging population will prove to be an issue not to be too spooked about.
Cars will drive themselves within 10 years, giving efficiency gains of an order of magnitude in transport, while redefining urban development and operations, and a developing robotics revolution following closely will have a deep impact as well.
If you're gonna talk long-range futures, you have to appreciate the status of technology as well.
Here's my blurb in detail:
http://andrewatkin.blogspot.co.nz/2013/04/the-remarkable-mega-cities-of-future.html
No to Christopher - will have a look though.
Transport and energy: Full automation means we can (and will) shift to network-based transport. This means, in short, you order up the car you need, which drives itself to you, and then it drives itself away to the next customer.
When you order up the car you need, it can be *only* what you need for the time. A small one or two seater is all you will want most of the time. Factor in hybrid technology, regenerative braking with modern flywheels (CVT's make them workable), the fact that all this stuff is easily affordable with a car that serves 20 homes, not just 1, and you will truly get an order of magnitude advantage on energy consumption. Also factor in reduced congestion and aerodynamic advatages from platooning. 5% of the total energy consumption is not unrealistic.
I can go on about freight too, but I won't.
http://andrewatkin.blogspot.co.nz/2012/12/thoughts-for-driverless-revolution.html
I think most people would agree the UK is one of the most technological advanced nations - it has at least 3 of the top 10 rated global universities (Cambridge, Oxford, Imperial), a raft of technologically driven companies (think Rolls Royce aeroengines or GSK in drugs) and on a whole range of parameters its scientists score in the top 5 nations:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/fi…
And yet.
In 2004 the UK imported a mere 5% of its energy needs.
By 2010 that had soared to 28% and by 2012 it was a staggering 43%.
http://www.telegraph.co.uk/earth/energy/10202929/Britain-imports-almost…
This process will eventually destroy the UK economy (via the knock on effects of ever growing trade deficits, never ending devaluations of the Pound etc), but no-one seems to be paying attention. The UK will get to the point where it can no longer pay its bills, and there is nothing remotely technological coming to the rescue.
Or they could tap into those hundreds of trillions of cubic feet of shale gas in the Bowland Basin , and become energy self-sufficient ....... much as the USA is also doing ....
.... and thereby defy the doomsters who've cheerfully predicted their economic demise , by powering ahead into a new golden age of prosperity for their citizenry ..
The reason our regions are depopulating is not because they are unsuccessful. NZ's wealth despite 30 years of attempted diversification is still generated on farms in the regions. The problems is this industry does/can not employ all of our young folk.
What happens is we give them a good basic education and then cast them to the wind. Some will end up in Auckland or Christchurch, a lot will go to Australia and the remainder can be found in any corner of the world.
The big question is how come we haven't industrialised like other countries, why are we not following Germany, Finland, South Korea, Japan etc.
AA above thinks technology will bring a bright future, I'm not so sure. I'm more of the view we will need technolgy and organisational change just to keep our head above water in an increasingly resource constrained world.
But what I am sure of is that new technology is not going to come from a small city in New Zealand but it might come from a small city in Finland or Germany. An idea may come from NZ but the development of it will happen elsewhere.
You see the vision our leaders have of New Zealand is that we a giant farm to feed the world, nothing more. Any region in New Zealand that tries to challenge that idea like Canterbury will be squashed. The good people of Canterbury do not want their plains, rivers and aquifers turned into cow poo cesspits. But that is the vision of our 'respected' leaders in Wellington.
Of course even if a region tries to do something different, it has no resources to support a new industry. Remember all our taxes go to Wellington. Regions can't even afford a decent transport system without help from Wellington let alone proper University departments like Finland or vocational training like Germany.
I am with Jeremy Grantham (I think the link is on Friday top 10), the increasingly easy production of solar power (new technology) and the fact that most countries are no longer having enough children to replace their population might mean we can adapt to peak oil/non renewable resources. I take the optomistic view, but admit it will be a close run thing.
Crikey , Bernard , don'tcha read the eminent Charles Drace's stuff ? .... he came up with similar theories in the late 1990's , concluding that housing was dead in NZ , and not to recover within our lifetimes !
..... 14 years later , we're sitting atop the mother of all house price bubbles ....
Your article , Bernard , assumes that life carries on in a lineal manner from here .... no allowance for health improvements , longevity gains , retirement being staved off until 70 0r 80 years of age , micro-businesses being constructed out of the internet , 3-D printing ......
..... shift to Buller , cobber , the refreshing climate will sharpen up your focus .... guaranteed !
Bernard,
A good article, and in my view highlighting where the pain of an ageing society will occur, notably in the downsizing to nothing of some very small towns, and to considerably smaller, of current small medium towns. The issue of society as a whole struggling with ageing or paying pensions seems less of an issue to me.
Japan does seem a good role model; some rural towns and regions are well advanced on coping with downsizing, as emotionally painful as it no doubt is for some. And in total, Japan may actually look forward to having 100 million people rather than 125 million.
Some downsizing presumably is easy enough. Mow enough sports fields to meet demand, for example.
Picking winners regionally would seem to make some sense; even though that will have local political challenges. The West Coast for example may benefit from concentrating good facilities in one of Westport, Greymouth, Hokitika, and the Buller region. It probably already is.
The article implies the future is all Auckland. To me, there are plenty of opportunities for all the other main cities and towns, where there is likely to be regional concentration into them, as well as enough of a magnet in Wellington, Christchurch, and the other university towns to attract people directly as an option to Auckland.
Not a bad articule Bernard. Though amongst all the talk about the an aging propulation I don't see any questioning at why birth rates are declining across the world. Put it this way, declining birth rates is a symptom, what is the cause of that? All the cheap oil used up by 50 years ago when the decline started happening perhaps? Any discussion about solutions to the sypmtoms seems a bit pointless if you don't address the cause.
I reckon this issue can be addressed in several ways:
The smaller centres should help themselves. Free up their planning controls. Provide an outstanding developer friendly culture. Allow for quality residential comunities to develop, places where retiring Aucklanders can buy a nice comfortable 2 bedroom townhouse for 300K.
In order to help improve the attractiveness of smaller places, the govt should follow the german lead and provide grants to fund new community places based on growth. So.....let's say Napier becomes super developer friendly, lot's of new housing starts getting built, then Napier will get rewarded from Central Govt by getting grants. So, Napier gets a wonderful new library or swimming centre, for example. Then things start to get self perpetuating...growth generates new facilities which generates new growth which generates new community facilities...
So its an incentive based system
Jobs in the development and service sectors, in particular, will then be created
I agree with your argument MIA. Also if Councils got some of the PAYE tax and they attracted more or higher paying jobs to their region. They would get more funds to reinforce this effect. Perhaps by investing in specific types of vocational education or research.
I believe that is how relatively small places the size of Napier/Hastings in Northern Europe have really succesful industrial companies.
Wrong thinking. Convention centres is John Keys version of Think Big. Wellington cannot think of something unique for everywhere so they try to force the same idea onto everywhere.
Decentralisation means different regions have the resources to support different things. Some will work and get supported by people/higher wages being attracted there.
It's like a diversified portfolio being better or a polyculture being better than a monoculture.
Good article, Bernard. Ms Jackson is, however, wrong: councils do need to worry now. First they have to confront their own growth-centric culture and second they have to start revising their asset management plans.
There is one little softening of the blow in the form of low income rates rebates. Currently central government rebates 20-25% of rates for low income households. As households age they will become eligible to get these rebates which in effect will be a transfer fron Auckland to everywhere else.
the first problem councils have is that they are geared up for growth. They have economic development units part of whose job is to promote their area to business and residents. They take on debt (albeit for good reasons) secure in the knowledge that inflation and growth will magic it away reasonably quickly. Mayors are expected to be upbeat and spruik their area (Tim Shadbolt and Bob Parker come to mind). It's going to be really hard to shift mindset before the realities give them no choice.
infrastructure planners (engineers) plan decades into the future based on assumptions about what the future demand for assets will be. Until now they have mostly assumed that the future looks like today but with more people. If it was just a desktop exercise it wouldn't matter so much but the rates you pay today partially reflect their view of the future so it does matter.
Kumbel nice to hear from you. Last week you made a joke about having town hall envy in response to a picture of a colossal Chinese town hall. But really it is the Northern European councils you should be envious of.
This small town http://en.wikipedia.org/wiki/Vaasa in Finland, smaller than Napier/Hasting can tax its residents at 19.5% of income and therefore as well as a town hall, has a hospital and more than one University.
This is not unusual in Northern Europe.
Blenheim is small, has its own hospital.....I really worry about yet more taxes raised by councils, my rates have averaged 6% for 18 years, that is a doubling every 12 years or so...
Give the councils the ability to tax yet more? Id really wish not...differently, maybe....as someone said the demand for anything free is infinite. Fast forward 24 years from today, I dont see how I could pay the rates in retirement...its quite likely Id have to sell or stop paying...or work til I die.
It seems short term outlook ie grow baby grow, is mutually exclusive to long term outlook....comes back to too many ppl every time.
regards
Steven I am not suggesting for NZ we hand over the responsibilty for healthcare to local government. Actually that is going too far down the road of decentralisation. It leads to the postcode lottery problem.
It makes sense that local communities with different types of geography, sizes and businesses have the possibility to provide different types of transport and education solutions. It doesn't make sense if you have a heart attack or schizophrenia you will get different treatment depending on where you live.
I would want local government and vocational employment to be a local responsibility.
But what I wanted to show is that sensible successful places have different arrangements for how they fund and what they do local government wise.
http://m.spiegel.de/international/germany/a-759377.html#spRedirectedFro…
Rural decline is happening all over. Globalisation is all about centralization. That is why Auckland and greater Auckland councils were amalgamated. If government wanted to stop this decline, you would not have John Key mumbling about regional development, he would be doing something about it.
In another report commissioned in 2010, Professor Jackson said that NZ was losing people in the 20-40 age group through emigration. This isn't news to anyone who has lived in NZ and the trend has been going on for much longer than three years. The question is always the same - what are the government doing about it? I believe there are at least one million Kiwis living and working abroad. I run into Kiwis in every country I visit who have left NZ for good. From my class at college two thirds are living in either Canada, UK or USA. The other third are dead mostly prematurely. The country is ripe for mass immigration from anywhere just to keep the numbers up - but this is misguided, even immigrants get old and die.
Let's hope neither central government nor local government try to "solve" this problem.
People move to Auckland in the hope of making money, of getting ahead. It's no more complicated than that. But the forces that create opportunities in Auckland at the expense of the rest of the country are way larger than our governments have the capacity (let alone the appetite) to tackle. So this trend will continue despite any action taken by the public sector.
I disagree with Brendon about where wealth is created. The value-add (and therefore the nations wealth) begins pretty much at the farm gate. Growing, mining, cutting, and catching are lowly-paid occupations. There is virtually no market for warm, frothy white liquid in Hawera but there is a massive market for infant formula in China. The people who buy the milk, process it and market it overseas live in cities not on farms. As a country we do need a productive rural sector so we need all the infrastructure that makes it possible for our farms to operate efficiently but that's pretty much it outside Auckland.
Before we all go to jump off the nearest bridge I do not believe for one minute that this will be a linear process. There will be all sorts of individual reactions that go against these macro trends. In 2050 New Zealand will not be 2013 + 37 years. But our public sector has absolutely no way of knowing where that place will be let alone leading us there.
Council amalgamation is inevitable. Smaller rural councils will find the costs of managing down in the face of central government's continuing imposition of higher environmental and other standards impossible. The local government we think we are preserving ceased to exist many years ago so we can stop being sentimental and get on with it now. We should end up with about 14 councils tops. For this reason I will vote against capitation (population based transfers of tax to local government) in the immediate future as amalgamation provides an in-built transfer from regional cities into their rural areas.
I come down completely in favour of Matt In Auck's proposal to relax regulation to allow the counter-currents to flow.
BTW central government already runs a massive regional support programme: we call it Wellington.
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