Auckland is currently growing more rapidly than the rest of New Zealand – as it has been doing for most of the last century. At the same time, other New Zealand regions are struggling with aging populations and drifting economies.

NZ city population growth 1926-2006
Source: Grimes and Tarrant (2013)

Understandably, some people look at these trends and conclude that Auckland’s a bit of a problem. If the city’s prospering while small towns decline, isn’t it because the government is spending too much money trying to pump growth into Auckland and too little elsewhere?

In short, is Auckland costing New Zealand too much?

The answer, in a word, is no. If anything, the government’s spending a little bit less in Auckland than it spends elsewhere. But don’t just take my word for that – let’s take a look at the data on where central government is spending money.

A few years back, NZIER did a useful analysis of where the government spent money and provided services. The following tables summarises their key findings. Overall, they find that Auckland gets only 31-32% of overall government expenditure – slightly less than its share of the population.

Regional government spending table

For all the visual thinkers out there, here’s a chart of government spending per person in New Zealand’s five most populous regions. Aucklanders get less spending per capita than the other large regions. This reflects the city’s young demographics – more workers, fewer pensioners – as well as the economies of scale enabled by larger, denser places.

Regional government expenditures per capita chart

But regardless of those advantages, the picture is clear: Aucklanders get a bit less government spending per person than residents of other regions – not more.

But, you say, what about all these costly transport investments we keep hearing about? Isn’t NZTA putting up megabucks to dig the Waterview tunnels and widen motorways and occasionally build the odd kilometre of busway? Isn’t Auckland Transport looking for money for CRL and light rail?

In other words, maybe we’re putting all our capital investment eggs in the Auckland basket?

NZIER’s report also seems to puncture that myth. They found that Auckland received around 35% of central government’s overall capital expenditures – only a wee bit more than the city’s share of the population. So it’s not like the government’s investing wildly in Auckland and leaving no money for other regions.

That being said, data on transport expenditures alone paints a slightly different picture. When I looked at NZTA’s regional expenditure analysis, I found that Auckland received almost half of the agency’s spending on new and improved roads over the last decade. (Unfortunately, consistent data isn’t available on PT infrastructure expenditure, as a lot of that is funded out of general tax funds or local government rates.)

However, this level of spending isn’t fundamentally out of line with Auckland’s growth. The following table looks at spending and population growth outcomes for New Zealand’s five most populous regions. It compares the share of NZTA’s spending on new and improved roads over the 2004-2013 period with each region’s share of national population growth between the 2006 and 2013 Censuses and their share of projected population growth to 2043.

RegionShare of NZTA spending on new and improved roads, 2005-2014Share of population growth 2006-2013Share of projected population growth 2013-2043
Auckland48.5%55.0%61.5%
Canterbury5.9%6.4%13.9%
Wellington10.1%10.3%5.2%
Waikato13.7%10.4%7.8%
Bay of Plenty8.0%4.4%4.1%

A couple of things jump out at me from this table:

  • Although Auckland has received a large share of new road spending over the last decade, this may just be enough to keep up with current and projected population growth.
  • NZTA spending on new roads in Canterbury over this period hasn’t been wildly disproportionate relative to its population growth over the same period – although spending figures will have been bumped up by the Canterbury earthquake rebuild. However, Canterbury’s growth projections imply that there may be a case to spend more in the region.
  • On the flip side, Wellington, Waikato, and the Bay of Plenty all received a higher share of spending on new roads than their growth projections imply. Wellington, for example, has received 10% of national spending on new roads over the past decade, even though it’s only projected to accommodate 5% of national population growth over the next three decades. (Transmission Gully will boost the spending figure higher.)

Finally, spending on new roads only accounts for around 1/2 of NZTA’s overall budget. The remainder, which is spent on stuff like road maintenance and PT operations, tends to be distributed on a more or less proportionate basis.

So that’s it in a nutshell. Auckland’s hardly the rapacious parasite that some people make it out to be – it’s not sucking small towns dry of their tax dollars. If anything, it’s the opposite: taxes paid in Auckland fund pensions for small town residents. And while Auckland has been getting a higher share of spending on new roads, that’s not unreasonable given the current and projected rate of population growth in the city.

What do you think about regional government spending?

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49 comments

  1. “If the city’s prospering while small towns decline”

    Only cities are listed on the chart. No towns shown.

    Interesing take though, that you interpret growth as “prosper” and slower growth or no growth as “decline”.

    I think to most kiwis, bigger and more expensive means a declining city. Sustainable growth, or stable living (no growth), with affordable housing, means prosper.

    Funny how different folk see things differently.

    1. That’s all very well if you are already established, with a job and house. If you are young, starting out, then finding a job in one of these stagnating towns, is next to impossible. Funny how these youth will see things different from you.

    2. Given your expressed views about the evils of big cities and the virtues of small towns, why do you live in Auckland?

      More generally, if you’re right about the views of “most Kiwis”, which I doubt, why are people choosing to come to Auckland or stay in Auckland? It’s impossible to reconcile that notion with the observed behaviour of a large number of people.

  2. Auckland is clearly a different case from the rest of NZ. And expenditure in Wellington needs to be reined in.

    The next important question is the quality of the spend and this is where the government and/or NZTA are not correctly reading the transport trends and good design imperatives for urban Auckland and are getting it wrong
    In the past I have not minded if Auckland has subsidized the rest of NZ to some extent, but my view is that the CRL should have been half finished by now and fully funded by government as a motorway equivalent.

  3. Any “big smoke” in any given country will always be undervalued and largely disliked by the population that lives outside of it. JAFAs are rather nice people on the scale of big city folk and it is hardly our fault that people keep moving here. My population we probably deserve a little more of central government expenditure, but of course it could be better distributed (less visionless motorways and more flat bike paths). By economic output Auckland deserves a lot more financial input from the beehive. Regional towns need to be funded as well, but the reality of the modern world is that cities are the heart and towns are arteries that need to feed them. Where is my damn subway mr flagchanger?

  4. Government needs to revitalise the provincial economy or NZ will no longer be a “going concern”; just a top-heavy Auckland with the countryside full of bed and breakfasts owned by James Cameron

    There’s a reason the French government subsidised the “rural lifestyle” – because not everything can be summed up as dollars and cents (or even utils…)

    1. Quite seriously how would they do that? Plenty of people believe that somehow the regions need to be revived but I’ve yet to see an actual plan where that happens.

      1. So you are suggesting the government should spend public money to force people to live places they don’t want to live, and simultaneously subsidise businesses to set up in inefficient locations where they aren’t productive and where they don’t want to set up… so the people who don’t want to be there can have a unproductive job in a business that doesn’t want to be there either, with eternal subsidies from the rest of the people and businesses who are lucky enough to be allowed to stay where they want to be…. just so the ‘rural lifestyle’ can conform to you own concept of a bucolic countryside existence?

        How about we build a Potemkin village around an old meatworks and a coal mine. We can pay actors to pretend to work in them while you can sit there and marvel at the provincial economy at work. That would be easier for all concerned, and the rest of us can get on with doing what we want to do.

        1. People *do* want to live there, if there is sufficient economic activity for them

          Are you saying we just let the market rule? If so, fine, but I doubt your liberartian ethics actually stand up to further tests

      2. So you are suggesting the government should spend public money to force us to live places they don’t want to live, and simultaneously subsidise businesses to set up in inefficient locations where they aren’t productive and where they don’t want to set up… so the people who don’t want to be there can have a unproductive job in a business that doesn’t want to be there either, with eternal subsidies from the rest of the people and businesses who are lucky enough to be allowed to stay where they want to be…. just so the ‘rural lifestyle’ can conform to you own concept of a bucolic countryside existence?

        How about we build a Potemkin village around an old meatworks and a coal mine. We can pay actors to pretend to work in them while you can sit there and marvel at the provincial economy at work. That would be easier for all concerned, and the rest of us can get on with doing what we want to do.

      3. While I have a lot of sympathy for the aspiration expressed here, I also have trouble thinking of a way of doing that without wasting lots of money or distorting our economy.

        Also, the first chart in this post shows that Auckland was still growing faster than the rest of the country – and faster than its current rate! – during the period when NZ _was_ running an active regional development policy. So it’s highly unlikely that any plausible set of policies would succeed in limiting Auckland’s growth.

        1. “Distorting the economy” implies some sort of economist’s Platonic ideal of a pure economy unencumbered by external interventions

          In reality, the “pure” economy is what the government wants, and a “distorted” economy is what occurs when individuals act against those desires.

          1. You misinterpret our advocacy, comrade! According to Marxist-Leninist doctrine, we must strive mightily to heighten the contradictions to goad the proletariat to march under the red banner of socialist revolution. Only once we have fully deregulated and privatised everything will the rapacious deaths-head of the liberal capitalist order be revealed to the masses!

      4. Here you go:
        1. Low corporate tax in special economic zones
        2. Forbid immigrants to settle in Auckland
        3. Force government departments to regionalise e.g. WINZ HQ in Hamilton (done in the UK)
        4. Work for Dole schemes to build regional infrastructure

  5. Quick read of methodology – MFAT/NZDF spending is nationally apportioned in the service approach. Flawed, as Auckland obviously receives disproportionate benefit from safety/security/trade (rich get richer scenario)

    1. How does Auckland receive a disproportionate benefit from defence?? It would get picked off first?

      As for trade, the regions rely on exports more than Auckland. Auckland can be considered in a large part as import competing – particularly in services.

      1. Defence funding creates a stable global economy, which directly assists Auckland to a greater extent than more self-sufficient regional areas.

        Aucklanders would die in a week without supermarkets.

  6. A brief note – the argument is limited when we are only talking about costs and not looking also at the value generated from investment spending, and also the long-term cost implications of under-investment in a city or region

    1. Definitely agree with that – the quality of investment is really important. Spending lots of money on bad projects – Rob Muldoon anyone? – will generally make individuals and regions worse off rather than better off in the long run.

      However, looking at the quantity of spending can give a quick-and-dirty view on whether there are any areas of underinvestment (or overinvestment).

  7. The only outlier on those tables is Wellington – propped up by Aucklanders. Take away the government largesse from Wellington and you have the North Island version of Picton.

    1. Yes without government Welly goes back to being a charming little fishing village in a dramatic harbour setting; yes Picton, or more ideally; Positano..

      As it is that’s regional development with bells on right there! Distortionary madness say the drys…..

      1. To be fair – it would be more like Dunedin – a university, a small port, a few artists.

        Other than the placement of capital cities like Wellington, Canberra, and Brasilia I can’t think of a single regional development programme that has worked. But the idea of regional development is politically popular so it will keep coming up despite the futility of it.

    2. @ harrymc. What particular government largesse do you think is propping up Wellington at the moment? All I can think of is unnecessary roading projects which quite a lot of us don’t want anyway, and which will more likely drag the place down than prop it up.

  8. Taking the non-Auckland approach to this, because we don’t just want to be a one-horse country….while some cities/towns may be in decline, or just growing at fairly slow rates – Tauranga and Hamilton are also growing quickly. Both of these cities are close to Auckland and have rich economies around them. Nelson is also worth a mention as a growing area, particularly in the Richmond area.

    The other traditional big zones – Wellington, Christchurch and Dunedin aren’t growing. Christchurch has it’s obvious reasons, but Dunedin and Wellington have horrible climates and a lack of connection to industry to propel it. If anything, they’re becoming isolated cities. Wellington is also having to deal with a non-growing state services sector.

    1. Yeah, terrible climate. More sun & less rain than the city of sails and you cant sail without wind.

      Some of these regions could do rather well with decent links to the major city nearby. Frequent and decently fast Regional rail between Tauranga/Rotorua/Hamilton/Whangerei and Auckland
      would provide reason to be for those centres.

      1. The climates of Auckland and Wellington are actually very similar. Auckland averages 1212 mm of rain per year, Wellington 1243. Auckland averages 2,003 hours of sun per year, Wellington 2,058.

        1. As a proud ex Wellingtonian I can tell you that those numbers and reality are quite different. Auckland has a way better climate.

          1. They are just averages, so it could swing either way, but I guess I’m just saying the stats show they’re not quite as different as one might think. I’m from California and have lived in Auckland for the last 3.5 years. I love Auckland and absolutely want to stay, but I would not cite the weather as a reason for staying.

    2. Yeah, horrible climate. It’s pretty much the hellhole of the South Pacific. When it’s not being a jumped up little Picton.

  9. If wellington receives a little less than $1000 per capita more than Auckland doesn’t that suggest that it isn’t as dependent on Government as people make out? Given the city has the highest median income in the country you would expect that the difference would be much higher, must be all those Xero and Greenbutton types propping the place up. Rather it seems that Canterbury and the bay of plenty are the modern pork barrels, the earthquake probably explains a bit of Christchurch but I can’t help thinking that the South Island having a disproportionate number of MPs has a little to do with it. I wonder what’s driving the bay of plenty up? Surely the Rena isn’t that expensive?

    1. NZIER reported two measures of regional government expenditure:
      * the *expenditure* approach, which measures where money is being spent. Under this approach, spending for govt head offices would largely be ascribed to Wellington.
      * the *service* approach, which measures where the services are going to. Using this approach, that head office spending would be apportioned throughout the country based on who used the “outputs” of different government departments.

      Using the first approach, the difference between Auckland and Wellington is much, much higher. Wellington gets around $24,500 in government spending per capita but only around $17,700 in government *services* per capita.

    2. How does the South Island have a disproportionate number of MPs? The number of SI seats is fixed and then this determines the number of NI electorates on a population basis (with the balance of the 120+ coming from the list).

  10. Shouldn’t you also look at the amount of tax paid by each region if you are trying to determine ‘fair’ spending ratios?
    I’m guessing that Auckland pays a significant amount of the government tax take – its the higher income earners that pay the majority of the tax and they are mainly in the bigger cities.

  11. I’ve recently experienced a little piece of regional development that worked by transferring my expenditure to a region in return for services provided. My wife and I rode the Alps to Ocean cycle way from Aoraki to Oamaru. Central govt and others have stumped up some capital and gainfully employed a bunch of locals to mostly build a hugely enjoyable trail between the points. It’s still work in progress so there are still some bits of tarmac to be suffered. We met some delightful people along the way who absolutely love living where they are and none had a bad word to say about Auckland or expressed any envy. There was only the thinly veneered; “I wouldn’t want to live there”. We paid for transport, accommodation and meals locally with hard earned Auckland earned cash and we’re very happy to have contributed to the regional GDP. That’s how regional development can work, provide goods and services that customers from elsewhere want to buy, not some recycled version of Muldoonism. Of all the many great things we saw along the way one of the most impressive were the Oamaru Domain Gardens that put the Auckland Domain to shame.

    1. Nice one! I was just down in Dunedin doing something similar over the weekend – rented bikes and cycled out to the end of the Otago Peninsula, which was spectacular. Will have to write up a bit of a post on the subject.

    2. I’m not sure turning the regional population into the servants of urban tourists is what they want.

      But, yes, if you want boot-blacks and shoe-shines, feel free

  12. The first graph is awful. It is 10 years out of date and the Auckland figure is obviously the full metropolitan Auckland figure while Wellington and Christchurch are not. Worse Christchurch has had significant growth in its outer metropolitan areas. Selwyn and Waimakariri being some of the fastest growing councils in the country for several decades now.

    Further the article implies that people are migrating to Auckland from other parts of the country, which is not true. As John Polkinghorne wrote last year http://greaterakl.wpengine.com/2014/10/09/northward-drift-no-more/

    Auckland’s growth is from internal pop growth and international migration.

    Given the problem in defining how populated each area is and how much they are growing it is hard to make conclusions.

    1. The data’s from a 2013 paper by Arthur Grimes and others. It’s the only source of long-term data I’m aware of, but it hasn’t been updated with the 2013 Census results. If you want to measure metropolitan Christchurch, I recommend you go to their data and add back in the outlying towns: http://www.motu.org.nz/our-work/population-and-labour/individual-and-group-outcomes/a-new-zealand-urban-population-database/

      Figures on more recent population changes are based on Census data for whole regions, so they actually over-count current and forecast growth in metro Christchurch.

      Lastly, I certainly didn’t say that Auckland is growing because people are moving there from other regions. I’m well aware of the data on the sources of Auckland’s growth.

    2. Brendon if do get the numbers together we’ll happily run a better and more up to date chart…… with a post explaining your methodology and why it’s more accurate; we love more accurate data, especially when communicated well visually.

  13. Auckland’s share of NZTA capital expenditure. There are some big RONS sucking it up now, but what does the data look like going back a few decades? My impression is that Auckland’s share has often been quite small in the past.

    1. That’s a good question – unfortunately NZTA’s published data only goes back to 2005 so I can’t offer any data.

      For what it’s worth, OECD data going back to the 1990s suggests that NZ as a whole was spending a lower share of GDP on new/improved roads prior to the creation of the National Land Transport Fund in 2004: http://greaterakl.wpengine.com/2014/08/02/the-inflationary-impact-of-road-spend-ups/

      The perceptions of “under-spending” probably date from that period – I’d imagine that most regions felt like they could do with more money.

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