Tracking the Nelson regional economy
July 2009
This report was produced with the assistance of The New Zealand Institute of Economic Research (NZIER) The Nelson Regional EDA wishes to acknowledge and thank the Nelson Regional Airport for their support Preface
Welcome to the first release of the Nelson Regional Economic Development Agency’s quarterly report to monitor the Nelson regional economy, Tracking the Nelson Regional Economy.
The EDA has three key strategic objectives:
Bill Findlater, CEO • facilitate economic development projects that build national and international competitiveness
• provide economic advice to the Region
• provide ongoing assessment of the Region’s performance.
We acknowledge there are many generic quarterly reports on the economy but there aren’t any related specifically to our region using relevant comparative figures.
With this report we’ve used three other regions that could be argued are similar to Nelson in character and therefore create a better base for comparison.
The regions used are; Bay of Plenty, Gisborne/Hawkes Bay and Otago.
Whilst it is acknowledged the country is experiencing a difficult economic climate, the report clearly demonstrates the greater Nelson region is holding its own relatively well.
It also demonstrates that the myth of ‘Sunshine Wages’ in this region is just that, a myth!
We greatly appreciate the valuable support of Nelson Airport Ltd in enabling us to commission NZIER to develop the report.
We also acknowledge those people and organisations that were part of the consultative process in the initial stages of scoping the report. Although we haven’t been able to include all of your ideas, we believe NZIER has developed a report that will enable us all to consider relevant information when we need to make important business decisions.
Bill Findlater CEO Nelson Regional Economic Development Agency Contents
1. Introduction 6
2. Purpose and nature of the Report 6
3. Relationship to the Nelson Regional Economic Development Strategy 7
4. Make up of the Nelson regional economy 8
4.1 Key characteristics of industry and firms 8
4.2 Key industries in Nelson-Tasman 9
4.3 Industries’ share of GDP 10
4.4 Distribution of employment 12
5. Indicators 14
5.1 What we have selected to monitor 14
5.2 Overall state of the economy 19
5.3 Outlook for the regional economy 25
5.4 Living standards 28
5.5 State of the regional labour market 34
5.6 Industry performance 41
5.7 Firm dynamics 52 Tracking the Nelson regional economy at a glance
Nelson regional economy
Overall state of Outlook for the Living The state of the Industry Firm dynamics the regional regional standards regional labour performance economy economy market
Regional GDP General Individual Working age Tourism Business births business incomes population and relative to situation the labour force Building and deaths Regional GDP Household per capita construction Domestic incomes Labour force growth trading activity participation Horticulture and Regional GDP House prices related processing ? per worker Hiring intentions Employment Housing Forestry and Population Investment affordability Unemployment wood processing growth intentions Internet use Registered Seafood Net migration (no trend data unemployed yet) Marine Difficulty in engineering obtaining labour Scientific Qualifications of research the population Key
Upward trend (this is positive for all indicators except unemployment) Downward trend (this is negative for all indicators except unemployment) ? Don’t have the data yet, but aim to in the future Mix of positive and negative results
Key points for the Nelson regional economy
• Like New Zealand as a whole, the region is experiencing an economic slowdown
• The tourism and construction sectors are suffering in particular
• Unemployment is set to rise
• Housing is becoming more affordable
• The region’s longer term prospects are enhanced by strong population growth, net migration and the increasing focus on added value (eg aquaculture)
1. Introduction
The Nelson Regional Economic Development Agency is pleased to present this report. It is the first of a new series of quarterly reports to monitor the Nelson economy. Each one will give the latest data on a set of indicators.
2. Purpose and nature of the Report
We initiated this project in order to get more reliable and consistent information on how well the Nelson economy is doing. At the same time, we wanted to ensure that it was as useful as possible to our funders, partners and other stakeholders. So one of the first things we did was talk with a cross-section of potential users of the report. This is what they told us:
How the report would be used: • enhancing understanding of the region’s industry make-up
• strategic decision-making
• marketing
• advocacy
What the report should cover: • how the region is doing overall (in its own right and in comparison with NZ overall and other comparable regions)
• how well off the people are (and how well off in comparison with NZ overall and other comparable regions)
• how key industries are doing • how well firms are doing overall
• what the future is likely to hold for the regional economy (lead indicators)
The qualities that would make the report highly valued: • authoritative, unbiased
• all in one place and easy to access (including links to other relevant information) • insightful commentary (on overall report and selected topics)
• showing trends – not just snapshots
• as up-to-date as possible
The report will be refined and developed as we gain experience. Feedback from users will be a key input into this process.
Tracking the Nelson Regional Economy 6
3. Relationship to the Nelson Regional Economic Development Strategy
The Nelson Regional Economic Development Strategy (REDS) gives the following vision for the Nelson region:
Smart, sustainable development that maintains economic diversity, preserves quality of life and does not degrade the region’s natural beauty and environment.
Monitoring the regional economy won’t give the whole picture, but it will show a significant part of it. The REDS emphasises the connections among economic, social, environmental and cultural wellbeing within an overall sustainable development framework. This is consistent with the approach taken by the Nelson City and Tasman District Councils. The economy doesn’t function in isolation from the environment or society. This report is therefore part of a wider set of indicators of regional performance.
By looking at progress across the indicators in this report, we will see what areas of the economy are doing well and what are off track. This will help us and the community see if the vision is being realised and help to target our efforts more effectively for the benefit of the region.
Tracking the Nelson Regional Economy 7
4. Make up of the Nelson regional economy
4.1 Key characteristics of industry and firms The following information is important to understand the regional economy. It is less about how well the region is performing and more about its characteristics.
Overview of the make up of the Nelson regional economy
How often is it Characteristic What does it tell us? measured?
Industry and firms
Key industries in Nelson- Which industries the Annually Tasman regional economy relies on
Unofficial series, updated Industries’ share of GDP Shape of regional economy quarterly by NZIER
Industries’ share of GDP Whether shape of regional compared to New Zealand economy is different to Unofficial series, updated as a whole and reference national/reference quarterly by NZIER regions economies
Distribution of employment Where region’s workers are by industry in Nelson- Annually employed Tasman
Distribution of workplaces Whether regional economy and employment by has more or less SMEs or Annually workplace size in Nelson- larger firms than rest of Tasman economy
Share of region’s Are region’s workers employment by workplace employed in SMEs or larger Annually size firms?
Tracking the Nelson Regional Economy 8
4.2 Key industries in Nelson-Tasman
The following table shows the distribution of firms by industry in Nelson and Tasman. It highlights the importance of primary industries (Agriculture, forestry and fishing) and the service sector.
These categories are quite broad. We have broken them into more detailed industries in section 5.6 below.
Figure 1 Key industries in Nelson and Tasman Geographical units in Nelson and Tasman
Education & Training Public Administration & Safety Administrative & Support Services Prof'nal, Scientific & Techn Serv Rental, Hiring & Real Estate Serv Financial & Insurance Services Information Media & Telecomms Transport, Postal & Warehousing Nelson Accommodation & Food Services Retail Trade Tasman Wholesale Trade Construction Electricity, Gas, Water & Waste Serv Manufacturing Mining Primary Industries Support Services Forestry & Logging Aquaculture & Fishing Agriculture Agric, Forestry & Fishing
0 1,000 2,000 3,000 4,000 5,000 6,000 Source: Statistics New Zealand
Tracking the Nelson Regional Economy 9
4.3 Industries’ share of GDP
The following chart shows GDP by industry for the Upper South Island (Nelson-Tasman- Marlborough-West Coast) for the year to March 20081.
Figure 2 Composition of GDP $m in 1995/96 prices
Ownership of OO Dwellings
Unallocated
Govt Administration & Defence
Health & Comm Serv: Personal & Other Serv: Education
Finance, Insurance, Property & Business
Transport, Storage & Communication
Wholesale & Retail Trade: Accom, Cafes & Restaurants
Electricity, Gas & Water Supply: Construction
Other Manufacturing
Food Beverage & Tobacco Manf'ing
Natural Resources(1)
Agriculture & Services to Agriculture
0 100 200 300 400 500 600 700 800 900 100 0 Source: NZIER Note: (1) “Natural Resources” includes Fishing, Forestry and Mining
How does the region’s mix of industries compare with others? The region has similar shares of economic activity to New Zealand as a whole in most groups, with two notable exceptions: a much higher share in primary production (Agriculture, Fishing, Forestry and Mining), and a correspondingly lower share in services (Finance, Business Services, Social and Private Services). This has implications for the region’s growth potential, as services sectors tend to grow more rapidly than the primary sector.
1 The NZIER Regional database is in part based on data from the Household Labour Force Survey, in which these four regions are combined.
Tracking the Nelson Regional Economy 10
Figure 3 Shares of GDP compared to New Zealand Percent
40
Nelson/Tasman/Marlborough/West Coast
30 Total New Zealand
20
10
0 Primary Prodn Manufacturing EGW: Distribution Services Other Construction
Source: NZIER
When we compare the Upper South Island to the reference regions the differences are not as pronounced. But even compared to similar regions, primary industries in the Upper South Island still account for a larger share of economic activity than in any of the other regions, and service industries a smaller share.
Figure 4 Shares of GDP compared to reference regions Percent
40
Nelson/Tasman/Marlborough/West Coast Bay of Plenty 30 Gisborne/Hawkes Bay Otago
20
10
0 Primary Prodn Manufacturing EGW: Distribution Services Other Construction
Source: NZIER
Tracking the Nelson Regional Economy 11
4.4 Distribution of employment
The region’s employment by industry is somewhat different to its distribution of firms. Agriculture, forestry and fishing is the largest employment sector. But Manufacturing, Retail trade and Health care and social assistance also figure highly in terms of employment, as they are heavily influenced by a few large workplaces.
Figure 5 Distribution of employment by industry in Nelson/Tasman Filled jobs: as at February 2008
Other Services Arts & Recreation Services Health Care & Social Assistance Education & Training Public Administration & Safety Administrative & Support Services Prof'nal, Scientific & Techn Serv Rental, Hiring & Real Estate Serv Financial & Insurance Services Information Media & Telecomms Transport, Postal & Warehousing Accommodation & Food Services Retail Trade Wholesale Trade Construction Electricity, Gas, Water & Waste Serv Manufacturing Mining Primary Industries Support Services Forestry & Logging Aquaculture & Fishing Agriculture
0 1,000 2,000 3,000 4,000 5,000 6,000
Source: Statistics New Zealand Business Demographics database
The difference is highlighted below, with the largest firms (100+ employees) being the smallest in number, but having the largest number of employees.
Tracking the Nelson Regional Economy 12
Figure 6 Distribution of workplaces and employment by workplace size in Nelson/Tasman Geographic units and employee count: as at February 2008; workplace size groups according to number of employees
12,000
10,000 Workplaces Employment
8,000
6,000
4,000
2,000
0 1 to 5 6 to 9 10 to 19 20 to 49 50 to 99 100 and Over
Source: Statistics New Zealand Business Demographics database Note: The above excludes workplaces with zero employees.
Figure 7 Distribution of employment by workplace size compared to reference regions As at February 2008; workplace size groups according to number of employees
35% Nelson/Tasman
30% Bay of Plenty Hawke's Bay
25% Otago
20%
15%
10%
5%
0% 1 to 5 6 to 9 10 to 19 20 to 49 50 to 99 100 and Over
Source: Statistics New Zealand Business Demographics database
As Figure 7 illustrates the share of people employed in different sized business is largely the same in Nelson Tasman as comparable regions.
Tracking the Nelson Regional Economy 13
5. Indicators
5.1 What we have selected to monitor
Stakeholders suggested a large range of potential indicators that would be of interest. These have been sifted using two criteria:
will it be meaningful in terms of monitoring performance?
is the data available?
This led to the list of indicators selected for this report. We intend to review and refine the indicators as we gain more experience in producing and using the quarterly reports.
In a number of cases, we provide comparisons with the whole of New Zealand. These comparisons are interesting but the results are naturally heavily influenced by the Auckland region. We therefore also selected three “reference regions” which were considered to be more meaningful for comparison in terms of industry mix and demographics. The reference regions are Bay of Plenty, Hawkes Bay and Otago.
The following table gives an overview of the indicators, what they tell us and how often they can be measured.
Tracking the Nelson Regional Economy 14
Overview of Indicators
What does it tell How often is it Indicator us? measured?
Overall state of the regional economy
Trends in regional Gross How fast the economy, and Not an official series but Domestic Product (regional thus the income of the can be estimated by NZIER GDP) region, is growing. each quarter.
Whether the region is Trends in regional GDP Not an official series but catching up or falling compared to reference can be estimated by NZIER behind the national regions each quarter. economy
As above. Quarterly, Regional GDP per capita Broad measure of average provided population growth income in region. estimates available.
How productive the region’s Regional GDP per worker Quarterly. workers are.
Indicator of potential Population growth Annually growth of region.
Indicator of potential Trends in population Annually growth of region.
Indicator of attractiveness of region to non-residents Trends in net migration Monthly from abroad, and global connectedness.
Trends in net migration Whether region is more or compared to whole of New less attractive than New Monthly Zealand Zealand as a whole
Trends in net migration Whether region is more or compared to reference less attractive than Monthly regions reference regions
Outlook for the regional economy
How confident region’s General business situation businesses are about the Quarterly next 6 months
How busy firms in the Domestic trading activity region are – indicator of Quarterly expected economic activity
Outlook for employment in Employment intentions Quarterly the region
Outlook for capital Investment intentions Quarterly investment in the region
Tracking the Nelson Regional Economy 15
Living standards
Average incomes for Individual incomes Annually. employed people.
Individual incomes Whether incomes in region compared to reference are higher/lower than Annually regions reference regions
Average incomes for Household incomes Annually. household.
Household incomes Whether household incomes compared to reference in region are higher/lower Annually regions than reference regions
Not an official series but Regional GDP per capita Broad measure of economic can be estimated by NZIER levels well-being each quarter.
Measure of changes in House prices Quarterly wealth for house owners
How easy it is for people to Housing affordability Quarterly buy a house in region.2
How well digitally Internet use Annually connected the region is.
The state of the regional labour market
Trends in the working age Potential productive population and the labour Quarterly capacity of region force
How engaged in the labour Trends in labour force market the working age Quarterly participation population is
Trends in employment Job creation Quarterly
Degree of capacity in labour Trends in unemployment Quarterly market
Degree of capacity in labour Registered unemployed Quarterly market
How hard it is for firms in Difficulty finding labour Quarterly region to find workers
Level of qualifications in the An indicator of human Five-yearly population capital in the region
2 Note that rising house prices reduce house affordability. That is a negative for those not already in the housing market. But for those who already own a house, it is a positive indicator as it improves their net wealth.
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Industry performance
Tourism
Popularity of region as Guest nights Monthly tourism destination
Popularity of region as Guest nights compared to tourism destination, Monthly reference regions compared with other regions
Building and construction
Residential building Likely prospects for house Monthly consents – number building sector
Residential building Likely prospects for house Monthly consents – value building sector
Non-residential building Likely prospects for Monthly consents – value commercial building sector
Other construction building Likely prospects for civil Monthly consents – value construction sector
Horticulture and related processing
Grape growing
Kiwifruit growing Number of workers in each horticulture Annually Berry fruit growing sector
Apple and pear growing
Fruit and vegetable processing Number of workers Other food product in each processing Annually manufacturing sector Wine and other alcoholic beverage manufacturing
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Forestry and Wood Processing
Forestry Number of workers Logging in each forestry Annually sector Forestry support services
Log sawmilling
Wooden fitting and component manufacturing Number of workers in each wood Annually Reconstituted wood product processing sector manufacturing
Other wood produce manufacturing
Seafood
Aquaculture
Fish trawling, seining and Number of workers netting in each seafood Annually sector Other fishing
Seafood processing
Marine engineering
Shipbuilding Number of workers in each marine Annually Boatbuilding sector
Scientific research
Indicator of the region’s Scientific research research and development Annually capacity
Firm dynamics
How dynamic the region’s Business births relative to economy is. Annually deaths How entrepreneurial the region is.
Tracking the Nelson Regional Economy 18
5.2 Overall state of the economy
5.2.1 Trends in regional Gross Domestic Product
Gross Domestic Product (GDP) measures economic activity, or the production of goods and services.
How has the region’s GDP changed over time? When we examine trends over the years ended March 1998 to 2009, we see that the region’s economy has been growing at a slower rate than the New Zealand economy as a whole – an average of 1.7 percent per annum, versus 2.9 percent.
Figure 8 Trends in GDP compared to New Zealand $m in 1995/96 prices
7,000 140,000
6,000 120,000
5,000 100,000
Nelson/Tasman/Marlborough/West Coast (LHS) 4,000 80,000
New Zealand (RHS)
3,000 60,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: NZIER
However, national growth has been heavily influenced by rapid growth in Auckland. A comparison with the reference regions is shown below. Growth in the Upper South Island has been similar to the other regions over the last decade – comparable to that of the Bay of Plenty (which averaged 2.0 percent per annum), better than Otago’s (1.2 percent) but below that of Gisborne-Hawke’s Bay (2.3 percent).
Tracking the Nelson Regional Economy 19
Figure 9 Trends in GDP compared to reference regions $m in 1995/96 prices
7,000
6,000
5,000
Nelson/Tasman/Marlborough/West Coast 4,000 Bay of Plenty Gisborne/Hawkes Bay Otago
3,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: NZIER
While GDP measures total economic activity in the region, a measure of economic well- being at the individual level is GDP per capita, i.e. GDP divided by population.
Figure 10 Growth in GDP per capita Percent, cumulative, years ended March 2000-08
30
25 23.5
20.8 20
15
10.2 10 7.9 6.0 5
0 Nelson/Tasman/Marlb'/W New Zealand Bay of Plenty Gisborne/Hawke's Bay Otago Coast Source: NZIER
The Upper South Island’s GDP per capita has been growing more slowly than for New Zealand as whole, reflecting the fact that its GDP has been growing at a lower rate than the national average, whereas its population growth has been similar (see next section).
However, the region has been growing more strongly than two of the three reference regions. The faster growth in GDP per capita for Gisborne-Hawke’s Bay reflects the much higher growth in GDP in that region.
Tracking the Nelson Regional Economy 20
Another relevant indicator is of GDP per employed person. This is a measure of labour productivity, and in particular enables us to explore the relative contributions to growth from employing more people, versus from more production per person employed. The latter is the main basis for sustainable growth in wages and salaries.
Unfortunately, the methodology employed to estimate regional GDP does not yet enable us to estimate this indicator with sufficient confidence that it is a reliable measure of labour productivity. This is a gap we aim to fill over time.
5.2.2 Trends in population
Figure 11 Trends in population compared to New Zealand 000s of persons, as at June
100 5,000
Nelson/Tasman (LHS) 95 New Zealand (RHS)
4,500 90
85 4,000
80
75 3,500 1996 1998 2000 2002 2004 2006 2008 Source: Statistics New Zealand
The two constituent parts of the region are of similar size, with Tasman District having an estimated population of 46,500, and Nelson City 44,700. Tasman’s population has consistently been growing more strongly than that of Nelson, and it has been the larger of the two council areas since 2003. Moreover, the population is predominantly urban – the main urban area, which spans the boundary of the two local authorities, had an estimated population of 58,700 in June 2008, 64 percent of the area’s total.
Tracking the Nelson Regional Economy 21
Figure 12 Trends in population within the region 000s of persons, as at June
60
55
50
45
40 Nelson Urban Area Tasman District Nelson City 35
30 1996 1998 2000 2002 2004 2006 2008
Source: Statistics New Zealand
Between 1996 and 2008, the area’s population grew by 14.0 percent, an average annual rate of 1.2 percent, about the same as New Zealand as a whole.
In comparison with other regions:
Bay of Plenty grew by 17.0 percent, an average of 1.4 percent per annum, over the period
Hawke's Bay by 4.2 percent (0.4 percent per annum)
Otago by 7.5 percent (0.7 percent per annum).
Figure 13 Population growth compared to reference regions Percent, cumulative, years ended March 2000-08
25
20 17.0
15 14.0 14.4
10 7.5
5 4.2
0 Nelson/Tasman New Zealand Bay of Plenty Hawke's Bay Otago Source: Statistics New Zealand
Tracking the Nelson Regional Economy 22
5.2.3 Trends in net migration
International migration is a key driver of population change, and is by far the most variable and responsive to economic conditions (compared to births and deaths). New migrants are also an important channel through which the region builds global connections.
Migration to and from the region has followed national trends, but is has less of an impact on population growth compared to New Zealand as a whole.
Figure 14 Trends in migration in Nelson/Tasman Permanent and Long-Term, number of persons, years ended March
2,000
1,500
1,000
500
0
-500 Arrivals Departures Net
-1,000 1999 2001 2003 2005 2007 2009 Source: Statistics New Zealand
Tracking the Nelson Regional Economy 23
Figure 15 Trends in net migration Net Permanent and Long-Term migration as a percent of population, years ended June
1.5
1.0
0.5
0.0
Nelson/Tasman -0.5 New Zealand
-1.0 1998 2000 2002 2004 2006 2008 Source: Statistics New Zealand
Examination of the underlying data suggest that both Permanent and Long-Term arrivals and (to a lesser extent) departures to and from Nelson are lower relative to population than the national average. In other words immigrants are less likely to settle in Nelson, and its residents are less likely to emigrate, than is the case across New Zealand. The relatively low levels of inward migration reflect the tendency for most new migrants to settle in larger urban centres, especially Auckland.
Figure 16 Trends in migration compared to reference regions Net Permanent and Long-Term migration as a percent of population, years ended June
1.0
Nelson/Tasman Bay of Plenty Hawke's Bay 0.5 Otago
0.0
-0.5
-1.0 1998 2000 2002 2004 2006 2008
Source: Statistics New Zealand
When we examine the comparator regions, Nelson-Tasman does relatively well from international migration. All the regions follow the same trend; but Hawke’s Bay and Bay of Plenty tend to experience net migration losses, with no or rare gains respectively. The
Tracking the Nelson Regional Economy 24
trend for Otago was roughly the same as Nelson-Tasman until the June 2003 year, but its net movements have been more favourable since then.
5.3 Outlook for the regional economy
The above data provides some insight as to how the Nelson-Tasman region has been developing, over time and relative to the reference regions. The following section shows data which indicates regional economic activity looking forward. It draws on NZIER’s Quarterly Survey of Business Opinion (QSBO), which provides lead indicators for how the national and regional economies will develop over the quarters ahead.
Although currently QSBO data are not collected separately for Nelson-Tasman, we do have data for Nelson/Tasman/West Coast as a single region since late 2007. In future reports, data will be specifically collected for Nelson-Tasman.
5.3.1 General business situation
The QSBO asks respondent firms about their expectations of the general business situation over the next six months, and reports the net percent expecting an improvement less those expecting a deterioration. As Figure 17 shows, this measure has historically been a very good predictor of economic growth in the following quarter.
Figure 17 General business situation and GDP Net percent of firms, moving annual average, LH Scale: average annual percent change, 1 quarter lag, RH scale
40 10
8 20
6 0
4 -20 2
-40 Economy wide (LHS) 0
-60 Nelson/West Coast (LHS) -2 Expenditure on real GDP (RHS)
-80 -4 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09
Source: NZIER Quarterly Survey of Business Opinion
The views of firms on the general business situation are an accurate reading on where economic activity is going. Firms in the Nelson/West Coast region generally shared the views of their counterparts throughout 2008, although appeared less pessimistic in the last quarters – although we should be cautious about reading this as a sign of prospective economic improvement in the region, given the small sample size.
Tracking the Nelson Regional Economy 25
Collecting the same data for the Nelson/Tasman region, with a large enough sample to be confident that it is robust, will very likely provide a good indication on changes to regional GDP several months before official data are released.
5.3.2 Domestic trading activity
Firms are also asked whether their own activity increased or decreased in the last three months, and whether they expect it to increase or decrease in the next three months. This is also reported as the net percent experiencing/expecting an improvement or deterioration.
Figure 18 Domestic trading activity – next three months Net percent of firms
40
30
20
10
0
-10
-20 Economy wide
-30 Nelson/West Coast
-40
-50 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09
Source: NZIER Quarterly Survey of Business Opinion
The views of firms on their own prospects strongly mirrors the equivalent numbers for firms’ experience in the previous three months (not shown), and is one of the most tangible leading indicators of economic activity. The above chart highlights the very sharp deterioration in business activity since late 2007, with business expectations turning negative – a trend observed for Nelson-West Coast firms, albeit with about a one quarter delay.
(An interesting observation is that firms are almost always more positive, or less negative, about their own prospects than they are about general business situation – perhaps the inherent self-belief of entrepreneurs?)
5.3.3 Employment intentions
Firms’ employment intentions are derived by subtracting the number of firms indicating that they intend to reduce employment, from the number of firms intending to increase their staff.
The staffing intentions of businesses in Nelson/West Coast have largely followed the same direction as those elsewhere in New Zealand over the last two years, albeit with more variation (possibly seasonal).
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Figure 19 Numbers employed – next three months Net percent of firms
30
20
10
0
-10
Economy wide -20 Nelson/West Coast
-30
-40 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09
Source: NZIER Quarterly Survey of Business Opinion
5.3.4 Investment intentions
Firms report whether they plan to increase or decrease capital expenditure in plant and buildings. Intentions have been falling for both types of investment since the December 2007 quarter for New Zealand. Investment intentions among Nelson and West Coast firms have followed the same direction, although have been less negative.
Figure 20 Investment intentions – next twelve months Net percent of firms
15
10
5
0
-5
-10
-15
-20 Economy wide - plant investment Nelson WC - plant investment -25 Economy wide - building investment Nelson WC - building investment -30 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09
Source: NZIER Quarterly Survey of Business Opinion
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5.4 Living standards
5.4.1 Individual incomes
People in non-urban areas generally have lower incomes than their urban counterparts, and this is apparent comparing the region’s incomes with the national average (which include high-income Auckland and Wellington), and with those in Nelson and Tasman separately.
Figure 21 Individual incomes, 2006 Median annual income per person, $
New Zealand 24,400
Nelson/Tasman 22,370
Tasman 21,600
Nelson 23,100
20,000 21,000 22,000 23,000 24,000 25,000 Source: Statistics New Zealand Census of Population and Dwellings 2006: except Nelson/Tasman, NZIER estimate
In 2006, average incomes in the combined area were 92 percent of the national average. Incomes in Tasman were 94 percent of those in Nelson. Looking at incomes in the combined Nelson/Tasman/Marlborough/West Coast region3, suggests that the gap has been closing since 1998.
Incomes in the wider region have been growing more strongly than the national rate over the period – by an average of 4.9 percent per annum over the decade, compared to 3.5 percent nationally. As a result, median weekly incomes for people in paid employment in the June 2008 quarter were $700 per week, 96 percent of the national average of $7294,5.
3 This series is as published by Statistics New Zealand. No breakdown is available for the Nelson/Tasman region, although this may be possible from the June 2009 quarter. We investigated the possibility of estimating incomes for Nelson/Tasman by combining income and earnings data from other statistical sources. However for technical reasons, it does not appear feasible to produce robust estimates. 4 Median averages – incomes in the middle of the distribution – are normally considered more representative of the population than mean averages, as the latter are biased upwards by the highest incomes. 5 Note that data for June 2008 quarter are only available for median incomes for persons in paid employment. Data for mean incomes and household incomes have not been published for technical reasons.
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Note that the sample is of resident households, and hence the survey generally does not capture seasonal workers coming into the region temporarily.
Figure 22 Trends in individual incomes Mean and median weekly incomes per person in paid employment, $
900
N/T/M/WC median 800 New Zealand median N/T/M/WC mean New Zealand mean 700
600
500
400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics New Zealand New Zealand Income Survey
Figure 23 Trends in individual incomes compared to reference regions Median weekly incomes per person in paid employment, $
900
Nelson/Tasman/Marlborough/West Coast 800 Bay of Plenty
Gisborne/Hawke's Bay 700 Otago
600
500
400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: NZIER
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5.4.2 Household incomes
A similar story is apparent for household incomes.
Figure 24 Trends in household incomes Mean and median weekly incomes per household, $ 1600
N/T/M/WC median 1400 New Zealand median N/T/M/WC mean New Zealand mean 1200
1000
800
600
400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Statistics New Zealand New Zealand Income Survey
In June 2007, the median average household income in the wider region was $1,161 per week, 98 percent of the national average of $1,203. It grew by an average of 6.3 percent per annum, compared to 5.1 percent nationally.
When we compare the Nelson/Tasman/Marlborough/West Coast area with the other regions, we see that all have had similar incomes from employment and experienced similar income growth over the last decade. However, where incomes were apparently falling in the late 1990s elsewhere, they rose in Nelson/Tasman/Marlborough/West Coast, and continued to rise; so that its incomes have gone from being the lowest of the four regions a decade ago, to being equal highest today.
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Figure 25 Trends in household incomes compared to reference regions Median weekly incomes per household, $ 1600
Nelson/Tasman/Marlborough/West Coast 1400 Bay of Plenty
1200 Gisborne/Hawke's Bay Otago
1000
800
600
400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Statistics New Zealand New Zealand Income Survey
5.4.3 Regional GDP per capita
Figure 26 GDP per capita $000s, year ended March 2009
Otago 26,913
Gisborne/Hawke's Bay 37,146
Bay of Plenty 24,532
New Zealand 31,418
Nelson/Tasman/Marlb'/W 34,049 Coast
0 10,000 20,000 30,000 40,000 Source: NZIER
Not withstanding slower growth in GDP, the Upper South Island had higher GDP per capita than the national average (which was true over the entire period from 2000 to 2008). Likewise, it had higher GDP per capita than two of the three reference regions; the exception, higher GDP per capita in Gisborne-Hawke’s Bay, is a consequence of the very high GDP growth rates in that region.
Tracking the Nelson Regional Economy 31
5.4.4 House prices
Figure 27 Increases in house values Index, December 2000 quarter = 1000 2500
2000
1500
1000 Tasman
Nelson
500 New Zealand
0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Quotable Value New Zealand House Price Index; re-expressed by NZIER to Dec 2000 base.
Over the most recent price boom, Nelson and Tasman house prices rose more rapidly than those in other parts of New Zealand from 2001 to 2003, then grew more slowly for the following three years; so that growth from 2000 to 2006 was comparable. The peak was in the December quarter of 2007, and prices in the region have fallen slightly less (Tasman -5.5 percent; Nelson -6.7 percent) than across the country (-9.0 percent).
The median sale price in May 2009 for houses in the “Nelson City Zone” was $340,000, and in the wider Nelson area, $346,250. These were slightly higher than the national median price of $337,500.
5.4.5 Housing affordability
Housing affordability is assessed by the costs of servicing a mortgage, calculated from median dwelling prices and mortgage interest rates relative to average weekly earnings, see Figure 28.6 How these factors change in relation to each other signifies how much income is needed to service a mortgage on a house of median selling price.
6 This section and data are based on and sourced from Massey University Home Affordability reports
Tracking the Nelson Regional Economy 32
Figure 28 Housing affordability Percent of average individual weekly earnings to service a mortgage 15
20
25
30
35 Otago Hawke's Bay 40 Waikato/BoP Nelson/Marlborough
45 May 05 Nov 05 May 06 Nov 06 May 07 Nov 07 May 08 Nov 08 May 09 Source: Massey University Home Affordability reports
Given that mortgage interest rates are the same in Nelson as elsewhere in New Zealand, and that regional incomes are similar to New Zealand averages (see Figure 24), the difference between series in Figure 28 largely represents differences in dwelling prices.
Nelson and Marlborough have experienced several periods since late 2005, where the median dwelling price rose by significantly more than the New Zealand average. As a consequence housing affordability has decreased in Nelson/Marlborough (the value of the series displayed in Figure 28 increased), in absolute terms and relative to the New Zealand average.
The latest data show an improvement in home affordability since late 2008. This improvement is largely due to falling mortgage interest rates which apply to all regions of New Zealand.
5.4.6 Internet use
Access to the internet is one of the more commonly used measures of an area’s adoption of technology, or digital connectedness. As can be seen from Figure 29 the Nelson- Tasman-Marlborough-West Coast area rates relatively highly with regard to both total internet and broadband internet access, with the highest take up outside the three large urban regions.
Tracking the Nelson Regional Economy 33
Figure 29 Internet use Proportion of households with internet access
80% Internet access
Broadband access 60%
40%
20%
0%
n ato Otago e’s Bay Taranaki Waik Auckland Northland Wellingto Canterbury Southland Bay of Plenty awatu-Wanganui Tas Marl W Coast orne Hawk Man lson Gisb Ne
Source: Statistics New Zealand Household Use of Information Technology Survey 2006 and Census of Population and Dwellings 2001 and 2006
5.5 State of the regional labour market
The Household Labour Force Survey (HLFS) is drawn from a sample of households that are ordinarily resident in New Zealand, and provides a range of relevant measures, including
Working age population - persons aged 15 and over
Labour force - persons employed or actively seeking work
Labour force participation rate – share of the working age population in the labour force
Persons employed
Persons unemployed Unemployment rate – unemployed persons as a share of the labour force
The following charts show trends in Nelson-Tasman and New Zealand as a whole since the March 2001 quarter, based on customised data for the region from Statistics New Zealand7.
7 Note that for these calculations, we have expressed the data as annual averages rather than using quarterly data. This is to compensate for high quarterly variation in the regional data.
Tracking the Nelson Regional Economy 34
( Figure 30 Trends in the working age population and labour force 000s persons, annual average
90 4,000
80 3,500
70 3,000
60 2,500 50 2,000 40 1,500 30 Nelson/Tasman Working Age Popn (LHS)
Nelson/Tasman Labour Force (LHS) 1,000 20 New Zealand Working Age Popn (RHS) 500 10 New Zealand Labour Force (RHS)
0 0 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics New Zealand Household Labour Force Survey
The working age population has been increasing by an average of 2.8 percent per annum in Nelsons-Tasman in the seven years ending March 2009, versus 1.7 percent for New Zealand. Similarly, its labour force increased by 3.1 percent per annum, compared to 2.2 percent nationally.
Figure 31 Trends in labour force participation Labour force as a percent of the working age population, annual average
70.0
68.0
66.0
Nelson/Tasman
64.0 New Zealand
62.0 2001 2002 2003 2004 2005 2006 2007 2008
Source: Statistics New Zealand Household Labour Force Survey
Tracking the Nelson Regional Economy 35
The region’s participation rate has largely followed the national trend, albeit with more short-term variation. It averaged 67.4 percent over the period, exactly the same as for New Zealand as a whole. However, the regional participation rate has fallen materially over the last year, compared to continuing rises nationwide.
Figure 32 Trends in employment 000s persons, annual average
60 2,500
2,250
50 2,000
1,750 40 Nelson/Tasman (LHS)
1,500 New Zealand (RHS)
30 1,250 2001 2002 2003 2004 2005 2006 2007 2008
Source: Statistics New Zealand Household Labour Force Survey
Regional employment growth lagged national growth until 2004, but overall has been growing more strongly, so that it increased by 3.3 percent per annum over the last seven years, compared to 2.4 percent nationally.
5.5.1 Trends in unemployment
In the year to March 2009, there was an average of 1,800 unemployed people in the region, leading to an unemployment rate of 3.3 percent of the labour force. This compares to a national rate of 4.5 percent. The region has had a lower unemployment rate than the rest of New Zealand for almost all of the current decade, and has been declining over the last year, compared to rising unemployment nationally.
Tracking the Nelson Regional Economy 36
Figure 33 Trends in unemployment Unemployed persons as a percent of the labour force, annual average
6.0
5.0
4.0
3.0
2.0 Nelson/Tasman
New Zealand 1.0
0.0 2001 2002 2003 2004 2005 2006 2007 2008
Source: Statistics New Zealand Household Labour Force Survey
5.5.2 Registered unemployed
The region’s relative low unemployment rate is reflected in smaller numbers of registered unemployed, relative to its population. Registered unemployed includes only those people registered with the Ministry of Social Development. While not comparable to official unemployed as measured in the HLFS, it is a useful early indicator of unemployment trends.
The Nelson-Tasman-Marlborough region has displayed a similar decline in registered unemployed as other regions over the business cycle, but has been at lower levels than the three reference regions for about two years.
Tracking the Nelson Regional Economy 37
Figure 34 Trends in registered unemployment Persons in receipt of an Unemployed Benefit as a percent of the estimated regional population
2.0
Nelson/Tasman Bay of Plenty
1.5 Hawke's Bay Otago
1.0
0.5
0.0 2004 2005 2005 2006 2006 2007 2007 2008 2008
Source: Ministry of Social Development Statistics and Statistics New Zealand
The Ministry of Social Development and the Department of Labour jointly produce Quarterly Regional Labour Market Reports. These reports are available online following the release of the Household Labour Force Survey (HLFS), and provide additional detail to some of the employment variables covered in this report. For example, information on who is receiving the unemployment benefit, by age and sex, is available. See http://www.dol.govt.nz/publications/lmr/regional/joint/
5.5.3 Difficulty finding labour
Firms in the QSBO are asked whether they found it more or less difficult to recruit skilled labour in the last quarter, and the net difference is an indication of how “tight” the labour market is.
Figure 35 suggests that the labour market has eased considerably over the last few quarters, with a major switch - from 46 percent of firms reporting it being more difficult to recruit skilled labour in December 2007 quarter, to a net 42 percent reporting it less difficult in March 2009.
The same trend has been apparent in Nelson and the West Coast – indeed, firms in the region were reporting more difficulty in late 2007, so the easing has been even more dramatic.
Tracking the Nelson Regional Economy 38
Figure 35 Difficulty finding skilled labour and earnings Net percent of firms reporting it more difficult to find skilled labour, LH scale: average annual percent change, 2 years later, RH scale
40 10
8 20
6 0
4 -20 2
-40 Economy wide (LHS) 0
-60 Nelson/West Coast (LHS) -2 Expenditure on real GDP (RHS)
-80 -4 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09
Source: NZIER Quarterly Survey of Business Opinion
As the labour market tightens or eases, this eventually results in an increase or decrease in wage pressure. Hence firms’ difficulties in finding skilled labour is a good lead indicator of future changes in hourly earnings, with a delay of about two years. The chart suggests that a substantial fall in wage inflation is to be expected in coming quarters.
5.5.4 Level of qualifications in the population
A useful measure of human capital is the highest formal qualification of the population.
Figure 36 Highest level of qualifications Percent of persons aged 15 and over reporting a qualification
100%
80%
60%
40%
20%
0% Nelson/Tasman New Zealand Bay of Plenty Hawke's Bay Otago
No qualification School qualification Sub-degree tertiary qual'n Degree
Source: Statistics New Zealand Census of Population and Dwellings 2006
The shares of the Tasman/Nelson population with no, school and sub-degree tertiary qualifications (e.g. trade and technician level) are slightly higher than the national average, by about 1 percent each. The main difference is in degree qualifications, where
Tracking the Nelson Regional Economy 39
only 12 percent of Nelsonians report holding a degree, compared to 16 percent of all New Zealanders.
In comparison with the reference regions, Tasman/Nelson residents are better qualified than their counterparts in the Bay of Plenty and Hawke’s Bay, which have relatively more people reporting no qualifications, and fewer with tertiary qualifications. Otago residents have more people with degrees, and fewer with no qualifications, than Tasman-Nelson and the other reference regions, which is to be expected as the only one of the four regions with a university.
How has the qualification mix of Nelsonians been changing over time? Comparing the above with comparable data from the 2001 Census suggests that the qualification mix has been moving upwards.
Figure 37 Highest level of qualifications, 2001-2006 Percent of persons in Nelson/Tasman aged 15 and over reporting a qualification
100%
80%
60%
40%
20%
0% 2001 2006 No qualification School qualification
Sub-degree tertiary qual'n Degree
Source: Statistics New Zealand Census of Population and Dwellings 2001 and 2006
The share of Tasman/Nelson residents holding no qualification fell between the two Censuses, and those with degrees rose. Oddly, in 2006 there was a higher number of people of whose highest qualification was from secondary school, and a much lower number with a non-degree tertiary qualification, compared to 20018.
Increasing qualification levels are usually observed over time. This reflects the fact that in recent years young people have secured higher qualifications than previous generations; and this effect is cumulative, i.e. as older people with few or no formal qualifications are replaced in the population and labour force by younger well-qualified people.
8 This may reflect differences in the classification structures used in the two Censuses. In 2001, there was a single category for “vocational qualifications”; in 2006, this had been superseded by categories for “level 5 diploma” and “level 6 diploma”. Hence part of the difference may be a result of the way people classified their own qualifications.
Tracking the Nelson Regional Economy 40
5.6 Industry performance
5.6.1 Tourism
The best available measure of tourism activity is the number of guest nights in commercial accommodation in the region, of both domestic and international visitors.
This does not include many small accommodation providers, nor businesses that provide short term accommodation as a secondary commercial activity. Nor does it include visitors who stay privately, e.g. with friends and relatives.
It should also be noted that ideally, we would also have some measure of regional visitor expenditure – New Zealanders generally spend less than international visitors, and Australians less than other nationalities. Unfortunately, visitor expenditure data is unavailable for regions9.
Figure 38 Tourism – guest nights 000s, moving annual totals
1,600 30,000 Nelson/Tasman - domestic (LHS) Nelson/Tasman - international (LHS) 25,000 New Zealand - domestic (RHS) 1,200 New Zealand - international (RHS) 20,000
800 15,000
10,000
400
5,000
0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Statistics New Zealand Accommodation Survey
There are quite different trends for domestic and international tourism in Nelson. International guest nights have been increasing, albeit at a slower rate than for New Zealand as a whole. But its domestic guest nights fell from 2003, and have not recovered since – in fact they are only on a par with numbers at the start of the decade.
The recession has affected tourism markedly over the last year, although in different ways. International visitor nights have fallen, more so nationally than in Nelson. But the region’s domestic visitor nights have dipped quite substantially, more than has been the case nationally.
Nelson/Tasman does however compare favourably with the reference regions. Its guest nights were the highest of any of the four regions until 2003, and subsequently on a par
9 Expenditure data for international tourists is available from the International Visitor Survey, but only for their whole visit to New Zealand, and not for the individual regions that they visit.
Tracking the Nelson Regional Economy 41
with Bay of Plenty. It has been higher than Hawkes Bay and Otago over the whole period.
Figure 39 Tourism – guest nights compared to reference regions 000s, moving annual totals
1,400
1,200
1,000
800
600 Nelson/Tasman Bay of Plenty 400 Hawke's Bay Otago 200
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Statistics New Zealand Accommodation Survey Note: Bay of Plenty does not include Rotorua; Otago does not include Queenstown
Moreover, Nelson/Tasman has consistently had the highest number of international guest nights in its visitor mix.
5.6.2 Building and construction
The level of construction is a key driver of the economy, as it tends to vary more than most other types of activity, and thus make a major contribution to speeding up or slowing down of growth. Building consents are an important early indicator of construction trends – typically, leading actual building completions by about six months – as well as a measure of confidence of local households and businesses.
In the last decade, housing construction has followed the same trend as across the rest of New Zealand, although the downturn between 2004 and 2006 was much more pronounced.
Tracking the Nelson Regional Economy 42
Figure 40 Residential building consents – number Number, new residential dwellings: rolling annual totals
1,200 40,000
1,000
30,000
800
600 20,000
400 Nelson/Tasman (LHS) 10,000
200 New Zealand (RHS)
0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics New Zealand
Figure 41 Residential building consents – value $ million, new dwellings and alterations: rolling annual totals
300 10,000
250 8,000
200 6,000
150
4,000 100 Nelson/Tasman (LHS)
New Zealand (RHS) 2,000 50
0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics New Zealand
Non-residential consents have generally followed the national trend, although have been more variable. This is to be expected in a smaller region, when individual projects can have a substantial impact on total building activity.
Significantly, consent values have fallen over the last year – in the twelve months to May 2009, consents for non-residential buildings worth $81 million were issued, 24 percent lower than the equivalent total for the year to May 2008. This is in stark contrast to the national trend, which has (so far) continued to rise, reaching $4.7 billion over the last year.
Tracking the Nelson Regional Economy 43
Figure 42 Non-residential building consents – value $ million, new buildings and alterations: rolling annual totals
150 8,000
Nelson/Tasman (LHS)
New Zealand (RHS) 6,000 100
4,000
50
2,000
0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics New Zealand
Other Construction includes such things as roads and bridges, dams etc. The regional and national trends have been quite different. Consent values have more than doubled nationally since 2003, especially because of the increased road building programme. However, the increase in Tasman/Nelson has not been as large, and has been very “spiky”, as a result of the influence of consents for a few large projects in late 2007 and early 2008.
Figure 43 Other construction building consents – value $ million, new structures and alterations: rolling annual totals
15 600
Nelson/Tasman (LHS)
New Zealand (RHS) 10 400
5 200
0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics New Zealand
To place the above in context, consents to the value of $244 million were issued in the year to May 2009, and 64 percent ($154 million) were for new houses and alterations. Non-residential buildings ($81 million) were a third of the total, and Other Construction ($8 million) only 2 percent.
Tracking the Nelson Regional Economy 44
So, unless there are some substantial commercial or infrastructure projects in the pipeline, the immediate prospects for the building industry are dependent on expected house construction. Nationally, the housing construction sector is probably approaching the trough of the cycle, and will start to pick up within the next year, given increasing inward migration and low mortgage interest rates.
Key industries
In the following sections we review trends in employment in key industries from 2000 to 2008 (from the Business Demographics database, which records the employee count as of March of each year). This provides an indication of industry trends (in the absence of production data) and of the relative importance of different sub-industries.
Note that:
• the timing of collection – March – may mean that the employee count is not fully representative of underlying trends in industries that are strongly seasonal, as the seasonal peak may have passed by March, or occur earlier or later in different years
• they cover “economically significant enterprises” which exclude some types of business; the most important exclusions are of those with annual GST expenses or sales of less than $30,000, and/or a rolling mean employee count of fewer than three
Note also that the following charts use different scales, so cannot be directly compared.
5.6.3 Horticulture and related processing
The big cluster of horticultural employment in the area – Apple growing – has shown a steady decline in recent years. This is in line with national trends, although as Nelson has about a third of total national employment this is not surprising. Grape growing has grown, but this has been offset by falling employment in Kiwifruit and Berry fruit.
Tracking the Nelson Regional Economy 45
Figure 44 Employment trends – horticulture Employee count: Nelson/ Tasman LH scale, New Zealand RH scale
400 3000 8000 250 Kiwifruit Growing Grape Growing
200 300 6000 2000
150
4000 200
100 1000
2000 100 Nelson/Tasman 50 Nelson/Tasman New Zealand New Zealand
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
400 3000 5,000 12,000 Berry Fruit Growing Apple & Pear Growing
10,000 4,000 300
2000 8,000 3,000
200 6,000
2,000 1000 4,000
100 Nelson/Tasman Nelson/Tasman 1,000 New Zealand New Zealand 2,000
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
Source: Statistics New Zealand Business Demographics database
Processing of food products is an important complement to their production. We show below some key processing industries (excluding meat, dairy, beer and grain processing).
Tracking the Nelson Regional Economy 46
Figure 45 Employment trends – food processing Employee count: Nelson/ Tasman LH scale, New Zealand RH scale
300 10,000 125 10,000 Fruit & Vegetable Processing Other Food Product Manf'ing
250 8,000 100 8,000
200 6,000 75 6,000
150
4,000 50 4,000 100 Nelson/Tasman New Zealand 2,000 25 Nelson/Tasman 2,000 50 New Zealand
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
200 6,000 Wine & Other Alc Bev Manf'ing
150
4,000
100
2,000
50 Nelson/Tasman New Zealand
0 0 2000 2002 2004 2006 2008
Source: Statistics New Zealand Business Demographics database
Fruit & vegetable processing in Nelson has been highly variable over the period, but by the end of the period employed approximately as many people as at the start. In comparison, at the national level this industry was losing jobs gradually over the period.
Other food manufacturing – the catchall for all types that do not fall into other obvious categories, including many specialist food products – and Wine making have grown strongly over the period, more so in the region than nationally.
Tracking the Nelson Regional Economy 47
5.6.4 Forestry and wood processing
Figure 46 Employment trends – forestry and logging Employee count: Nelson/ Tasman LH scale, New Zealand RH scale
100 2000 600 6,000 Forestry Logging
500 5,000 80 Nelson/Tasman 1500 New Zealand 400 4,000 60
1000 300 3,000
40 200 2,000 Nelson/Tasman 500 New Zealand 20 100 1,000
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
250 5,000 Forestry Support Services
200 4,000
150 3,000
100 2,000
Nelson/Tasman New Zealand 50 1,000
0 0 2000 2002 2004 2006 2008
Source: Statistics New Zealand
The most important part of the forestry sector is in Logging mature trees. The regional and national trends have been similar, with an expansion of activity from 2002 to 2004, followed by a decline to around 2000 levels by the end of the period.
Forestry and forestry support services (which includes contract nurseries, planting and silvaculture) have collectively declined over the period, although these activities showed opposite paths in the region over the decade.
However, most parts of the wood processing industry have been growing strongly in the region. Sawmilling expanded in the decade, in line with increased harvesting, and has subsequently retreated – although employment in Tasman/Nelson in 2008 was still higher than in 2008, in contrast to the national decline.
Tracking the Nelson Regional Economy 48
Figure 47 Employment trends – wood processing Employee count: Nelson/ Tasman LH scale, New Zealand RH scale
1000 10,000 400 10,000 Log Sawmilling Wooden Fitting & Component Manf
800 8,000 8,000 300
600 6,000 6,000
200
400 4,000 4,000
Nelson/Tasman Nelson/Tasman 100 New Zealand New Zealand 200 2,000 2,000
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
400 2,000 200 2,500 Reconstituted Wood Product Manf Other Wood Product Manf
2,000 300 1,500 150
1,500
200 1,000 100
1,000
Nelson/Tasman 100 500 50 New Zealand Nelson/Tasman 500 New Zealand
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
Source: Statistics New Zealand
Both manufacturing of Structural fitting & components, and Reconstituted wood products, have expanded their employment in Tasman over the period – in the latter case, contrasting with falling employment nationally.
Only the relatively small Other wood product manufacturing has shed jobs in Tasman/Nelson over this time, in contrast with stable employment nationally.
The drivers for these industries are mixed, with domestic demand – i.e. the housing boom – contributing to expansion in the middle of the decade. The subsequent slowdown in some, but not all, parts of the industry indicates that export demand has (at least until a year ago) taken up most of the slack.
Tracking the Nelson Regional Economy 49
5.6.5 Seafood
The key part of the seafood industry is in Processing, which provides approximately double the employment of the entire harvesting sector. Its employment has been falling slightly over the decade.
Figure 48 Employment trends - seafood Employee count: Nelson/ Tasman LH scale, New Zealand RH scale
125 1,500 1,500 2,500
Aquaculture Fish Trawling, Seining & Netting
100 2,000
1,000 1,000 75 1,500
50 1,000 500 500
Nelson/Tasman Nelson/Tasman 25 New Zealand New Zealand 500
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
100 750 2,500 8,000 Other fishing Seafood Processing
2,000 6,000
500 1,500
50 Nelson/Tasman 4,000 New Zealand 1,000 250
2,000 Nelson/Tasman 500 New Zealand
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
Source: Statistics New Zealand Business Demographics database
The second largest sector – Trawling, seining & netting - also showed a decline between 2002 and 2005, although has since been relatively stable.
Aquaculture has shown apparently strong growth, especially Onshore Aquaculture. Other types of fishing have declined, and these two trends have approximately offset one another.
Tracking the Nelson Regional Economy 50
5.6.6 Marine engineering
The two main segments of marine engineering are Shipbuilding and Boatbuilding, with the former covering vessels 50 tonnes and over, and the latter smaller vessels.
Figure 49 Employment trends – marine engineering Employee count: Nelson/ Tasman LH scale, New Zealand RH scale
200 8,000 200 1,250 Boatbuilding Shipbuilding
1,000 150 6,000 150
750
100 4,000 100
500
50 2,000 50 Nelson/Tasman Nelson/Tasman New Zealand 250 New Zealand
0 0 0 0 2000 2002 2004 2006 2008 2000 2002 2004 2006 2008
Source: Statistics New Zealand Business Demographics database
The two segments have been moving in opposite and roughly offsetting directions over the decade. This may reflect a change in the type of vessels being serviced (e.g. fewer commercial and more recreational boats), or a switch in the commercial fleet towards smaller craft.
Similar trends have been observed nationally, although the regional fall in shipbuilding and growth in boatbuilding has been much more pronounced. But Nelson has a very small share of the national industry in both categories.
5.6.7 Scientific research
In Scientific research services (i.e. in dedicated research facilities), the area has seen substantial growth in employment, even stronger than the growth experienced nationally. This is a small industry, relative to both total employment in the region and as a share of national employment in scientific research, but is seen as critical to the region’s competitive prospects.
Tracking the Nelson Regional Economy 51
Figure 50 Employment trends – scientific research Employee count: Nelson/ Tasman LH scale, New Zealand RH scale 400 12,000
Scientific Research Services
10,000
300
8,000
200 6,000
4,000
100 Nelson/Tasman 2,000 New Zealand
0 0 2000 2002 2004 2006 2008
Source: Statistics New Zealand Business Demographics database
5.7 Firm dynamics
5.7.1 Firm births and deaths
Business start-ups indicate how conducive a region is to encouraging entrepreneurship. Business start-ups are influenced by general national and regional economic conditions, regulations and access to finance. At a regional level, entrepreneurial culture and the willingness of entrepreneurs to take a risk are important for business development.
The corollary of start-ups is that some firms will go out of business, and this is not necessarily a bad thing, as it releases resources for new and growing firms.
As Figure 51 shows a greater number of firms have been started each year since 2001 than have closed in Nelson and Tasman (the ratio of births to deaths is greater than 1)10.
10 Data on business births and deaths are from Statistics New Zealand, from a customised data request.
Tracking the Nelson Regional Economy 52
Figure 51 Business births relative to deaths Ratio of business births to business deaths
2.0 Nelson/Tasman
New Zealand
1.5
1.0
0.5
0.0 2001 2002 2003 2004 2005 2006 2007 2008
Source: Statistics New Zealand
The notable increase in net births in 2004 was largely due to improved use of administrative data - enterprises which existed but were not previously counted were added to the sample.
The ratio of firms start-ups to deaths is similar for the Nelson Tasman region as the New Zealand average. Some difference in the Nelson Tasman and New Zealand ratios is to be expected due to the relative greater importance to the region of particular sectors, primarily agriculture.
The relevance of firm births and deaths for labour productivity was investigated by the New Zealand Treasury (Law and McLellan 2005). They found that firms both entering and exiting the market had below average labour productivity. The productivity of start- ups grew rapidly after birth, whereas the productivity of dying firms was generally stagnant or declining prior to death. Their findings suggest that firm turnover contributes positively to labour productivity growth in New Zealand. We would expect a similar story for the regional economy: higher rates of firm turnover should contribute positively to labour productivity.
Tracking the Nelson Regional Economy 53
Appendix A Table of figures
Figure 1 Key industries in Nelson and Tasman...... 9 Figure 2 Composition of GDP...... 10 Figure 3 Shares of GDP compared to New Zealand...... 11 Figure 4 Shares of GDP compared to reference regions...... 11 Figure 5 Distribution of employment by industry in Nelson/Tasman...... 12 Figure 6 Distribution of workplaces & employment by size in Nelson/Tasman...... 13 Figure 7 Distribution of employment by workplace size compared to reference regions..13 Figure 8 Trends in GDP compared to New Zealand ...... 19 Figure 9 Trends in GDP compared to reference regions ...... 20 Figure 10 Growth in GDP per capita ...... 20 Figure 11 Trends in population compared to New Zealand ...... 21 Figure 12 Trends in population within the region ...... 22 Figure 13 Population growth compared to reference regions ...... 22 Figure 14 Trends in migration in Nelson/Tasman ...... 23 Figure 15 Trends in net migration...... 24 Figure 16 Trends in migration compared to reference regions ...... 24 Figure 17 General business situation and GDP ...... 25 Figure 18 Domestic trading activity – next three months ...... 26 Figure 19 Numbers employed – next three months ...... 27 Figure 20 Investment intentions – next twelve months ...... 27 Figure 21 Individual incomes, 2006...... 28 Figure 22 Trends in individual incomes...... 29 Figure 23 Trends in individual incomes compared to reference regions...... 29 Figure 24 Trends in household incomes ...... 30 Figure 25 Trends in household incomes compared to reference regions...... 31 Figure 26 GDP per capita...... 31 Figure 27 Increases in house values...... 32 Figure 28 Housing affordability...... 33 Figure 29 Internet use ...... 34 Figure 30 Trends in the working age population and labour force ...... 35 Figure 31 Trends in labour force participation...... 35 Figure 32 Trends in employment...... 36 Figure 33 Trends in unemployment...... 37 Figure 34 Trends in registered unemployment...... 38
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