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Review of Central Hawke's Bay District District Plan District Attachment 1 Review of Central Hawke's Bay District District Plan District Economic Assessment August 2013 Report Prepared by Sean Bevin, Consulting Economic Analyst Economic Solutions Ltd, Napier Email: [email protected] Contents Executive Summary ........................................................................................................................ i 1- Introduction ............................................................................................................... 1 2- Economic Profile and Trends ..................................................................................... 2 3- Growth ‘Drivers’ and Development Opportunities ................................................. 13 4- Economic Growth Outlook ...................................................................................... 23 5- Accommodating Additional Business/Industry Development ................................ 26 6- Conclusion and Recommendations ......................................................................... 30 Appendices CHBD District Plan Aug131.doc Economic Solutions Ltd i Executive Summary 1. This report provides an economic assessment of the historical, current and forecast future situation of the Central Hawke’s Bay district, for the purposes of the review of the District Plan for the area that is now being undertaken by the Central Hawke’s Bay District Council. The report is also intended to inform the formulation and implementation of the Council’s important Economic Development Strategy. 2. The specific economic matters that are addressed in the assessment include the current demographic and economic profile of the district, trends in key economic indicators for the district over the past decade or so, the main drivers of economic and social/community development in the area, forecast future demographic and economic growth in the area over the longer-term, district advantages and strengths for additional industrial development, implications of the analysis for the District Plan review and also future economic development policy, and associated recommendations. 3. District Profile – the main findings of the report in respect of this matter are as follows: . The main demographic characterisatics of the district include its relatively small population base, limited population growth, majority rural population, ageing population, significant Maori population, household growth significantly ahead of population growth and an increasing number of single-person households. Rural economic activity accounts for the vast majority of the total district land area and pastoral farming and associated cropping account for most of the total rural production land. Horticultural land uses have grown considerably over the past decade but nevertheless still account for a relatively small proportion of the total rural production land area. The total rural land area under irrigation is currently in the order of 7,500ha or 3% of the total pastoral/ cropping/horticultural land area in the district. Primary production and commercial/ business services account for over 80% of all businesses in the district, with sheep/beef/grain farming accounting for the highest proportion of total agricultural sector business numbers. The district has a limited base of manufacturing businesses. Grape-growing, mixed sheep/beef and dairying enterprises have increased in number noticeably during the past ten years. The dominant manufacturing activity is meat processing, followed well behind by log sawmilling, and the manufacturing of fabricated metal products and plant and equipment. The district also has a predominantly small business profile. The direct wealth-creating sectors of primary production and processing-manufacturing collectively account for about 55% of total economic activity and employment in the district. Changing external market conditions impacting these sectors result in a considerably fluctuating economic growth track in the area. As with the rest of the Hawke’s Bay region, overall earnings levels and the standard of living in the district are noticeably below the overall national situation. Tourism adds to the much needed economic diversification of the district. Over the past decade, annual employment in the district has generally been in the range 6,000- 7,000. Unemployment has been increasing since 2006/2007 and the annualised rate of unemployment in 2012 stood at 8.3%. Employment seasonality is a particular feature of the district, as it is across the Hawke’s Bay region as a whole. CHBD District Plan Aug131.doc Economic Solutions Ltd ii 4. Economic and Social Development ‘Drivers’ – the detailed report identifies the main ‘drivers’ over time of economic and social development in the district as including: . Historically, the economic state of the dominant primary production sector (especially sheep and beef farming) and the related primary processing and rural servicing sectors. The primary production and processing sectors have in turn been significantly influenced over time by a range of internal and external factors such as climatic vagaries, livestock numbers, international market conditions, exchange rate levels, labour availability, processing capacity, farm management and farming practices, degree of land use intensification and technology change (including irrigation). Population and household growth, and the availability of employment opportunities. 5. Future Population and Household Growth – the main findings of the analysis in the report on this matter, are as follows: . Both population and household growth in the district are currently tracking Statistics New Zealand ‘Medium’ or ‘middle of the road’ growth projections for these two indicators, which indicate total population decline of close to 8% over 2013-2031 accompanied by limited total household growth of under 3%. The population of both the 0-14 and 15-64 (traditional working- age cohort) age-groups is projected to fall significantly whilst the 65+ population is projected to double. The district’s Maori population is projected to increase by 10% over the period. The amount of zoned and serviced land currently available in the district for additional housing is considerably in excess of even the Statistics New Zealand most optimistic household growth projection for the area. The proposed Ruataniwha Water Storage Scheme, if implemented, will result in a considerable additional labour requirement for the district. Whilst the analysis in the report infers, on the basis of prevailing and projected population growth trends, a good case for the formulation and implementation of a focused population growth and attraction strategy in the district, nevertheless, it is considered that this should await the provision by Statistics New Zealand of the detailed population results for the area from the 2013 Census and a detailed analysis of the results and their implications for the future development of the district. It is also considered that a future population growth strategy in the district should also be closely linked to, amongst other factors, addressing specific development requirements and opportunities in the area (such as the proposed major water storage project), in order that the strategy contributes to sustainable population, residential and economic growth and development in Central Hawke’s Bay. 6. Ruataniwha Water Storage Scheme – the main points to note from the analysis on this matter are as follows: . One of the objectives of the Scheme, which is now being assessed by the Government’s Environmental Protection Authority, is to provide a major and secure supply of irrigation water for future rural land use in its catchment. Current planning is that the Scheme could potentially irrigate 20,000 to 30,000ha of farmland with associated productivity gains extending to a CHBD District Plan Aug131.doc Economic Solutions Ltd iii greater area. As with other significant irrigation initiatives in New Zealand, the Scheme should facilitate a wider range of and more intensive agricultural land uses in the district (e.g. grazing, mixed use/cropping, vegetable growing, dairying, pipfruit and viticulture), resulting in a currently estimated $160 million annual increase in farm-gate production in the area. The total multiplied or flow-on regional GDP and employment impacts of the Scheme are currently respectively assessed at, at the present time: construction ($350 million GDP spread over 12 years and a total employment impact of 4000 job-years or the equivalent of 4000 people each working on a particular job for one year), increased farm production (an annual GDP gain of $127 million and an associated total fulltime equivalent employment impact of 1,160) and allied additional processing activity (potential maximum annual impacts of GDP $108 million and employment 1,090). The multiplied or flow-on impacts cover the business activity required to service the total construction stage for the Scheme (construction of the dam and the irrigation network), agricultural activity once the network is operational, any allied ‘processing’ activity and the household spending of personnel involved in some capacity with the construction and ongoing operation (including additional agricultural activity) of the Scheme. The impacts therefore represent a significant additional or new commercial opportunity for local and regional businesses, as well as providing further employment opportunities in the district and region. The detailed report identifies a range
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