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Regional economies

by Malcolm McKinnon

Farming has been important in many regional economies for over a century, but people find most jobs in New Zealand’s towns and cities. Spectacular scenery in Central Otago and on the West Coast makes tourism a big player in the economy of these regions, although viticulture and mining also feature.


Early regional economies

What is a regional economy?

Different regions of any country have different combinations of physical and human resources – ‘resource endowments’ – and these give rise to different regional economies. Decisions by workers and businesses can intensify the differences between economies: businesses may open or close; workers may move away or come in. Government policies at national and local levels can also cause differences: schools or hospitals may be opened or closed; a railway built here, or closed there.

Regional economies can be defined in two different ways. Regions may be characterised by the sharing of certain economic indicators, such as similar production profiles. These can be called ecological or landscape regions. An example is the South Island high country east of the Southern Alps, where land is either unutilised or given over to extensive pastoral farming.

Regions may also be defined by economic integration – these can be called economic regions. An example is Canterbury, which includes the parts of the high country and neighbouring plains that have economic links with Christchurch.

Early Māori

New Zealand’s first regions were ecologically based. Māori were drawn to those parts of the country where moa or seals were found in large numbers – Canterbury and Otago in the case of moa, and rocky coasts for seals.

Other parts of the country had economies based on horticulture, bird snaring and inshore fishing. Horticulture and snaring thrived best in the more temperate part of the country – the upper North Island.

With the demise of the moa and many seal populations, the north became the most populated part of the country. The differences in climate and resources divided the country into three main regions:

  • the north, where probably two-thirds of the population lived
  • the middle regions, where horticulture was marginal
  • most of the South Island, which was sparsely populated.

Exchange, a form of trade, allowed some products to move from one end of the country to the other, notably volcanic glass (obsidian) and pounamu (jade or greenstone). But the exploitation of them did not lead to permanent settlement.

Local exchange created an early form of economic regions. Inland people would travel to the coast for seafood. Coastal people would travel inland for bird snaring. Oral traditions often tell of such journeying.

Early Europeans

The regional pattern of early European encounters in New Zealand was dictated by the distribution of natural resources – timber, flax, seals and whales – and places of population where they could trade goods for food.

Sealing stations were mostly located around Foveaux Strait, between Stewart Island and the Fiordland and Southland coasts. The seal population was severely depleted by the 1810s.

From the late 1820s to the 1840s (at which time whale numbers declined) shore whaling stations were established, especially in the far south, around Cook Strait and along the east coast.

Flax was sourced from a number of low-lying coastal areas, notably in the Bay of Plenty, the East Coast, and west coast harbours in the upper North Island. Kauri, found mostly in Northland and Coromandel, was the most favoured timber. It was felled near rivers and creeks so it could be readily shipped out.

Trading settlements grew up where Māori could supply Europeans with produce, and Europeans could supply manufactured goods and cloth to Māori. This occurred wherever there were significant numbers of Māori, and was not a regional pattern. Kororāreka and Maketū were examples of such settlements.

European immigrant settlements were established throughout New Zealand between 1840 and 1850. All initially depended on capital brought by immigrants or investors, and when the capital ran out they struggled; in 1850 the non-Māori population was only about 30,000.


Development of regional economies, 1850 to 1920

From around 1850 the principal economic activity through parts of the lower North Island and much of the South Island came to be farming sheep for wool. Flocks were pastured across the grasslands on the eastern plains and basins of both islands. The wool was exported.

Towns and ports became points of intersection between the sheep runs and their distant markets, as well as channels for imports. With ports serving distinct hinterlands, a series of economic regions was created.

The South Island and the lower and upper North Island developed at different paces. The South Island was earliest, followed by the lower North Island and then the upper North Island.

South Island

Most of the farmable parts of the South Island were in pasture or crops by 1880. Nelson, Blenheim (with its port of Picton), Christchurch (with Lyttelton), Timaru, Ōamaru, Dunedin (with Port Chalmers) and Invercargill (with Bluff) were all agricultural service towns with ports for their regional economies.

In the 1880s large areas in such regions switched from growing crops to pasture, as the frozen meat trade to the UK flourished.

The West Coast was the exception to the South Island pattern of economic regions. Initially opened up by gold miners in the 1860s, by 1920 its economy was dominated by coal mining, with Westport the centre for the northern (Buller) region, and Greymouth servicing the central and southern (Westland) region.

Dredging for gold flourished in Central Otago in the 1890s and 1900s, but waned thereafter. Mining outside the West Coast was not a feature of whole regions, but of individual settlements such as Kaitangata in Otago, and Nightcaps in Southland.

Lower North Island

In the North Island, Hawke’s Bay and Wairarapa, both with much open land, developed first. Hawke’s Bay had its own port at Napier. Wairarapa runholders used Wellington once a rail connection was established in 1878.

Elsewhere in the lower North Island control of land was gained from Māori, and extensive tracts of forest were cleared, after which regional economies developed. There were three focal points:

  • New Plymouth, which was the port and principal town for the dairy districts of Taranaki
  • Whanganui township, which was the port for a vast pastoral region extending inland to Mt Ruapehu
  • Palmerston North, which was an inland ‘port’ – a hub for rail communications and a centre for rural Manawatū.

Upper North Island

The kauri harvest dominated the economy of the upper North Island – the old Auckland province – until 1910. Together, kauri and kauri gum accounted for 58% of the province’s exports in 1885. A fair proportion was exported through the port of Auckland, which was by far the principal port nationally for inbound goods. A network of coastal shipping routes linked smaller ports in the region to Auckland.

Story of a New Zealand region

 

Jane Mander’s The story of a New Zealand river (1920), about life in a timber settlement on the Kaipara River, for which Auckland is ‘town’, captured the contours of the provincial economy of the north at the onset of the 20th century.

 

Second only to kauri product was gold, which was mined by business enterprise on the Coromandel Peninsula, mostly financed from and exported through Auckland.

Rotorua was the centre for a fledgling tourist region economy that reached to Lake Taupō, Mt Ruapehu and the headwaters of the Whanganui River.

Farming was not economically important in the north of the North Island before 1900 – soils and climatic conditions did not suit the pasturing of sheep, and there were only local markets for the production of butter and cheese. The East Coast was an exception – its pastoral economy was ecologically an extension of Hawke’s Bay, but it developed a distinct regional economy around the town of Gisborne.

After 1900 dairying expanded rapidly in Northland, Waikato and the Bay of Plenty, and sheep farming expanded in the King Country. Auckland continued to be the principal port for these districts, but population increases and the development of urban centres – notably Hamilton in Waikato – created new regional economies by 1920.


Regional economies, 1920 to 1960

The regional character of the economy in 1920 was the product of the settlement and development processes of the preceding 60 years. Three main changes took place over the next 40 years:

  • towns and cities grew faster than rural areas, though this did not change the regional map
  • manufacturing became important in some regions
  • one further regional economy developed – on the Volcanic Plateau of the North Island.

Urban growth and regions

Once rural areas had been opened up, population increase slowed down, except in the towns. An increasing proportion of people who serviced the regional economy – through businesses or shops, in schools and in hospitals – worked in the towns. Smaller numbers continued to work on the land. New Zealand’s population, which was 61% urban in 1921, was 76.4% urban by 1961.

The map of regional economies changed little – the nexus of port, town and hinterland remained characteristic. When the Encyclopaedia of New Zealand marked out regions in the early 1960s, they closely resembled those of 1920.

Manufacturing

The principal manufacturing of the early 20th century – meat freezing, and butter and cheese production – reproduced the production economy of the regions. Dairy factories in particular stayed close to suppliers. Meat freezing works were often located on rail lines and near ports. So Wellington gained major works that drew their ‘kill’ from Manawatū and Wairarapa.

Other kinds of manufacturing were a product of population growth and import-substitution policies. These manufacturing plants tended to be located near centres of population, so the growth in manufacturing reinforced the dominance of the main centres, particularly Auckland, Wellington and Christchurch. In 1956 those cities accounted for 60% of the manufacturing labour force, but only 40% of the population.

Some manufacturing – particularly of garments – thrived in towns such as Dannevirke, Levin and Ōamaru, which did not have large markets but had a supply of labour, particularly women. These towns became larger than they would have if they were simply service towns for rural hinterlands.

Volcanic Plateau

A distinctive regional economy developed on the Volcanic Plateau in the 1950s – a combination of electricity generation, timber, tourism and farming. Hydroelectricity schemes employed a lot of workers during the construction of power stations – between the late 1940s and the early 1980s construction was almost continuous in schemes on both the North and South islands. But on the Volcanic Plateau there were so many, and the region was so under-populated, that they shaped the character of the region.

The plateau’s exotic forest plantations came to maturity in the 1950s, and plants at Kinleith, near Tokoroa, and at Kawerau were built to process timber. The timber industry was far more prominent on the Volcanic Plateau than in any other region.

Bay of plenty of activity

 

The economic boom on the Volcanic Plateau linked it to the coastal Bay of Plenty once the port at Tauranga was developed as an outlet for the timber harvested on the Plateau. The name Bay of Plenty was applied jointly to both areas.

 

Ecological regions in the 20th century

Geographer Kenneth Cumberland identified 11 ecological regions in 1948. Each had a different profile. He grouped economic regions, for example the East Coast, Hawke’s Bay and Wairarapa, which had similar patterns of land use and production.


Regional economies, 1960 to 2000

Between 1960 and 2000 a number of developments shaped the regional character of the economy:

  • new resource-based industries emerged in some regions
  • debate took place on the need for government-assisted regional development
  • manufacturing declined in importance
  • tourism, recreation, horticulture and lifestyle choices shaped economic activity in some regions.

New resource-based developments

Large-scale manufacturing affected some regions:

  • an aluminium smelter at Bluff in Southland contributed a significant wage and purchase bill to that regional economy
  • Kāpuni and Māui gas fields in Taranaki were exploited from the 1960s, and in the early 1970s a number of downstream plants were also established
  • a steel mill was built at Waiuku in South Auckland – it had an employment impact on the local district, but not on the region as a whole.

Debate on regional development

Differences between regional rates of growth prompted a debate on regional development in the late 1960s – should lagging regions be assisted, and if so, how?

The ‘lagging’ regions were those where extensive pastoral farming or other extractive industries were dominant, but not generating enough growth; for example on the East Coast, the West Coast and in Southland.

The development of manufacturing created another kind of inequality. Manufacturing for local consumers became concentrated near the largest markets: Auckland, Wellington and Christchurch. By 2000 Auckland was four times the size of the other two cities. Dunedin, which in the late 19th century had been New Zealand’s principal manufacturing centre, was disadvantaged.

In terms of employment and income levels, New Zealand did not have significant regional imbalances in the early 1970s. Regional development was provincialism by another name – regions lobbying for government spending, usually on infrastructure such as container ports, or items such as specialist university schools or the latest medical technology.

Decline in manufacturing

From the mid-1980s the government relied on the market to shape economic decisions by workers, employers or investors.

Import licensing and tariff protection were scrapped, and a lot of manufacturing became uneconomic. The manufacturing labour force fell from 24.7% of the total labour force in 1976 to 12.9% in 2000. There was a change in the character of regions where manufacturing had been important. The demise of car assembly in Wellington, its major centre, contributed to manufacturing employment falling from 18.7% of total employment in 1976 to 9.8% in 1996.

Closure of many government services and rationalisation by private firms made regional economies thinner, with fewer possibilities for growth.

Tourism, recreation, horticulture and lifestyle

Tourism became a major sector for the Volcanic Plateau, the West Coast and Central Otago. In the West Coast it outranked mining, forestry and farming as a source of income. On the Volcanic Plateau tourism and recreation had long been important, but their significance increased with the relative decline of forestry.

The growth of horticulture, in particular vineyards, caused new economic and settlement patterns to develop, notably in Marlborough and parts of Central Otago. Vineyard visits became popular with tourists.

In the vicinity of major cities, and also in areas such as Central Otago, economies grew and reoriented themselves as people moved for lifestyle reasons. Queenstown Lakes was the fastest-growing district in the South Island in the early 2000s. Retirement movement to ‘sunbelt’ towns led Nelson to grow faster than Invercargill, Kāpiti faster than Porirua, and Tauranga faster than Rotorua.

On the outskirts of cities such movements were more diverse and less age-specific. On the outer margins of Christchurch and Auckland, new settlement revived economic activity in many otherwise declining towns, but it extended urban influence rather than creating new regional economies.


Regional character of the economy, early 2000s

Population-based sectors in regional economies

Sectors such as education, health and the retail trade have displayed very similar patterns across regions, because their incidence is population-based. But the pattern for tertiary education was more concentrated. In Manawatū 9.4% of the workforce was employed in tertiary education in 2006, compared with 7.2% nationally, because Massey University and other tertiary educational institutions were located there.

Small regions lacking a major hospital naturally registered low on health-sector employment – health workers were 4.8% of the workforce in the King Country in 2006, compared with 8.1% nationally.

Farming, manufacturing and mining

In the early 2000s farming remained important for employment in a number of regions. It accounted for over a quarter of the labour force in the King Country in 2006, and over 15% in the East Coast, Wairarapa, Marlborough, South Canterbury and Southland, compared with 6.8% nationally.

Mining accounted for 3.9% of the West Coast labour force – not a large percentage but nearly 20 times the national average.

Much manufacturing in the early 2000s was primary-product based. It was therefore significant in a number of rural regions, notably Taranaki, Hawke’s Bay, South Canterbury and Southland. Wellington had the smallest manufacturing labour force of the main centres – just 6.7% in 2006, compared with Auckland’s 11.3% and Canterbury’s 12.8%.

Tourism

The accommodation sector was important on the Volcanic Plateau, on the West Coast and in Otago, illustrating the importance of tourism to their economies. In all three regions it accounted for 9–10% of employment in 2006, compared with 5.6% nationally, and in the Queenstown Lakes district, the most visited part of Otago, that figure rose to 17.8%.

Two distinctive cities

In the early 2000s Auckland and Wellington had high concentrations of workers in the information, financial and professional sectors – combined, these accounted for 13% of employment nationally in 2006, but 18.2% in Auckland and 21.3% in Wellington.

But there were marked differences between the two cities. The wholesale trade sector accounted for 7.4% of Auckland’s workforce compared with 5% nationally, reflecting its central role in the import and distribution of goods. In Wellington, the capital city, 10.7% of the workforce was employed in the public administration sector in 2006, compared with 4.1% nationally.

Whereas the combined Wellington urban areas formed a single labour market, Auckland was more segmented. The different industrial compositions of Auckland and the North Shore on the one hand, and Manukau on the other showed:

  • North Shore and Auckland city combined were twice as strongly represented as Manukau in the professional and related sector in 2006 – 13.7% compared with 6.7%
  • Manukau was twice as strongly represented in manufacturing – 15.9% compared with 8.6% in the North Shore and Auckland.

Other cities’ economies

Other major cities – Christchurch, Hamilton and Tauranga – did not have such specialised functions and displayed an industry structure much closer to the national one in the early 2000s, although the importance of the construction industry in Tauranga reflected the city’s rapid growth, including the expansion of its port.

Dunedin diverged markedly from the national profile in education and health, on account of its university and medical school. The two sectors accounted for just over 22.2% of employment in 2006, compared with just over 15% nationally.

Occupation, age and regions

Economic regions had varying age and occupational characteristics in the early 2000s. Wellington and Auckland had a high proportion of professionals, whereas rural regions had very high proportions of labourers. Other categories were fairly evenly distributed.

The most marked difference in age was between North and South Island regions. In the north, 23.7% of the population were aged up to 15 in 2006, compared with 21.0% in the south. The north had 11.2% aged 65 and over, compared with 13.2% in the south.

Ethnicity and regions

Immigrants mostly look for work in cities, particularly the largest, Auckland. In 2006, 19% of Aucklanders were Asian, compared with the national figure of 9.2%. Auckland also had the highest proportion of Pacific peoples – 14.4% compared with 6.9% nationally.


External links and sources

More suggestions and sources


How to cite this page: Malcolm McKinnon, 'Regional economies', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/regional-economies/print (accessed 13 August 2020)

Story by Malcolm McKinnon, published 11 Mar 2010