The Challenges facing small towns

Outside our main centres, the dual challenges of decreasing population growth rates and a steadily aging population are putting pressure on small town New Zealand.

Additionally, regions with smaller population bases and less dominant service sectors often rely on primary production industries, such as agriculture or horticulture, which yield lower average incomes and skill requirements, and face their own challenges in remaining relevant in an ever-changing, increasingly international marketplace.

Aging populations

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Many of our regional populations are aging. This follows a wider OECD trend for aging populations across the western world, and is equally apparent nationally in New Zealand in our main centres. This issue is compounded by population movements within the country. As more people are drawn to our cities, there are potentially fewer young people and families to drive economic activity in our small towns and regions.

Some of the consequences of population aging can be:

  1. Lower average household incomes. Regions with an older demographic balance tend to feature lower levels of household income, a major factor in the assessment of living standards.
  2. Lower rates of growth for local government income. Local governments are responsible for providing a plethora of services to local populations. Aging populations with lower household incomes and slowing rates of population growth threaten a disparity between services required and available tax/rate revenue to support that spending.
  3. Population decline and shrinking workforces. In the longer term, with lower population growth rates, many regions face reducing populations and shrinking workforces. As age steadily increases, deaths by their very nature increase. Without a matching stream of incoming residents and workers, either through local births or immigration, a newer form of ‘depopulation’ (as seen in Japan in the last decade) may mean some local services become unsustainable in terms of patronage (eg schools, retail outlets) and funding (eg council rates). Population decline may also dampen housing demand – though our ageing population will help offset this. Over the next two decades we can expect to see, with few exceptions, one territorial authority (regional and district councils) after another reach the end of growth and, in most cases, shrink in size. By 2043 around 44 territorial authorities (TAs) are projected to be experiencing decline, by then affecting 22 per cent of New Zealand’s projected population of 5.6 million.
Dependence on limited primary industry

Dependence on limited primary industry

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Many regions are faced with economic dependence on a limited number of traditional primary industries – like fishing, horticulture, forestry and agriculture.

These primary industries, while vital to our economy, generally feature lower rates of GDP per worker, lower average incomes and lower skill level requirements than the more service-oriented industries clustered in and around our main centres.

As such, workers in the regions, on average, are less productive and earn less than the national average in economic terms.

Diversifying local economies is a priority, to create stronger, more robust regional economies that can support income and employments rates to foster and sustain a healthy community and bolster living standards for a wider range of kiwis.

Increasing regional activity.

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If many of our regions are to meet the challenges of an aging population, shrinking workforces and the resulting potential for economic stagnation or decline, game changing industries like the oil and gas industry offer high value jobs and essential economic activity.

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