Why 'zombie towns' are appearing all over NZ revealed in new report

Auckland's rapid growth in recent years is leaving some regions littered with "zombie towns", while helping others grow as "refugees" flee the congested city, an economist has claimed.

A new report out on Thursday from the Productivity Commission, New jobs, old jobs: the evolution of work in New Zealand's cities and towns, takes a close look at what's changed since the beginning of Sir Robert Muldoon's reign in the mid-1970s. 

It found most new jobs since then have appeared in big cities, especially Auckland, and declined in small towns. Hardest-hit have been those whose economies rely on manufacturing - in 1976, a quarter of all workers made things for a living, dropping to 10 percent by 2013. Despite its fast population growth, the real number of manufacturing jobs in Auckland actually fell.

Employment in primary industries across the country also dropped, from 3 to 2.4 percent of the workforce.

"The decline of manufacturing and the rise of service sectors has had important regional implications," the report, written by Andrew Coleman and Guanyu Zheng, reads. "This is because some of the fastest-growing service industries have disproportionally favoured larger urban areas."

Employment in New Zealand's nine biggest urban areas increased by 65 percent, but less than 15 percent in most others, and actually decreased in a few.

The worst-off places

Economist Shamubeel Eaqub told The AM Show on Thursday manufacturing has been in decline "for a long time".

"I got into a lot of trouble a few years ago when I called Whanganui a 'zombie town'. That was mainly because I was describing how lots of the reasons for small towns to exist was around these old-fashioned jobs - manufacturing and those kinds of things."

Tokoroa was ranked worst of New Zealand's 30 biggest centres in the report, having lost 44 percent of its jobs between 1976 and 2013. Greymouth, Whanganui and Oamaru all registered negative growth, while Levin, Invercargill, Masterton and Dunedin have been treading water for decades. 

And it's not going to get any easier for many small towns.

"In some places the decline is really hard to fight because they don't have a very strong reason to grow from where they are," said Eaqub. "If you're not already big or you don't have some very special thing that makes people want to move to your region or businesses to locate there, then it's really, really difficult."

Why some towns are doing just fine

On the other hand, some smaller centres have thrived - Tauranga, Kapiti, Rangiora and Queenstown have registered triple-figure growth in job numbers, and places like Nelson, Hamilton, Blenheim and Napier-Hastings are doing just fine, despite 40 years ago not being all that different to the likes of Tokoroa and Whanganui. The report has an explanation for that. 

"Much of the difference in the growth of medium-sized areas appears to stem from the rising importance of consumption amenities, such as a good climate and attractive scenery. In other words, employment grows in some areas because they are nicer places to live."

Shamubeel Eaqub.
Shamubeel Eaqub. Photo credit: The AM Show

Eaqub agrees, adding another possible reason some smaller centres haven't turned into zombies.

"Places like Queenstown, Tauranga or Hamilton, they're benefitting either from tourism or amenity value, or because they're next to a big city that's pushing up the growth."

For some North Island towns, Auckland's sheer size is keeping them alive.

"Auckland just take all the growth because it's becoming so constrained, it's so congested, it's so expensive... A lot of the congestion and the cost of Auckland are now making Auckland refugees, creating population growth in lots of places - places like Gisborne, which haven't grown for decades, grew by a very large amount in the last census."

Eaqub says the report will be of interest to the Government, particularly when it comes to allocating funds from the Provincial Growth Fund.

"When we think about putting money through the Provincial Growth Fund into these kinds of regions, we've got to ask ourselves what we are trying to achieve... This is actually very much an unknown science - economic development is something we haven't done for a very long time."

'Eyes open'

 Productivity Commission economics and research director Patrick Nolan says there's no going back.

"That shift has had pretty significant regional implications because the new jobs have been concentrated in larger areas," he told Newshub.

"The reality is that technological chance has always taken place and it's going to continue to take place, so we just have to have our eyes open about how to best manage it."