Part 3: Population projections and demographic

Matters arising from the 2015-25 local authority long-term plans.

In this Part, we discuss what local authorities included in their LTPs about population projections and demographics, and the effect of these assumptions on each local authority's plans. We also comment on economic development initiatives because many local authorities discussed the importance of economic development initiatives in addressing changes in population.

Population trends

Declining and ageing populations are seen as significant issues for much of regional New Zealand. By contrast, some local authorities are experiencing, and projecting, strong growth. We wanted to assess the assumptions that local authorities made in their LTPs about population and demographic change, and consider how they proposed to respond to those changes.

We compared the information in the LTPs with historical and future trends that central government agencies have reported widely and publicly. All LTPs indicated varying changes in population movements in the years ahead, but not all local authorities are facing a declining population. Most local authorities acknowledged that they had an ageing community, which could present a significant future challenge.

The population assumptions that local authorities use inform the future direction that each local authority will take, and should be important in determining their financial strategy and infrastructure strategy. It is important that assumptions are appropriately linked to both strategies. If a local authority anticipates a declining and ageing population within the next 30 years, that local authority's infrastructure strategy should indicate how the council intends to meet the changed infrastructure needs of its community as the population changes. The financial strategy should give a picture of how this will be funded. We did not see those clear links in many LTPs.

Our review identified some inconsistencies in the quality of disclosures about population assumptions in the LTPs. Local authorities used inconsistent periods to report their projected population changes. At the least, good practice would be for population assumptions to cover the 10-year period of the LTP, and the 30-year period of the infrastructure strategy.

Population movements

All local authorities are required to identify their significant forecasting assumptions in their LTPs, including the level of uncertainty with those assumptions, and must disclose the possible effect of uncertainties on the financial forecasts.7

These assumptions include growth forecasts,8 which are significant in determining the expected future demand for services and, therefore, the local authority's spending. A growing community puts increasing pressure on the services that the local authority must provide. It is important that the local authority can accurately forecast any increases in its population so that it can adequately plan to meet the community's needs in the future.

A declining population might expect to receive the same services, but demand for those services will reduce as the population reduces. This means that fewer ratepayers meet the cost of those services, making the services more costly for each ratepayer.

Historical trends

New Zealand has 17 regions, each governed by a regional council or unitary authority. Within those regions are 67 districts.9 Each is governed by either a city or district council, unless the region is governed by a unitary authority. A unitary authority, such as Marlborough District Council, covers the roles of both regional council and district council.

The 2013 Census of the country's "usually resident population" reported that all regions but one showed population growth or had steady populations between 2006 and 2013. The exception was Gisborne, which experienced a slight decline. This means that, although some districts within a region might have experienced a decline, the population of the region as a whole increased (except for Gisborne).

According to the 2013 Census, 47 of the 67 territorial authorities – that is, city, district, and unitary councils, but not regional councils – experienced population growth between 2006 and 2013. Eighteen districts experienced a decline in population and two remained static. Of the districts that experienced a decline, Waitomo, Ruapehu, Wairoa, and Opotiki experienced the biggest average annual changes of between -0.1% and -1.9%.

Predicted population change

The Thirty Year New Zealand Infrastructure Plan 2015 reports that between 2013 and 2043, all regions will experience population growth, to varying degrees. The West Coast, Southland, Gisborne, and Manawatu-Wanganui regions will experience the lowest rate of growth at 1%.10 Unsurprisingly, the most growth is predicted for Auckland, at 33%.11

What local authorities said in their LTPs

In their LTPs, eight of the 11 regional councils predicted population increases. The other three regional councils anticipated no change to their populations. Of the six unitary authorities, five expected growth. Only Chatham Islands Council expected no change.

Forty-six of the 61 city and district councils are anticipating growth, 10 are expecting some decline, and five expect their populations to remain static.12 So, although none of the regional councils are anticipating declines in their populations, 15 districts13 within the regions projected either a static population or some decline in numbers.

There can be markedly different population changes in the urban areas compared with the rural and provincial areas. Some regional councils are forecasting growth in their urban centres, yet anticipate decline in their rural centres. In the Waikato region, for example, Hamilton City Council, Waipa District Council, and Waikato District Council forecast strong growth, while the region's other local authorities face either slow growth or a declining population. These significant variations are likely to present some challenges to the local authorities in terms of working together for the betterment of the region as a whole when the districts within the region may have different needs. We note that Hamilton City Council, Waipa District Council, and Waikato District Council have set up a collaborative planning framework to respond to this issue.

The projected population increases from 2015 to 2025 varied, from a nominal increase of 160 for Central Hawke's Bay District Council and 325 for Waitaki District Council to an increase of 20,240 for Hamilton City Council. Figure 16 shows projected population change by region.

Figure 16
A regional view of projected population change (includes unitary, district, and city councils)

Figure 16 A regional view of projected population change (includes unitary, district, and city councils) .

Source: Data collated by our office from information available in long-term plans.

Of the local authorities projecting declining populations, two were projecting a decline over the 10-year period of the LTP, three projected a decline by 2023, two were unclear about the period of decline, one projected a decline by 2031, and two projected a decline by 2045.

Consistency of reporting

The periods that local authorities used for their population projections are inconsistent. Many local authorities included projections for either the 10-year period from the 2013 Census or the period of the LTP. Others provided population projections to 2045, which was in line with the 30-year infrastructure strategies. Other local authorities used reporting periods ranging between 2019 and 2066. Figure 17 shows the different reporting periods that local authorities used for population projections in their LTPs.

Figure 17
Local authorities' reporting of population movements, by period

Figure 17 Local authorities' reporting of population movements, by period.

Source: Data collated by our office from information available in long-term plans.

Some local authorities forecast growth for more than one period. For example, Hamilton City Council included the forecast increases from 2015 to 2025, and then to 2045, and, finally, to 2061. We consider that this provided a richness of data that is useful for readers.

Some local authorities forecast a population increase between 2013 and 2033, and then projected a slowing down in growth or a decline by 2045. Timaru District Council projected an increase by 2033, with numbers peaking in 2038 before declining in 2063. Overall, the local authority expected its population in 2063 to be higher than its 2015 population.

Although many local authorities included population assumptions to 2045 (the 30-year period covered by the infrastructure strategy) in their LTPs, many did not. The infrastructure strategy is intended to provide the community with clarity about future infrastructure needs and proposals over a 30-year period. Providing information on population trends helps the community to better understand local authorities' intentions for future infrastructure needs.

We also saw variations in how local authorities chose to report their forecast population changes. Some used graphs with vague legends and minimal explanation, so it was difficult to determine specific numbers. Others used percentages instead of numbers. Some reported that they projected "a slight increase" or that there would be "no dramatic change".

Some local authorities reported a year-by-year percentage increase, but did not always provide the current population figures. This made it difficult to determine what the population would be at any given time.

Our comment

It is a matter for each local authority to determine how they report their assumptions in their planning documents. There is no legislative requirement for all local authorities to report uniformly. Our audit opinion covers the quality of the information and assumptions underlying the forecast information provided in the LTP. No LTP received a modified opinion, which means that we were satisfied that the assumptions used were reasonable. However, we consider there is merit in local authorities adopting a more uniform approach to their growth assumptions to enable more consistency of reporting. In our view, they should, at least, set out the forecast population changes during the 10-year period of the LTP and the 30-year period of the infrastructure strategy.

Ageing population

The number and proportion of people aged 65 and over is increasing.14 This affects population growth by slowing it down as deaths exceed births. Also, as more and more people reach retirement age, the working age population will reduce, putting pressure on local economies. As a community ages, its needs for community services will change. The community's infrastructure needs will also change. With more people moving on to fixed incomes, affordability will become an increasing challenge. The consequences of an ageing population are likely to be significant. Local authorities must anticipate these changing demands and respond appropriately.

Statistics New Zealand expects that, by 2031, deaths will outnumber births in 16 territorial authorities. For 56 territorial authorities, all of the population growth between 2011 and 2031 will be in the 65+ age bracket. Figure 18 shows the projected population growth of the 65+ age bracket for 2011-31.

Many LTPs acknowledge that an ageing population is going to present challenges for the local authority and the community. However, we saw little discussion about how local authorities were planning to respond to potential changing requirements for services and infrastructure. This could be because changes are not expected within the 10-year period of the current LTPs. However, changes are expected within 30 years – the period of the infrastructure strategies – and we would expect to see some discussion of this in the LTPs (see Part 4).

Figure 18
Projected percentage of population growth in 65+ age bracket, 2011-2031 (medium projection)

Territorial authorityProjected population growth of 65+ age bracket as percentage of total local authority area population growth
Auckland Council, Hamilton City Council, and Queenstown Lakes District Council 36-37%
Tauranga City Council, Wellington City Council, and Selwyn District Council 44-46%
Waikato District Council, Palmerston North City Council, and Waimakariri District Council 60-63%
Whangarei District Council and Christchurch City Council 95%
The other 56 territorial authorities 100%

Source: Statistics New Zealand.

Economic development initiatives

Local Government New Zealand has identified regional economic growth as a strategic priority and recently stated that:

... regional growth is critical for national economic and social prosperity. Growth in the regions helps to ensure that a broad range of opportunities exist for all New Zealand communities.15

Because of the anticipated effect of declining populations in some districts, strong growth projections in others, and a widespread ageing population, it is unsurprising that economic development featured in the latest LTPs.

Of the 78 local authorities, about half included some form of economic development initiative in their LTP. The rationale behind some initiatives was not always clear in the documents. We did not always see a clear link between the population assumptions and the economic development initiatives. Some local authorities could have provided better explanations for the reasons behind their economic development proposals.

Although regional economic development is a priority for the local government sector,16 the level of resources allocated to these initiatives in the LTPs varied greatly. In some instances, it was minimal. We also saw a wide variety of approaches in the LTPs to addressing the need for economic development initiatives. Some plans had more details about proposals, costs, and desired outcomes than others.

In paragraphs 3.33-3.45, we have included a selection of economic development initiatives included in the LTPs. We do not comment on the merits or otherwise of the initiatives, because they reflect policy decisions that each local authority has made.

Far North District Council

Far North District Council projects a population increase of 4269 between 2013 and 2033, using Statistics New Zealand's medium-growth projections. This growth will be uneven in the district, with some eastern coastal communities experiencing slight growth and most other townships experiencing a decline of between 0.02% and 2% a year. During the period of the latest LTP, the Council has used the low population projection and is anticipating that growth will decline at a rate of 0.02% a year.17

The Council's LTP identifies "sustainable development of our local economy through partnerships, innovation, quality infrastructure and planning" as a community outcome and Council goal. The LTP also acknowledges that affordability is the community's biggest single challenge, and the Council has put in place strategic plans to invest in the local economy.

Although the Council consulted on a proposal to reduce funding for economic development from $640,000 to $190,000 for year one of its LTP – and received community support for this proposal – in the end, the Council resolved to add an additional $130,000 to the proposed budget to support a clear strategic direction for economic development. The Council plans to use its funding to support initiatives arising from the Northland Regional Growth Strategy, such as infrastructure development, Māori land development, and promoting the district.

Wellington City Council

Wellington City Council anticipates slow growth between 2015 and 2024, with an increase in the population of 12,000 residents. This represents an average growth rate of 0.6% a year.18 The Council plans to invest in a range of initiatives that it hopes will provide an economic catalyst for the city, which should result in stronger growth. The LTP indicates that economic development is crucial to the future prosperity of the region. Many projects in the Council's LTP are intended to support a growing economy. The Council plans to invest $341 million in regional economic development initiatives through the Wellington Region Economic Development Agency19 during the period of the LTP to support increased growth, more jobs, and greater visitor numbers.20

Waikato Regional Council

Waikato Regional Council anticipates overall growth in the region's population to a peak of 505,405 in 2047 followed by a decline to 494,298 in 2063. However, not all the local authorities in the region will experience the same pattern. The Council acknowledges that the long-term sustainability of services in the declining districts might need to be addressed. Conversely, those growing districts will bring a different set of pressures for the Council to address.21

The LTP forecasts that the sharp fall in international dairy prices will have a big effect on the Waikato region's economy. In support of the Council's strategic focus on regional development, it has resolved to establish a regional development fund to promote economic development. During the period of the LTP, it is expected that $18.9 million will be available to inject into regional projects. It will be funded from the Council's investment fund.

Historically, the investment fund has contributed to subsidising rates. The level of subsidy will reduce during the first five years of the Council's LTP by about $250,000 a year to contribute to the regional development fund. The reduction in subsidy is expected to be offset by efficiency savings elsewhere.

The Council agreed to provide funding of $350,000 a year over 10 years to put into effect the Waikato Mayoral Forum's economic development strategy, Waikato Means Business. Most of the funding will be used to support initiatives needed to deliver agreed actions arising from the strategy.

Buller District Council

The fluctuating price of coal significantly affects Buller district, which has historically relied heavily on coal mining. After a decline in world coal prices, coal mining activity in the district has contracted. The Council is projecting an initial decline in population followed by a period of stabilisation and then a gradual increase as coal prices begin to recover and the district's economic diversity expands. At the end of the LTP period, the Council expects population levels to have recovered to about 500 more people than in 2015. With a focus on economic diversification, the Council anticipates a further increase in population by 2030.22

As well as limited growth, the Council expects the proportion of the population over 65 years of age to increase from 18% to 28% in the next 30 years.

The Council's infrastructure strategy recognises that the declining and ageing population will put pressure on the affordability of assets, and it must be able to deal with these pressures. The strategy states that the Council remain open to increasing expenditure where investment in infrastructure may assist economic growth.23

Recognising these challenges, one of the main initiatives in the Council's LTP is to support existing economic activity and diversification into new forms of economic enterprise. The Council believes this can be achieved with a local and "‘whole of Coast' effort" by collaborating with the other West Coast councils and their regional economic development agency, Development West Coast. Each council has agreed to contribute a part-time staff member to work with Development West Coast on various initiatives.

All four West Coast local authorities have adopted a West Coast Economic Development Strategy, expected to be a "springboard" for economic development. The strategy will be driven by Development West Coast. Funding from Buller District Council will support increased tourism efforts. In 2015/16, this funding is estimated at $226,000. Also, the Council has committed $149,000 in 2015/16 to support independent museums in the district.

Our observations

As can be seen from these four examples, local authorities have adopted a variety of different initiatives and plan to allocate funding to support economic development in their regions. We noted a range of reasons for the initiatives, which, as expected, were not always linked to declining or ageing populations.

Many of the local authorities that have adopted economic development programmes are anticipating growing populations. Of the 39 local authorities with economic development initiatives, only 19 were projecting static or declining populations.

As noted earlier, ageing populations present a challenge for most local authorities. It is possible that ageing populations are part of the reason for many of the initiatives. However, this was not immediately apparent from some LTPs. In our view, local authorities could provide a richer narrative to their communities about the rationale and desired outcomes of their economic development initiatives.

7: Clause 17 of Schedule 10 to the Act.

8: Although growth assumptions can relate to the number of rating units in a district, they can also relate to changes in population.

9: Including the Chatham Islands.

10: National Infrastructure Unit (2015), The Thirty Year New Zealand Infrastructure Plan 2015, page 38.

11: National Infrastructure Unit (2015), The Thirty Year New Zealand Infrastructure Plan 2015, page 38.

12: Excluding unitary authorities and regional councils. Some local authorities reported population increases in the early years, with slight declines further out – but an overall increase on 2013 figures.

13: Excluding unitary authorities, which are treated as regions for the purposes of this analysis.

14: Regional Economic Activity Report 2014 and Statistics New Zealand.

15: Local Government New Zealand (2015), Mobilising the regions: the role of transport infrastructure in achieving economic success across all of New Zealand, page 2.

16: Local Government New Zealand (2015), Mobilising the regions: the role of transport infrastructure in achieving economic success across all of New Zealand, page 2.

17: Far North District Council (2015), Long Term Plan 2015-2025, page 83.

18: Wellington City Council, Long-term Plan 2015-25, page 89.

19: Wellington City Council, Long-term Plan 2015-25, page 45.

20: Wellington City Council, Long-term Plan 2015-25, page 41.

21: Waikato Regional Council (2015), 2015-25 Long Term Plan, page 50.

22: Buller District Council (2015), Long Term Plan 2015-2025, page 158.

23: Buller District Council, Long Term Plan 2015-2025, page 41.