Globalisation and the relaxation of border controls have radically changed the way in which local and regional economies work. Cities, districts and regions in New Zealand are now competing against their peers in other parts of the world for the same capital and same skilled workers. To succeed, local authorities need to ensure that they not only offer a good life and effective infrastructure and services they must also promote these attributes internationally.
Councils already make a significant financial contribution to economic development activities within their districts. In the 2015/16 financial year this amounted to approximately $250 million in spending specifically earmarked to increasing economic growth. Many of these programmes are undertaken in collaboration with central government agencies and local partners.
It is important, not only to communities but to New Zealand as a whole, that this investment is well targeted and results in positive economic outcomes.
Councils need to find ways to make their centres into environments which offer opportunities in education, employment and business. They need to become places where skilled locals want to stay and set up business and where skilled migrants will want to settle.
LGNZ is reviewing the effectiveness of local government’s economic development spend in order to develop frameworks and models to improve accountability and performance across the sector. The resulting outcomes will be promoted by LGNZ and shared amongst member authorities.
In order to be a successful trading nation New Zealand must develop and strengthen ties with potential markets. Investment flows not to countries but to cities and places within countries that are attractive to entrepreneurs and investors. To be successful New Zealand cities must strengthen their links with cities elsewhere. LGNZ is leading work on growing international relationships to increase sub-national linkages with cities and regions elsewhere.
Current frameworks dis-incentivise councils from investing in activities to grow their economies as a result of the fact that taxation, in the form of GST or income taxes, created by new growth goes to central government. Councils receive no revenue boost. LGNZ is working to change this situation by advocating for a mechanism that will allow councils to capture “value uplift”, for example, through mechanisms such as special economic zones.
The visitor industry is now New Zealand’s largest export industry however the speed of its growth is putting many of New Zealand’s smaller communities under pressure. It is a problem created by the way in which councils are funded as new facilities will be paid for out of property taxes while visitor expenditure, in the form of increased GST and income tax, benefits central rather than local government.
Without more equitable forms of funding there is a risk that visitors will lack the appropriate range of local amenities they need to have a positive experience. This poses a reputational risk for New Zealand as well as a policy risk for tourism as a whole should communities object to paying for an industry which creates national rather than local benefits.
LGNZ is committed to working with the Government and industry organisations to identify additional funding or funding tools to ensure that the cost of providing services and amenities to visitors is not met solely by property taxes.
To ensure the benefits of our growing economy are evenly distributed across communities, local and central government need to work together and develop a shared national approach to this complex and developing issue.
Date updated: 23 May 2017