This rather saccharine picture turned up in my lettterbox yesterday on the back of a publicity (for the mayor and councillors) pamphlet from the Wellington City Council.
The picture was actually part of an advert for the coming local body elections, but I thought it quite nicely encapsulated what is wrong with the mindset of so much of local government, including the Wellington City Council.
Many people would settle for local government doing the basics well. In Wellington, we are living with the ongoing disaster that is the new bus schedules and bus contracts. It should really be pretty basic stuff – not as if running or contracting bus services is a new activity for local government – but they can’t even manage that. That particular failure is the responsibility of the Wellington Regional Council (and you have wonder whether any sitting councillors will be re-elected in October).
What of the Wellington City Council? In a post a couple of months ago, I noted a little example of ongoing incompetence – the month it took, after several reports, to get them to fix a water leak in the middle of the road at the end of a quiet no-exit street, defended by a council officer on the grounds that they had needed to put in place a “traffic management plan”.
That’s a small item, and perhaps my experience was unrepresentative. A bigger example was the debacle of the Island Bay cycleway: never mind that it wasn’t wanted by residents, and is now facing a multi-million do-over (and a court case for judicial review): it was an “amazing thing” championed by the Mayor and his colleages.
But there are plenty of really big items too – both actual failures, and grand schemes (“amazing things” probably) that typically involves plans to spend tens of millions of dollars of ratepayers’ money with little serious scrutiny and evaluation. The biggest failure of course is house and urban prices: not as bad as Auckland, but certainly getting up there. Buying a house in Wellington city in your 20s – the sort of thing that was a normal expectation just a few decades ago – is quite out of the reach of any average earner now. And whatever overarching failures of central government in permitting this, the actual choices around land use regulation are made by local governments. High house and urban land prices in Wellington City are almost totally the responsibility of the Wellington City Council. An “amazing thing” no doubt.
Then, of course, there are the schemes championed by the Mayor to spend lots of money on a Wellington airport runway extension, even though the owners of the airport don’t regard such an extension as economically viable for them. At present, that one is tied up in courts, but it is another “amazing thing” they are keen on. Or the planned convention centre? A mere bagatelle at $180 million, and never a reasonable explanation for why – if this was such a good idea – no one in the private sector was rushing to build it. Or the ever-escalating cost of fixing Wellington’s Town Hall (well over $100m and rising). Another “amazing thing”?
And this week, residents suddenly found that the Central Library has been closed down indefinitely. I’m a bit of a sceptic on public libraries, but my kids (and many other people) use them a lot. According to the mayor, it wasn’t a legal obligation to close the building – a new seismic report – but a “moral obligation”. No hint as to when library might re-open, let alone of the cost of fixing this council-owned building. Too bad about the lost revenue (the closure meant closing down yet another car park), or the people who will lose their jobs (from the cafe inside the library – the public servants are protected). Like so many councils, Wellington can’t get the basics right but is only to happy to burble on about doing “amazing things”.
Okay, so that was the rant bit of this post. I had been planning anyway to follow up on my brief reference to Wellington’s (greater Wellington this time) economic performance in my post the other day on regional GDP. Over the period for which we have data (starting in the year to March 2000), Wellington has had the slowest growth in average per capita GDP of any region in the country. I might almost have expected that if the starting point had been 1980 – before the economic liberalisation that (a) slimmed down central government, and (b) meant many few companies were motivated to have head offices in Wellington. From a starting point of 2000 – and being anything but a Wellington booster – I was more surprised.
Of course, it is only fair to point out that average per capita GDP in Wellington is the highest of any region in New Zealand (Taranaki was higher for several years after 2007, after new oil production came on stream but it dropped back to second a few years ago now.)
For the last 10 years, Wellington has grown only a touch more slowly than the nation as a whole, but none of the lost ground has been recovered. (Recessions tend to be relatively good for Wellington, as the public sector lays off staff – or stops hiring – much more slowly than the private sector.)
There are various reasons why Wellington’s average GDP per capita might be higher than that in the rest of the country. One factor is that the share of the working age population employed is higher here (70.1 per cent last year in Wellington, 67.7 per cent in the country as a whole). Some of that – but not much – is because Wellington has a smaller than average share of population aged 65 and over (13.2 per cent in 2013, vs 14.4 per cent nationally). Wellington also has a slightly smaller (than average) share of the population in the under-15 age group. So there is something – but perhaps not much – to the old story about Wellington that it was where young people came, but as many as possible later left.
I suspect that the biggest part of the story – say, why average per capita GDP in Wellington is materially higher than in (similar population) Christchurch – is simply that Wellington is “dominated” by head office functions of the biggest entity in the country, government. “Public administration, defence, and safety” makes up about 4.5 per cent GDP nationwide, and 10.4 per cent in Wellington, and the overwhelming bulk of the well-paying jobs in that sector will be in Wellington head offices. And it isn’t just activities that are captured in that “public administration etc” component of production GDP. Like any head office (or, in case, system of head offices) there is a myriad of specialist functions – in private sector services businesses – that are in Wellington because the public sector head offices are here (consultants, lawyers, lobbyists etc).
(You can have arguments, if you like, about whether these public servants etc are in some sense overpaid – which, if true, would also inflate Wellington’s nominal GDP. Since I was a head office public sector functionary for decades and my wife is a senior public servant now I’m not even going to try to offer a detached perspective on that one.)
Of course, no city of 400000+ people is ever just about one industry, even indirectly so. As I noted in the earlier post, there is lots of hype at times about the Wellington tech sector, the Wellington film sector etc I’ve written previously about the film and related industry, which may well have a range of high-paying jobs, but is – on their own telling – totally reliant on central government subsidies for their survival here. The presence of that industry isn’t a sign of a city/region with an economy on a robust long-term footing.
In the regional GDP release, SNZ includes tables showing a breakdown by sector of each region’s GDP (although with another year’s lag, so the new data in that area are for the year to March 2017). I showed a chart the other day on the share of the “information, media and telecommunications” sector component of Wellington GDP. Here is a slightly revised version of that chart (this time as share of the total GDP of all industries, without the GST etc correction). I’ve also shown the share for public administration etc.
Without further digging it is nothing more than correlation, but do note that Wellington’s greatest relative regional decline (see previous chart) was over the period when the share of public administration etc was rising quite strongly.
There has been a decline in the nationwide share of GDP accounted for in that “Information etc” category, but it is nothing like the magnitude of the fall experienced in Wellington. That’s a relative decline. (The regional numbers include “other services” under that same heading, but nationwide – where a more-detailed breakdown is available – the share of “other services” has changed little over the period since 2000.
Perhaps all the good and exciting Wellington tech stuff is lurking under other headings? Glancing through the table the only obvious other category is “Professional, scientific and technical services”. But even add them together with the “Information etc” category and you still get a significant drop in the combined sector’s share of Wellington GDP (albeit in the first half of the period, the combined share has been fairly flat for the last decade).
And which sectors have grown strongly in Wellington since 2000? The three fastest growing sectors were – in first place – “rental, hiring and real estate services” (a corollary of the decline in owner-occupancy rates?), and then “electricity, gas, water, and waste”, and “food and beverage services”. It reminded of a recent conversation with someone who immigrated to New Zealand a few years ago and holds a high level head office job, and who really really loves Wellington. When I pushed him on why, a lot seemed to come down to the coffee. Nothing wrong with that I suppose, but hardly a successful outward-focused economy.
There aren’t really any policy lessons I want to draw from these data. In fact, the worst thing I could imagine would be the Wellington City Council – and its peers in the rest of the region – deciding they needed to “do something”, flinging more money at more wasteful proposals or the so-called economic development agency. Of course, they could – and should – fix up the housing and urban land market, and that might actually do a little¹ to boost the attractiveness of Wellington, boost average productivity, and do something to reverse the relative income decline. But there is less than no chance of such sensible policy emerging from the Wellington City Council – they’d rather carry on with their version of “amazing things”. Wellingtonians live with the results – and (in fairness to the the mayor and council) I fully expect my fellow citizens to re-elect the cheerleading incumbents come October. Just as New Zealanders keep electing governments that preside over our ongoing economic decline relative to the rest of the advanced world.
- I had an exchange with a reader in the comments section of Wednesday’s post as to why I’m not persuaded that the best housing (and transport) policies in the world would make much difference in closing the nationwide gaping productivity gaps. Perhaps if Wellington alone were to fix these things, it might make more difference. But location is, powerfully, against us.