Rural New Zealand is likely to disproportionately suffer the consequences of the country's ageing population and outward migration through a loss of skilled and innovative labour, according to the NZ Institute of Economic Research.
Principal economist Shamubeel Eaqub told a briefing in Wellington the country's shrinking population under the age of 40 is "very troubling" and the outflow of young people will have a bigger impact on rural areas that struggle to attract and retain talented labour.
"That slowing growth in young people under 40 is very troubling for me," Eaqub said.
"The impact is disproportionate across the regions - rural areas are losing more younger people than towns."
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That will make it more difficult for rural areas to develop and retain a highly skilled and innovative labour market - "all the bits and pieces that provide excitement and buzz", Eaqub said.
Last week, Government figures showed there were 2300 fewer new migrants arriving in New Zealand than people departing, taking the annual outflow to 4000. That's been bolstered by an increasing number of kiwis quitting the country for Australia for higher wages and a better standard of living.
Auckland was the only region in New Zealand to show positive net migration in the year ended April 30, which creates a "divergence between where Auckland is headed and the rest of the regions", Eaqub said.
NZIER doesn't expect the Reserve Bank to hike rates until 2014 as the country's tepid economy keeps a lid on inflation, and Eaqub gave an outside chance for a rate cut if Europe's sovereign debt crisis escalates any further.
The economic thinktank is forecasting gross domestic product growth of just 1.5 per cent in 2012, rising to 2.5 per cent next year as the Canterbury rebuild slowly gets underway.
With weaker economic forecast, the NZIER doesn't expect the Government to hit its operating surplus target in 2015, though Eaqub said as long as the fiscal path is improving it doesn't matter too much if the books aren't in the black until 2017/18.