In some parts of New Zealand talk of our rock star economy rings hollow. Phil Taylor reports from Kaikohe

Big business is buzzing about New Zealand's economic prospects. Confidence is at a 20-year high and only China is more bullish than our captains of industry.

New Zealand will be the "rock star" economy of 2014, global bank HSBC predicts, while back home, ASB Bank describes the forecast as "increasingly bright" with growth likely to hit 3.5 per cent this year. It sounds like life on another planet to towns like Kaikohe.

There were familiar phrases in the ASB's forecast: strong dairy earnings, favourable trade with China, construction growth in Canterbury and Auckland. Which raises the question of whether New Zealand has two, or even three, economies - bigger cities bolstered by urbanisation, earthquake reconstruction and inflating house prices, a rural dairy sector enjoying strong prices for milk products, and the rest, such as Kaikohe, in the poor-brother western ward of the Far North.

Once it was the hub of the north. Now the railway has long gone, as have the dairy factory and the timber mill. Raw logs are trucked away, only for some to turn up again as furniture made in foreign lands. There are a few dairy farmers making money, but not nearly enough.


The Kaikohe Hotel, once fit for a monarch, has been condemned as unsafe and awaits the wrecker's ball when demolition crews finish work in Christchurch. Graffiti artists have done their best but the hotel that hosted Queen Elizabeth in 1953 makes a sad sight behind a wire-mesh fence.

"It used to be full of shops but there aren't really any left," Herald columnist Deborah Hill Cone wrote last month about the decline she's seen during a decade holidaying in the north. She described a main street that was like a mouth with as many teeth missing as not. There's a story, too, in what remains.

"There's a KFC and a store that takes Winz vouchers and a doctor's surgery and a chemist," she wrote. She might have added the two shops on the main street they call Broadway that sell headstones. Irony and metaphor abound.

Overall, New Zealand's outlook is optimistic, says Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research think-tank, but there is another story. "There is a real unevenness," he says. "There is a big structural story to be told." Migration is driving urban centres and creating jobs but eroding the economies of rural communities.

Parts of Gisborne, Hawkes Bay, Wanganui and Manawatu are battling and Southland's growth is due to migration, including younger people who go on to raise families, says Eaqub. "These places don't often get talked about much because the focus is on the broader trend."

In contrast, Economic Development Minister Steven Joyce says the recovery is being led by the regions. "It's a myth to state that the New Zealand economy is just reliant on the performance of the dairy industry and the Christchurch rebuild. They are significant components but New Zealand's recovery is much broader. The New Zealand economy does well when a broad number of sectors are performing. Dairy is responsible for around 20 per cent of our total value of our exports."

Sipping a cup of tea in the room on Broadway from which he runs the electorate office of his brother, Hone, Arthur Harawira tells of having invited the Prime Minister to visit Kaikohe. He did so in response to Key's offer for iwi to come to Wellington where his ministers would explain how well NZ Inc was doing.

The PM has no plans to visit any time soon but was in Kaikohe last June as a guest of the Kaikohe Business Association, which told him the town needed jobs desperately. In his speech notes, chairman Steve Sangster wrote those words in capital letters. The area has been in decline for 30 years, losing Government departments, the railway, airport and (after the arrival of The Warehouse) specialty stores. The town now fears the district's government may be taken away in an amalgamation into a single unitary authority based in Whangarei - a prospect former Far North Mayor Wayne Brown has said would see Kaikohe "gone by lunchtime".

Top of Sangster's urgent needs list is ultra-fast broadband to allow talent in remote places to flourish. Without it the gulf between the cities and the backblocks will deepen, innovation will be stifled and efforts to attract business undermined. "Missing out means missing the bus."

He sold his business and home in West Auckland and moved two years ago with his wife, Annie, to a lifestyle block outside of Kaikohe where they graze stock, run a B&B and a dog training and minding business. "I'm a rat-race refugee," says Sangster, who has the enthusiasm and energy of a recent arrival but is under no illusions. "I'm not expecting any capital gain any time soon," he quips.

Locals are friendly and real, he says. He suspects Kaikohe suffers from an impression it has more crime than it does because the region's only prison is on its outskirts.

"The overriding thing is the sheer poverty, low incomes and low expectations of improving one's lot," says Sangster. Battered morale might be seen in the rejection of a proposal to levy 200 businesses a total of $60,000 to create a role to promote the town and seek investment, an initiative that's worked elsewhere. "It's easier to scare the horses," he shrugs, "when they are already a bit frightened. We need industry and jobs. I don't think you can fix the social ills unless you get the economy going."

The Government is a major contributor to the Far North but it is in welfare and paying for support services, bottom-of-the-cliff money. The median income is $23,200 for European New Zealanders and $18,200 for Maori - about a quarter less than the national averages. A large chunk of both receive incomes of less than $10,000. The unemployment rate is 10.8 per cent (compared to 9.1 for Northland and 6.2 for the country) and though the average house price nationwide rose 8.4 per cent on the back of Auckland and Christchurch, it fell 5.9 per cent in the Far North.

The pattern is plain in Census detail. The number of paid employees, employers and self-employed all fell between 2006 and last year. Increasing dependency is reflected in that the only industries that employ more people now than seven years ago are health care and social assistance, public administration and safety and education and training.

Requests to talk to Sonny Tau, leader of Ngapuhi, were unsuccessful. He's trying to get consensus for the tribe to settle its Waitangi Tribunal claim with the Government, which wants it done before the election. Tau has said $500 million is wanted, while Labour's Shane Jones this week said he believes the Government's figure is about half that - still bigger than any other settlement.

It would be significant for the region, says Sangster. "I don't know what the number is that is needed [to boost the region] but any big number is helpful."

Perhaps the brightest prospect for Kaikohe is Top Energy's plan to greatly expand its geothermal power plant at Ngawha. Progress, however, has been delayed because of cost-cuts announced this week that the company said was due to an expected revenue hit from a softening power market.

Top Energy has been drilling in the area since 2007 and believes there is enough resource to produce another 100MW of energy on top of the current 25MW - enough electricity to power every household in the Far North and to export power south to the rest of Northland. Its long-term plan was to build four more power stations at its Ngawha site at a cost of $500 million, that it would raise through leveraging assets and bringing in new investors. The power company and the council are looking to attract a company that could use the extra electricity or heat from the geothermal fluid, such as wood processing, dairy processing and aquaculture plants.

Just one of those could create as many as 200 new jobs, says the power company's boss, Russell Shaw. New power stations could be generating electricity by 2020. "It is still early days, however we are optimistic that we can create new opportunities."

Key said Northland as a whole has been struggling with high unemployment on and off for decades and the only way to change that long term was to encourage new investment. "It's important that Northland embraces all opportunities to grow jobs in the region while carefully managing the environmental impacts."

Inquiries by the Herald indicate that though fast broadband is being rolled out in Whangarei, it is a long way off for the Far North. Joyce yesterday said Kaikohe was receiving improved internet capability through the Rural Broadband Initiative. Opportunities for the Far North, he said, lay in accelerating Treaty settlements, developing Maori land (including forestry), expanding aquaculture and mineral exploration.

Spoke in the wheel of the trail

There are concerns that the sole cycle trail north of Auckland - the only one of the 18 Great Rides that make up the New Zealand Cycle Trail to cross the country - may never be finished.

The Twin Coast Cycle Trail is planned to run 84 kilometres from Opua on the east coast to the Hokianga Harbour on the west but, two years after it was originally supposed to be completed, only a quarter is open.

It has become bogged down in land disputes, including Treaty of Waitangi claims, which have seen roadblocks to impede work and signs painted on the trail telling cyclists they are not welcome. The picture (above) of a sign near Kaikohe was taken this month.

The success of the Central Otago Rail Trail inspired the network of trails that was adopted at the 2009 Jobs Summit, championed by Prime Minister and Tourism Minister John Key, and allotted $50 million of Government money.

The Prime Minister this week told the Herald that all of the trails involved negotiation and compromise. He said an official from Wellington was due in Kaikohe this week to discuss progress with the Far North District Council, which is developing the trail with a $4 million Government grant. "You have to remember that cycle trails are good for economic growth and good for jobs, and so it is in the interests of the local community to make it work.

"In the case of the Otago Central Rail Trail there were initially concerns about the trail, but time had proved them to be unfounded, and locals now fully support the trail," Key said. That trail injected $12 million per year into the Central Otago region and the numbers were up 11 per cent last year despite it having been open for 14 years.

Only 27km of the Twin Coast Trail is open. Another two sections, totalling 26km, are set to open at Easter.

The main sticking points are on sections between Kawakawa and Kaikohe. "Now that we are getting down to the wire there is some talk of it never really being fully opened in the way it was originally intended," Ray Clarke, who runs a bike hire business, said. "If that were to be the case we would find that very disappointing."

Clarke said he knew of cyclists who had turned back at the sign on a disputed piece of trail south of Kaikohe that is part of a Waitangi Tribunal claim. The claim involves land taken for the railway under the Public Works Act but not returned after the trains stopped 40 years ago. Kaumatua Ron Wihongi said last year that some landowners feared cyclists and walkers might not respect burial grounds and other waahi tapu sites.

"We don't want it through our land because if the track is open we can't stop anyone coming through. It provides easy access to farmland and privately-owned bush. It goes past our homes."

The council's trail co-ordinator, Adrienne Tari, said a few families rather than the runanga were entrenched in their opposition. "They want the land back, they don't want to share it." She said owners further west had allowed the cycleway to cross their land beyond Okaihua, where there was no rail corridor.

Tari said she was optimistic they would reconsider. "We need to get a big part of it opened so ... people see that it is too good for the area for it not to go the whole way."