Wellington has the highest GDP per capita of any region in the country and also boasts the highest median household income. Photo / Mark Mitchell
Wellington has the highest GDP per capita of any region in the country and also boasts the highest median household income. Photo / Mark Mitchell
THREE KEY FACTS
The Government has cut public spending by $1.5 billion, although overall public spending continues to climb in nominal terms.
Wellington’s unemployment is climbing, but from a low base.
The region has the highest median household income in the country.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the Press Gallery since 2018.
ANALYSIS
Labour leader Chris Hipkins says Wellington has been “hit hardest by the impacts of this Government’sdecision making”.
“You can feel that, you just walk down the street and you can feel that, you see that in shops closing and restaurants closing,” Hipkins said yesterday.
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He was one of a number of Labour MPs concerned at the plight of the capital. The party’s spokeswoman for Wellington, Ayesha Verrall, said the city was “profoundly challenged” and laid much of the blame on the Government’s public service cuts.
The Wellington economy’s dependence – or not – on public sector spending has been in the news since August last year, when Labour announced it would shave $500 million a year from departmental baselines. This figure was later upped to $1.5 billion a year by the incoming coalition. When it comes to stripping spending out of the capital, both sides wielded the knife.
The picture is mixed. Much of the reporting on the city’s problems has been necessarily anecdotal. Economic statistics are backward-looking. If there is a problem in the economy, it won’t show up in the statistics for another few months at the earliest. Most of the recent data we have is for the quarter ending June 30. The fiscal year, the first year of the new Government’s Budget, only began on July 1.
The data we do have suggests Hipkins has a point: Wellington has one key statistic that is heading in the wrong direction – and fast. The region’s unemployment rate is currently 4.2%, nearly a whole percentage point higher than in the December quarter when the new Government took over and it was just 3.3%.
Shifting nearly a whole percentage point in two quarters suggests all is not well in the capital, but it certainly doesn’t make Wellington the region to have been hardest hit since the Government took office: the crown belongs to Taranaki, whose unemployment rate has shifted upwards 1.3 percentage points, followed by the Bay of Plenty, where its has climbed 1.2 points.
Those statistics only cover the change in unemployment rates, which is what Hipkins appeared to be talking about. When you look at the unemployment rate itself, Wellington is still performing well. The region’s unemployment rate at 4.2% in the June quarter is in line with the national average – and lower than Auckland’s, which is 4.6%. Some perspective: both of those numbers are relatively low when taken in the context of the past couple of decades.
Wellington is doing better than the Bay of Plenty, which alongside having one of the highest unemployment rate increases in the country, can also claim the highest rate overall at 5.7% in the June quarter.
Unemployment in the Bay of Plenty hasn’t received much attention from politicians. It probably should. In the past 12 years, the region has only once had an annual unemployment rate lower than Wellington has now.
Comparing Wellington with the Bay of Plenty is a bit unfair given the latter has a history of high unemployment that can’t be turned around overnight, and Wellington often has among the lowest unemployment rates in the country (in the year to June 2024 it had the second lowest annual average unemployment of any region in the country, not that you’d know from all the complaining).
Wellington is undeniably in a funk. It seems like almost everyone in the city feels this way (apart from Ohariu MP Greg O’Connor who told the Press Gallery on Tuesday he loves Wellington so much he’s not afraid to go swimming in its harbour even when there are wastewater overflow warnings in place).
Wellington-based Infometrics chief executive and economist Brad Olsen said some statistics were heading in the wrong direction, such as the number of filled jobs for Wellington city residents, which was down 0.9% for the year to June. Olsen said the drop in employment for the current quarter was the largest of any metro area in New Zealand.
“Government and defence job ads are down 50% from a year ago,” Olsen said.
Olsen said these figures “haven’t fully incorporated the public sector cuts”, which might not properly appear in the data until next year.
He said Wellington’s position in the current downturn was “quite unusual” and much “sharper” than the rest of the country because of the concentration of public sector jobs. However, he cautioned Wellington was not the only city feeling the pinch, with the closure of two Central North Island mills yesterday resulting in the loss of 230 jobs.
Many, perhaps most, stats show the direction of travel isn’t good, but don’t support the thesis that the city is about to keel over. Wellingtonians are now, and have been for some time, some of the luckiest people in New Zealand. They are the highest earning and among the least likely to be unemployed.
Another Wellington-based economist, Bagrie Economics’ Cameron Bagrie, told the Herald, “if you look at a lot of the stats, Wellington is doing pretty well”.
Bagrie Economics' Cameron Bagrie says Wellington tends to do less well under right-wing governments. Photo / Alex Burton
He said the challenge was Wellington simply did less well under right-wing governments which tended to spend less.
‘Wellington does better under red than blue – one spends a lot more money,” he said.
A number of recent statistics show Wellington isn’t among the worst-performing economies in the country, but that it is simply catching up with the rest of New Zealand, which is in the grip of a self-induced recession designed to squeeze inflation out of the economy.
At a headline level, New Zealand’s economy is likely in recession, while the Wellington regional economy continues to grow. Provisional figures from Infometrics estimate Wellington’s GDP to be up 0.6% for the year to June 2024, well ahead of the rest of the country, which contracted by 0.2% in real terms.
Wellingtonians are rich – the region has the highest GDP per capita of any region in the country and it has the highest median household income.
Regional GDP per capita is $86,805 in Wellington, compared with a national average of $75,311. Barring a few years where oil and gas-rich Taranaki booked high regional GDP results, Wellington has had the highest GDP per capita of any region in the country for much of the past 12 years. Auckland is finally catching up, with its GDP per capita stat less than $100 behind Wellington.
Wellingtonians also do well on the earnings front, pocketing more than people in the rest of the country.
Median household income figures from Stats NZ show the median household income in Wellington was $149,600 in the year to June – $13,600 higher than second-placed Auckland. The national average is $122,500.
Wellington did well under the last Government. The median household income increased by 46% between 2018 and 2024, while the average increase in the rest of the country was 36%.
How’s this for an unpopular opinion: What if Wellington deserved those high incomes? Well, regional economics stats suggest Wellingtonians do earn their keep.
An Infometrics calculation shows Wellington’s GDP per filled job for 2023 was $155,540 compared with $137,196 nationally and $147,117 in Auckland.
One of the challenges the city faces, its inability to build enough housing, is only partly to do with the Government. There were 0.4 new dwelling consents issued per 10,000 people in Wellington for the year to June 2024. Auckland issued twice as many per capita at 0.8, while Canterbury led the pack issuing one new consent per 10,000 people.
Part of that might be the result of central government beating the confidence out of Wellington homebuyers, part of it might be the council, which has been slow to embrace YIMBY-ism, and part may be the fact that you have to be brave (and know a brave insurer) to build an expensive asset on an active faultline. Rising insurance premiums in the city are making themselves felt on growth rates.
The city shows signs of stagnation. It’s growing – but not fast enough. The number of new businesses in Wellington City was up 0.8% on the year before, about half the national average which is 1.5%.
The region is not without its problems, but it could probably do with looking at the bigger picture and having a sense of perspective that takes account of the fact other regions have been doing it far tougher for far longer – and they don’t have their economies underwritten by the Crown.
Even when things head rapidly in the wrong direction, things tend to be better in Wellington than they are anywhere in the country. The city simply cannot be beaten – good day, or bad.
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