Economic cohesion is improving across the regions

A key focus of regional economic development is helping ensure that economic opportunities are widespread throughout the regions. Ideally over the long term we want to see the gaps between economic performances in our regions close so that where you are located is no barrier to success.

In order to assess cohesion, one simple tool is the trend in standard deviation of GDP per capita at a regional level. In simple terms, this means we want to look at what happens to the differences in economic performance between our regions over time.

As far as this measure of economic cohesion in New Zealand’s regions is concerned, the economic distance between our regions has reduced over the past decade. In 2010, there was a 27% deviation in economic performances across New Zealand’s regions relative to the average. However, by 2021, this dispersion of regional economic performance had reduced to 16%. Notably dispersion of regional economic activity even reduced over the first year of the Covid-19 pandemic.

Of interest is that the New Zealand regional experience stands in contrast to Australia. A similar analysis of economic cohesion across Australia’s states shows a sharp deterioration over the past decade. A key driver of this widening of cohesion has been the rapid rise in Western Australia’s GDP per capita relative to elsewhere.

Now using dispersion of GDP per capita between regions is only one tool for understanding economic cohesion and it doesn’t inform us whether outcomes on the ground for households are equitable. But this measure does at least show that gaps in regional economic performances within New Zealand are beginning to close and that location is becoming less of a barrier to success than it used to be. Long may this trend of a regional renaissance continue.