Port Taranaki Economic Impact November 2012
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Final Report 28
Port Taranaki Economic Impact November 2012
The other main industries that tend to utilise port services are the chemical and metal product manufacturing industries. In 2012, around $112.5 million of fertiliser and chemical product was shipped through the Port. In 2012 there was also $52.7 million of metal products transported through Port Taranaki. Further, the metal product manufacturing industry does a significant amount of work for the oil and gas industry. Major businesses in the chemicals industry include Ravensdown Fertilisers, Methanex and Ballance Agrinutrients Table 6.5 shows the economic activity in these two industries in 2011.
Chemical manufacturing employed 406 FTEs and produced $72 million in GDP through 14 businesses. Metal product manufacturing employed more than 1,500 FTEs and produced GDP of $161 million through 123 businesses. Together, these two industries account for 4.0 percent of regional employment, 3.9 percent of regional GDP, and 0.9 percent of the region’s businesses.
Engineering firms in the Taranaki evolved from performing some of New Zealand's largest heavy engineering projects which are primarily linked the growth of major oil, gas and petrochemical developments. The importance of the metal product manufacturing industry to the region is represented by its location quotient of 2.22, which suggests that relative to national employment, the Taranaki has over twice as much of its employment in that industry. Table 6.6 presents the economic impact of the chemical and metal product manufacturing industries on the regional economy in 2011. Table 6.6. Chemical and metal product manufacturing economic impact
Chemical manufacturing in the Taranaki Region is estimated to directly produce $193.3 million in output, with a resultant contribution to GDP of $71.5 million and employment of 406 FTEs. Metal product manufacturing has a direct output of $446.7 million, producing GDP of $160.8 million and 1,521 FTEs. Location Quotient Chem ical Manufacturing 406 72 14 % of region activity 0.8% 1.2% 0.1% Metal Product Manufacturing 1,521 161 123 2.22
% of region activity 3.2% 2.7% 0.8% Source: BERL regional database FTEs GDP ($m ) AUTs Chem ical Manufacturing Direct Total Output
$193,281,042.93 $278,324,702 Value Added (GDP) $71,513,986 $111,561,817.98 Employment (FTEs) 406 792
Metal Product Manufacturing Direct Total Output
$446,697,861.40 $674,513,771 Value Added (GDP) $160,811,230 $258,906,080 Employment (FTEs) 1,521 2,236
Source: BERL Final Report 29
Port Taranaki Economic Impact November 2012 Adding indirect and induced effects to the equation, the two industries collectively produce $952.8 million in output, resulting in a GDP contribution of $370.5 million and the employment of 3,028 FTEs.
Transport and storage companies benefit from transporting the goods imported and exported through the Port. Because of the Port, these goods do not need to be delivered to another Port (Auckland, Wellington or Tauranga) and those goods exported out of and imported into the Region do not need to be trucked or, to a lesser extent, railed. Port activity supports a significant proportion of many transport companies’ business in the Region. It is unlikely that these companies would generate the same level of business if all goods were exported or imported through another port. Table 6.7 gives an overview of the transport and storage industry in Taranaki in 2011. Table 6.7. Transport and storage industry summary, 2011
In 2011, the road freight transport and storage industry employed 1,003 FTEs, generating $109 million through 129 businesses. The industry directly accounted for 2.3 percent of employment, 2.0 percent of GDP and 1.0 percent of businesses in the Taranaki Region. The transport and storage industry in the Taranaki Region has a higher location quotient than nationally at 1.54. This suggests that more than fifty percent more of the Region’s population are employed in the industry compared to nationally. Table 6.8 shows the economic impact of the transport and storage industry on the Taranaki Region ’s
Table 6.8. Transport and storage industry economic impact
The transport and storage industry had output of $295 million, generating $118 million in regional GDP and employing 1,081 FTEs. Adding indirect and induced effects increased output to $479 million, GDP to $204 million and employment to 1,611 FTEs. Location Quotient Transport and Storage Road Freight Transport 1,003 109
129 1.54
Warehousing and Storage Services 79 9 18 Total Transport and Storage 1,081 118 147 % of region activity 2.3% 2.0% 1.0% Source: BERL regional database FTEs GDP ($m ) AUTs Transport and Storage Direct Total Output
$295,042,878 $478,728,384 Value Added (GDP) $118,017,151 $204,387,541 Employment (FTEs) 1,081 1,611
Source: BERL Final Report 30
Port Taranaki Economic Impact November 2012
A change in circumstances has seen the volume of primary exports through Port Taranaki drop. This is largely a result of a change in Fonterra’s freight strategy, which has seen two-thirds of their product freighted out of Taranaki by rail rather than going out direct through Port Taranaki. This has had a flow on effect to the other primary sectors, namely meat, where the risk around certainty of service has seen a larger portion of their exports also leave Taranaki by rail rather than directly via the Port. Primary production and food processing is a significant grouping of industries in the Taranaki region. According to the BERL Regional Database for 2011, the primary and food processing sectors in Taranaki Region together accounted for $765 million in GDP, which is equivalent to 12.7 percent of total regional GDP. The GDP split is almost 50/50 between primary production and food processing. A summary of the primary production and food processing sectors is presented in Table 6.9. Table 6.9. Primary sector summary indicators, 2011
In 2011, the primary production and food processing industries employed 7,617 FTEs, which is 16 percent of the Taranaki Region’s total employment . These industries accounted for 4,224 businesses, around 29 percent of all businesses in the Taranaki Region. Within these sectors, primary industries account for 41 percent of FTE employment but 98 percent of business units (mainly farms). There were 3,098 FTEs employed in the agriculture sector (farmers or horticulturalists of some description) in 4,153 businesses. The agriculture sector has a location quotient of close to 1.53, suggesting that the industry is quite significant to the Region. The Taranaki region has a large food processing sector. The food processing sector employs 4,477 FTEs, 9.3 percent of the Region ’s employment, within 71 food processing business units. Their relative importance is apparent when you consider the location quotient of 2.36, which suggests that in the Taranaki Region, the food processing industry employs over twice as many people relative to national levels.
Agriculture 3,098 296
3,953 1.53
Aquaculture 3 0 2 0.17
Forestry and Logging 28 15 175 0.22
Fishing Hunting and Trapping 10 1 23 0.25
Total Prim ary 3,140 313 4,153 % of region activity 6.5% 5.2% 28.6% Food Product Manufacturing 4,477 452 71 2.36
% of region activity 9.3% 7.5% 0.5% Meat Processing 1,428 251
15 % of region activity 3.0% 4.2% 0.1% Dairy Processing 2,026 356
10 % of region activity 4.2% 5.9% 0.1% Total Prim ary and Food Processing 7,617 765 4,224 % of region activity 15.9% 12.7% 29.1% Source: BERL regional database FTEs GDP ($m ) AUTs Final Report 31
Port Taranaki Economic Impact November 2012 Meat and dairy processing account for most of the food processing in the Region. Over 77 percent of both employment and GDP in the food product manufacturing sector are in the meat and dairy processing industries. Traditionally, the majority of Port throughput of primary products has been dairy and meat related. More recently, however, there has been increasing throughput of logs. As shown in Table 6.9, forestry is a relatively small industry in Taranaki. The majority of the increase in log throughput has been from the Whanganui district. 6.5.1 Primary production The primary production sector has some involvement in the Port in terms of imported grains and use of fertilisers. However, its main relation is through the processing of its products (especially milk and meat), where a large proportion is exported through Port Taranaki. The region alone accounts for 15 percent of all herds (1,744) and 11 percent of all cows (486,915) in New Zealand.
13
The primary sector also includes forestry and logging, and commercial fishing. The Port has seen a large increase in log export throughput and is making space to enable increased activity in this area. Commercial fishing and seafood processing, while relatively small, is inextricably linked to the Port and is included in the Port-related impacts in section 5.2. The primary sector accounts for 6.5 percent of regional employment, 5.2 percent of regional GDP and 28.6 percent of regional businesses. Of most importance is the agriculture sector with over 98.7 percent of employment in the primary sector and a location quotient of 1.53. The economic impact of the primary sector on the Taranaki region is presented in Table 6.10.
The primary sector had output of $841 million, generating $312 million in regional GDP and employing 3,140 FTEs. Including indirect and induced effects the primary sector employs 4,821 FTEs generating $547 million in regional GDP from economic activity of over $1.3 billion.
13 New Zealand Dairy Statistics 2010-2011 (Livestock Improvement Corporation). Prim ary Sector Direct Total Output
841,999,755 1,305,091,344 Value Added (GDP) 312,685,743 546,948,546 Employment (FTEs) 3,140 4,821
Source: BERL Final Report 32
Port Taranaki Economic Impact November 2012
Dairy processing is a major industry in the Taranaki Region. Fonterra Co-operative Limited is the major processing business in the dairy industry in the Taranaki. Fonterra operates three major plants. The Whareroa (near Hawera) milk processing plant which boasts the Southern Hemisphere’s largest milk proc essing operation, the cheese factory at Eltham (Central Taranaki) under the Fonterra Brands banner, and the by-products manufacturing plant at Kapuni (South Taranaki), where lactose-based products are made. Table 6.11 shows the significance of the dairy processing industry in the Taranaki region.
In the Taranaki Region, there are 2,026 FTEs employed in dairy processing across ten major business units. Dairy processing contributes around $356 million to regional GDP, which is 5.9 percent of total regional GDP. Investment decisions in dairy processing are based on costs. Dairy factory locations are based on the proximity to their main resource – dairy farms. Therefore, the Port is unlikely to have much economic impact on the dairy industry other than in terms of reducing transportation costs for production in the Region. The dairy processing industry exports the vast majority of its production, primarily by sea. However, there has been a major transition in how Fonterra moves its goods to market. Port Taranaki used to be a major supplier of transportation services to the industry up until 2010, where Fonterra began railing product to larger facilities in Auckland and Tauranga and to access more regular and favourable shipping services. Fonterra still exports some products through Port Taranaki. However, less than two percent of all New Zealand dairy exports are through Port Taranaki. In relation to the industry’s interaction with the Port:
Milk products and butter/cheese accounts for around 22 percent of the Port’s container throughput by volume.
Only 7.1 percent of Port Taranaki exports by value are dairy related. Table 6.12 shows the economic impact of the dairy processing sector on the Taranaki economy in 2011. Table 6.12. Dairy processing economic impact
The dairy processing sector generates output of around $2.7 billion. This contributes around $356 million to the Taranaki Region’s GDP and employs over 2,000 FTEs. Adding indirect and induced impacts, the dairy processing sector generates around $4.9 billion of economic activity, around $1.3 million in regional GDP and employs almost 11,000 FTEs. Dairy Processing 2,026
356 10
4.2% 5.9% 0.1% Source: BERL regional database FTEs GDP ($m ) AUTs Dairy Processing Direct Total Output
$2,739,384,072 $4,930,891,330 Value Added (GDP) $356,119,929 $1,353,255,732 Employment (FTEs) 2,026 10,842
Source: BERL Final Report 33
Port Taranaki Economic Impact November 2012
Meat processing is the second largest food processing industry in the region. PPCS Richmond operates a significant slaughter and meat-processing fac ility at Hawera, which boasts the group’s largest beef -killing operation. In addition, Riverlands operates a similar beef-only processing operation at Eltham. There are a number of smaller processing and packing operations handling deer, pig and sheep meat processing within the area. There is also secondary processing of meat products in the region through the Itoham (NZ) Ltd plant at Waitara (North Taranaki). This plant processes meat products into a variety of patties and small goods for export to a number of countries around the world. Tegel Foods operates a fully integrated meat bird industry, covering breeding, hatching, growing and processing, all based around the Tegel processing plant and feed mill at Bell Block (on the northern outskirts of New Plymouth). Economic activity in the meat processing industry in the Taranaki Region is shown in Table 6.13.
In 2011, the meat processing industry contributed $251 million to GDP and employed over 1,400 FTEs. The sector directly accounted for 4.2 percent of GDP and 3.0 percent of employment in the Taranaki Region. According to Statistics New Zealand, Port Taranaki exported close to $6.7 million worth of meat products and a further $20.8 million of meat-related products in 2012. In relation to Port Taranaki activity, the meat processing industry:
is the third largest export by value, accounting for around 1.1 percent of export value through the Port. Table 6.14 shows the economic impact of the meat processing industry on the Taranaki Region in 2011. Table 6.14. Meat processing economic impact
The meat processing sector generates GDP of $251 million and employs over 1,400 FTEs. Adding indirect and induced effects, the industry generates GDP of $459 million and employs over 3,100 FTEs. Table 6.15 lists the meat processing and related companies that use Port Taranaki. Meat Processing 1,428
251 15
3.0% 4.2% 0.1% Source: BERL regional database FTEs GDP ($m ) AUTs Meat Processing Direct Total Output
$866,519,049 $1,343,104,526 Value Added (GDP) $251,290,524 $459,861,659 Employment (FTEs) 1,428 3,141
Source: BERL Final Report 34
Port Taranaki Economic Impact November 2012
AFFCO Limited Bernard Matthews Limited Canterbury Meat Packers Limited CMP Canterbury Limited Crown Marketing Limited Crusader Meats International CTG Rendered Products Gardner Smith (NZ) Limited IBBCO Trading PTY Limited Itoham (NZ) Limited Mathias Meats Limited Pilot (NZ) Limited PPCS Limited Riverlands Limited Taranaki Bio Extracts Taylor Preston Tradeskins (NZ) Limited Source: Port Taranaki
Final Report 35
Port Taranaki Economic Impact November 2012
Port Taranaki is a regionally focussed, socially responsible organisation. As well as providing monetary sponsorship, it is closely linked to the viability of a number of social events and community groups in the Region. The amount spent on sponsorship by the Port since 2002 is shown in Figure 7.1. Figure 7.1. Port Taranaki sponsorship
Between 2002 and 2011 the Port has provided close to $2 million in sponsorship, or an average of $198,000 annually. Port Taranaki is a major sponsor of the Taranaki Rugby Football Union, and supports a number of events that add to the vibrancy and economic wealth in the region. The Port provides favourable rentals to community groups located on its property such as the East End Surf Lifesaving Club and the New Plymouth Yacht Club. The Port also ensures access to Ngamotu beach, which is within its breakwaters and adjacent to its operational area. The popularity of Ngamotu Beach is testament to Port Taranaki's commitment to safe working practices and regard for the environment. In addition to the above, Port Taranaki has continued to provide and maintain access to public areas including the boat ramp, jetties, and car/trailer parking at the Lee Breakwater for public enjoyment. As noted in their 2011 Annual Report, Port Taranaki:
sponsored the following sporting activities: o
Taranaki Rugby Football Union $0 $100 $200 $300
$400 $500
$600 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ($ 0 0 0 's ) Source: Port Taranaki Annual Reports Final Report 36
Port Taranaki Economic Impact November 2012 o
Port Taranaki Open Golf Tournament o
Flannagan Cup Open Water Swim o
Icebergs Swimming Club o
New Plymouth Surfriders Club (juniors) o
New Plymouth Yacht Club (juniors) o
Taranaki Multisport & Triathlon Club o
Taranaki Race Walking Club o
Taranaki Secondary Schools Rowing Regatta 2010 o
Taranaki Surf Life Saving organisations, and o
Taranaki Windsurfing Club national competition.
Sponsored the: o
Department of Conservation’s “Seaweek”
o 1 st Mikotahi Sea Scouts, and o
Taranaki Toast masters’ Convention.
Continued to consult with the New Plymouth District Council and Ngati Te Whiti on the development and management of recreational areas in the vicinity of Ngamotu Beach.
Provided the venue for community activities including beach volleyball, triathlons, and school events.
Continued to provide the regular meeting venue for the Moturoa Toastmasters’ Club.
Conducted port tours and made presentations to various community groups including students from St Josephs, St Johns, St Pius X, and Westmount schools.
Final Report 37
Port Taranaki Economic Impact November 2012
The Regional Council is the 100 percent owner of the Port. The Port pays a dividend to the Regional Council each year. Rather than going out of the region to a foreign owner, this dividend tends to get redistributed back into the regional economy through the Council’s role of providing regional services and infrastructure. Dividends for the last ten years are shown in Figure 7.2.
Over the last ten years, Port Taranaki has returned close to $22 million to the Taranaki Regional Council in the form of dividends, at an average of $2.2 million each year. Dividend payments have been relatively similar other than in 2006, 2007, and 2009. The lowest dividend payment was in 2006 of $840,000, followed by $1 million in 2007. In 2009, there was a significant payment of $3.9 million. In the latest year, the dividend was around $1.9 million. To address the variability of dividends, the Regional Council maintains a dividend equalisation reserve. When dividends are lower, the reserve is used to maintain rate levels. If dividends are higher, then the reserve is replenished. 7.3 Economic development opportunities 7.3.1 Business productivity and development Oil and gas development in New Zealand Taranaki’s position as the centre of oil and gas exploration and production in New Zealand, and the capability and expertise developed with Port Taranaki to handle and service the industry, puts Taranaki in a great position to capitalise on the increasing activity in this area. This growth is being driven by the higher value of oil and gas and the increased focus in New Zealand at a political level to effectively realise the value of our natural resources. Examples include the proposal to develop a rapid response base at Port Taranaki to address maritime emergencies that could emerge out of oil and gas extraction; acting as the service centre to support oil exploration and extraction off the West Coast of New Zealand. Food exports to Australia Port Taranaki is unique in that it is the only deep-water port on the West Coast of the North Island. It is the closest Port to the Eastern Seaboard of Australia. This provides the region with a competitive edge in terms of time sensitive delivery to Australia. Taranaki is also a major food processing region and is connected to the Central $0.0 $0.5
$1.0 $1.5
$2.0 $2.5
$3.0 $3.5
$4.0 $4.5
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ($ m ) Source: Port Taranaki Annual Reports Final Report 38
Port Taranaki Economic Impact November 2012 North Island, which accounts for a significant proportion of food production and processing in the North Island of New Zealand. This suggests that there is potential for the Taranaki to be a food export hub, delivering time sensitive perishable goods to Australia. 7.3.2 Place-shaping Urban form and place-shaping are two important concepts in regional economic development. It is widely accepted that we operate in a global economy with an increasingly mobile global workforce. Having a built environment that can attract and retain that global population is critical to achieving growth and wellbeing outcomes. Port Taranaki plays a key role in this area. Ngamotu beach is an excellent example of enabling public access to a popular swimming beach that is actually within the Port breakwaters. Similarly, the coastal walkway, which is considered one of the more successful public investments to encourage liveability in New Plymouth is connected and enhanced by developments on port land, particularly around the marina and the eastern reclamation area. This area is developing as a social and recreational hub for the region. The area has a surf and yacht club, a range of dining and recreation options and a working marina. The Port also owns a significant amount of industrial and commercial property near the port as well as residential property investments within New Plymouth. Its actions around how this property is used can support place-shaping outcomes.
Final Report 39
Port Taranaki Economic Impact November 2012
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Final Report 40
Port Taranaki Economic Impact November 2012
Ports are a centre for trade and transportation. They enable industries access to domestic and international markets, and create business for those industries that provide services. The economic contribution of the port can be divided into two areas:
those that use port services (port associated industries). 8.1.2 The Port and port related businesses Both the Port Authority and Port-related businesses provide port services. Port Taranaki, both through its operations and its role as regional infrastructure, has a quantifiable impact on economic activity in the Taranaki Region. The port is an important generator of income, jobs, and economic output. It is a business in its own right which employs people and generates economic activity from its operations. Port-related industries are businesses that are reliant on the Port for either all or part of their business activity and existence. These businesses carry out port operations and are typically involved in the transportation or handling of cargo.
There are a number of port-related businesses. These include shipping agents, transport and storage companies, custom brokers, freight forwarders, dredging, offshore services and port servicing companies and government border agencies such as customs and quarantine services.
The operational expenditure generated by the Port and those companies that are directly dependent on the Port for their business - constitute the quantifiable economic impact of Port Taranaki. The direct impact is those initial revenues or employment generated by the port and port related industries. For the Port, these are the people employed, operational expenditures and capital expenditures. For port related industries, we updated those companies that provide Port-related services from the 2006 EIA. BERL contacted them and asked them: a) what portion of their business was driven by the Port, and then b) how many people they employed. For those companies we did not contact, we estimated the employees directly related to the Port in discussion with the Port. From this, we estimated employment due to the Port, which allowed us to determine GDP and output. We then used multiplier analysis to identify the indirect and induced effects.
Final Report 41
Port Taranaki Economic Impact November 2012
Alpha Customs Services Ltd Cape Shipping Services Hooker Pacific ISS Mackay Phoenix Shipping Agencies Quadrant Pacific Worldfreight Customs and Forwarding Ltd
C3 Limited Kingston Providores New Plymouth Stevedoring Services Surveying Companies ETL Group Intertek Testing Services SGS New Zealand
Fugro BTW Halliburton NZ M I Swaco NZ Offshore Services Offshore Marine Services Offshore Solutions Limited Programmed Total Marine Services Swire Pacific Offshore New Zealand Ltd Teekay Shipping Management
BLM Holdings Bulk Storage Terminals Downer Limited FBT Group Fonterra Golden Bay Cement J Swap
Pacific Terminals Technix Group Ltd Westpack
BF Hughes Transport Clark and Rogers Ltd FBT Group Field Transport GJ Sole Limited JD Hickman KiwiRail Mainfreight Group McCarthy Transport New Plymouth Customs Agency (Hookers) Q Transport R&L Freight Rural Fuels Symons Transport Transpacific Uhlenberg Transport
Blackstock’s Road sweeping
Customs/Immigration Drainage Plus Ian Roebuck Cranes Ministry of Primary Industries Molten Metals New Plymouth Underwater Services Pestaway NZ Ltd Port Health Specialised Container Services Titan Cranes
Similar to the 2006 EIA, the levels of activity of businesses related to the Port ranged from 100 percent down to less than five percent. 14
The direct expenditure and employment from the port and port-related industries is then entered into an input-output model of the regional economy to estimate the direct economic impact of the Port in terms of output (GDP) and Full
14 We accept that this is not a definitive list of companies that have port-related activity. However, it does cover the most obvious ones and we believe it is close to capturing most of them. In any event, it is likely that the results can be considered an underestimate. Final Report 42
Port Taranaki Economic Impact November 2012 Time Equivalent (FTE) employment. The direct impact is the ’new money’ brought into the Taranaki region due to the Port. T he effect of the ‘new money’ has two flow -on effects throughout the wider economy. The first flow-on effect is from businesses involved with the Port increasing their demand for materials and services from their supplier firms, who in turn make further purchases from their suppliers. For example the Port relies on transport operators to move goods to and from the port. These transport operators then rely on local mechanics to service their fleet. This is the indirect impact. The second flow- on effect caused by the ‘new money’ entering the economy is the spending of people employed by the direct and indirect expenditure. For example, transport operators may need additional staff when container throughput increases. The expenditure of this additional staff will generate additional activity elsewhere in the regional economy. This is the induced impact. The indirect and induced impacts are calculated using employment, value-added (GDP) and gross output multipliers as discussed in the Appendix. The above impacts of the event sum as the total effect on the Taranaki economy and is presented in Chapter 5. 8.1.4 Port associated industries Port users or associated industries are those businesses that use the Port to receive imports or ship exports. Indirectly, Port Taranaki acts as an enabler as it provides industries with access to its markets both domestic and internationally. The Port supports the major industries in the Taranaki region, by providing services to the oil and gas, primary production, dairy and meat processing, chemical and engineering industries. Industries that utilise Port services benefit from additional/specialist transport options and/or reduced transport costs, improving their ability to operate effectively and move goods to market. Port Taranaki is the key transport component for the operations of a number of industries in the Taranaki region. These industries benefit financially, operationally and strategically from having easy access to Port Taranaki. However, it is difficult to imply that the Port has an economic impact on these industries or if it has, how much, as causality and additionality are not assured. However, we can say that these industries benefit from the Port by using it to transport their goods to market or import raw materials. In the case of the oil and gas industry, the Port is used as a service base as well. The level of reliance on Port Taranaki differs between industries. For the oil and gas industry, the reliance is very high –
matter of cost or convenience where, if it were cheaper to transport goods out of a different port or by a different method, they would. We argue that the Port has significant relationships with these industries. The Port acts as an enabler or as a service, facilitating but not generating, activity. Our approach is therefore to consider the impact of these industries on the Taranaki Region, and then realise the level of importance of the Port to their activity. 15
15 This is where our impact analysis differs from earlier EIAs of Port Taranaki and the recent EIA of Port of Tauranga. The comparison with these other EIAs is discussed in 8.2. Final Report 43
Port Taranaki Economic Impact November 2012 Industries covered are based on the volumes and values of their goods that go through Port Taranaki. The major industries utilising Port services are the oil and gas, primary, dairy, meat, fertiliser and chemical, and engineering industries. 8.1.5 Multiplier analysis A multiplier analysis uses multipliers derived from inter-industry input-output tables for the Taranaki Region, and for New Zealand. The Taranaki regional input-output tables have been derived from the national input-output tables and other data by Butcher Partners, Canterbury - a recognised source for regional input-output tables and multipliers. 16
Multipliers allowed us to identify the direct, indirect and induced effects in terms of output (GDP) and Full Time Equivalent (FTE) employment. Measures Gross Output Multipliers – gross output is the value of production, built up through the national accounts as a measure, in most industries, of gross sales or turnover. This is expressed in $ million at constant prices. Gross output is made up of the sum of:
Income from self-employment;
Depreciation;
Profits;
Indirect taxes less subsidies;
Intermediate purchases of goods (other than stock in trade); and
Intermediate purchases of services. Value added multipliers – value added multipliers measure the increase in output generated along the production chain, which, in aggregate, totals Gross Domestic Product (GDP). Value added is made up of the sum of:
Compensation of employees (i.e. salaries and wages);
Income from self-employment;
Depreciation;
Profits; and
Indirect taxes less subsidies.
16 For a discussion on regional input output tables and the validity and reliability of the Butcher input output tables see Statistics New Zealand (2003) Regional Input Output Study. Final Report 44
Port Taranaki Economic Impact November 2012
– Employment impact multipliers determine the number of Full Time Equivalent (FTE) roles that are created for every $1 million spent in an industry for one year. It provides a measure of total labour demand associated with gross output. An FTE is the percentage of time an employee works represented as a decimal. A full-time position is 1.00; a part time position is 0.50. Direct, indirect and induced effects The underlying logic of multiplier analysis is relatively straightforward. An initial expenditure (direct effect) in an industry creates flows of expenditures that are magnified, or “multiplied”, as they flow on to the wider economy . This
occurs in two ways: 1.
The industry purchases materials and services from supplier firms, who in turn make further purchases from their suppliers. This generates an indirect effect. 2. Persons employed in the direct development and in firms supplying services earn income (mostly from wages and salaries, but also from profits) which, after tax is deducted, is then spent on consumption. There is also an allowance for some savings. These are the induced effects. Hence, for any amount spent in an area (direct effect), the actual output generated from that spend is greater once the flow on activity generated (indirect and induced effects) is taken into account. Leakages Generally the more developed, or self-sufficient, an industry in a region is, the higher the multiplier effects. Conversely, the more reliant an industry is on supply inputs from outside the region, the lower the multipliers. These outside factors can be referred to as “leakages”.
To put this another way, if a house was purchased in Taranaki, and all the materials and labour were sourced in Taranaki, and all the materials and labour that went into making the housing materials were made in Taranaki and so forth, and then the labour spent their wages or salaries in Taranaki, again on goods or services produced solely in Taranaki, then all the multiplier effects would be captured by Taranaki. Where inputs or outputs come from outside Taranaki, leakages are said to exist, and the multiplier effect reduces. Limitations of multiplier analysis Partial equilibrium analysis Multiplier analysis is only a “partial equilibrium” analysis, assessing the direct and indirect effects of the development being considered, without analysing the effects of the resources used on the wider national and regional economy. In particular, it assumes that the supply of capital, productive inputs and labour can expand to meet the additional demand called forth by the initial injection and the flow on multiplier effects, without leading to resource constraints in other industries. These constraints would lead to price rises and resulting changes in overall patterns of production between industries. To assess inter-industry impacts in full would require economic modelling wi thin a “general equilibrium” framework .
Applying such models becomes more relevant where the particular development is considered significant within the overall economy. Final Report 45
Port Taranaki Economic Impact November 2012
Related to partial equilibrium, using multipliers for economic impact assessments assumes that the event is something that would not have been undertaken anyway and that it will not displace existing activity. That is, the event is additional to existing activity. If it does either of the above, then the economic impact is less than that determined by the multiplier and it would be necessary to subtract both the activity that would have occurred anyway and the displacement effect. Impact Again related to “partial equilibrium”, multiplier analysis assumes that an event will not have an impact on relative prices. However, in a dynamic environment, it can be assumed that a large event would have an impact on demand and supply and hence prices. Hence, the larger the event and the more concentrated it is in a single industry or region, the more likely it is that the multipliers would give an inaccurate analysis of impacts. For example, if multiplier analysis was used to determine the effect of residential building construction nationally it would likely be inaccurate as residential building construction accounts for over 6 percent of GDP. Aggregation Industries outlined in input output tables are aggregates of smaller sub-industries. Each sub industry has unique inputs and outputs. The higher the level of aggregation the less accurate these inputs and outputs become. Thus, if determining the multiplier effect of a very specific event using highly aggregated data, there will be a lower level of accuracy. Similarly if an event encompasses a range of industries and multipliers from a single industry are applied the accuracy levels will diminish. Regions and boundaries The smaller or less defined a region and its boundaries the less accurate the multiplier analysis will be. Similarly, the easier it is to move across boundaries the less accurate the analysis will be. For example, at the national level the multipliers will be very accurate as it is easy to determine the inputs and outputs crossing through the New Zealand borders. Similarly it would also be fairly easy to determine a north island/south island split. As smaller regions without obvious geographic boundaries are selected then a higher level of assumptions need to be made and the multipliers become less accurate. For example, an individual could work in the Auckland Region but live in the Waikato Region and spend a large proportion of his/her recreation money in the Bay of Plenty Region. For any regional analysis the level of accuracy will have to be accepted. As a rule of thumb, the larger and more defined the region, the more accurate the analysis will be.
Final Report 46
Port Taranaki Economic Impact November 2012
The following attempts to compare Port Taranaki’s current economic impact to earlier EIAs in 1994, 1997, and 2006. We also compare Port Taranaki’s current economic impact to the economic impact of Port of Tauranga on the Bay of Plenty Region, and the Ports of Auckland on the Auckland Region. The results from the various EIAs are not directly comparable. Comparison of the current economic impact to earlier EIAs of the Port is difficult due to significantly different methodologies. In this regard, we caution against directly comparing the two numbers. We have attempted to compare like with like and only used those parts of our analysis that are (relatively) consistent or comparable with the earlier studies. Even then, we struggle to arrive at any useful conclusions. The major difference in approach is that our analysis does not suggest that a portion of activity in key industries that use the Port is due to the Port. We argue that these industries are likely to continue to produce at similar levels, regardless of involvement with the Port. Hence, our total economic impact is significantly lower than the other reports. However, we have considered those key users of the Port as being associated with the Port and have measured their impact on the Region. We can therefore compare as if we had included them in the impact – but suggest that they are associated with, rather than products of, Port activity. We have not included the associated activity of impending oil and gas and marina projects in the comparison to ensure consistency.
Port Taranaki undertook EIAs in 1994, 1997 and 2006. The major difference between the current and 2006 EIA and the earlier ones is that the earlier analyses identified a portion of industry activity as a ratio of exports, which were counted as an impact of Port activity. In our comparison we assume that these are associated effects rather than economic impact effects and so we believe they were overstated in previous EIAs. The main results are compared to the current EIA in Table 8.2. Table 8.2. Comparison with earlier Port EIAs
The only comparisons that can be made are on Port-related impacts that result from the direct operation of the Port. As expected these have not changed significantly (in real terms) between 1994 and 2012. The reason that associated effects are higher in 2006 and 2012 is because the 2006 and 2012 figures include total activity in the main industries, whereas the earlier studies only took a portion of those industries. On the other hand, Port Related Impacts Associated Effects Total
Port Related Impacts
Associated Effects
Total Port Taranaki 1994 26 1,299
1,325 205
7,980 8,185
Port Taranaki 1997 21 1,450 1,471 210
9,300 9,510
Port Taranaki 2006 26 3,905 4,576 228
35,377 35,605
Port Taranaki 2012 26 3,355 3,386 319
34,642 34,961
Source: BERL, Port Taranaki Regional GDP ($m , 2012) Regional Em ploym ent (FTEs) Final Report 47
Port Taranaki Economic Impact November 2012 the earlier studies included all industries related to the cargo and multiplied out the effects, whereas the 2006 and 2012 studies did not incorporate multiplier effects. The economic impact of Port Taranaki has decreased since 2006. The port related impacts of Port Taranaki on GDP has remained at relatively the same level as 2006. However, employment at the port has increased since 2006.
The use of the port by port-associated industries has decreased since 2006, with a decline in the ports GDP and employment contribution from associated industries down in 2012. 8.2.2 Ports of Tauranga and Ports of Auckland EIA comparison Two of New Zealand’s major ports, Ports of Tauranga and the Ports of Auckland have had an economic impact assessment completed. The Ports of Tauranga released an EIA in 2006, while released an EIA in 2012. Both had a relatively similar methodology to this EIA. A comparison of our results with those of the Port of Tauranga and Ports of Auckland is shown in Table 8.3. 17
Table 8.3. Comparison of EIA with Port of Tauranga and Ports of Auckland
Port Taranaki has a higher economic impact relative to the size of the Region. The economic impact of the Port on Region GDP is 8.1 percent in the Taranaki compared to only 3.5 percent in Tauranga, and 0.4 percent in Auckland. In employment, Port Taranaki accounts for 3.3 percent of regional employment compared to 1.8 percent for the Ports of Tauranga and 0.5 percent for the Ports of Auckland. The numbers suggest a higher reliance of economic activity in the Taranaki Region on the Port. This is to be expected considering the smaller, export-oriented economy and the industry mix. In
terms of associated effects, Port Taranaki’s area of activity is slightly higher at 55.6 percent than the Port of Tauranga with 32.6 percent and the Ports of Auckland with 18.1 percent in the case of GDP. In the case of employment, again, Port Taranaki’s area of activity is higher than Port Tauranga and the Ports of Auckland.
17 Note that the GDP is in nominal values and so are not directly comparable. However, the proportions of the total are directly comparable. Port Related Impacts Associated Effects Total
Port Related Impacts
Associated Effects
Total Com parison w ith Port of Tauranga EIA Port Taranaki 2012 490 3,355
3,845 1,592
34,642 36,233
% of taranaki totals 8.1% 55.6% 63.8% 3.3% 72.2% 75.5% Port of Tauranga 2006 446 4,129
4,575 2,199
46,297 48,496
% of BoP totals 3.5% 32.6% 36.1% 1.8% 37.9% 39.7% Ports of Auckland 2011 299 12,188
12,486 2,818
184,503 187,321
% of Auckland totals 0.4% 18.1% 18.5% 0.5% 29.9% 30.4% Source: BERL, Port of Tauranga, Ports of Auckland Regional GDP ($m , 2012) Regional Em ploym ent (FTEs) Final Report 48
Port Taranaki Economic Impact November 2012
This section looks at some of the trends in key Port measures. Port employment has remained relatively constant over the last eleven years as shown in Figure 8.1.
As at June 2011, Port Taranaki employed 121 people. There has been a rapid increase in employment between 2002 and 2003, where the number of employees increased from 96 to 107. From 2003 to 2007 there have been slight increases each year. From 2007 employment increased rapidly again peaking in 2009 at 129 employees. Since 2009, employment has declined. Employment at the Port has been more consistent than revenue, which is shown in Figure 8.2 in the following section. Port Taranaki has significant revenues. This is shown for the last ten years in Figure 8.2. Figure 8.2. Port Taranaki revenue
Revenue in the year to June 2012 was $39.2 million. This is significantly higher than the $28.3 million in revenue in 2002. However, revenue has declined since its peak in 2009 of $46.6 million. Figure 8.3 shows the Port’s operational expenditure between 2002 and 2011. 0 20 40 60 80 100 120
140 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Em pl oy e e s Source: Port Taranaki Annual Reports $0 $5 $10 $15
$20 $25
$30 $35
$40 $45
$50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ($ m ) Source: Port Taranaki Annual Reports Final Report 49
Port Taranaki Economic Impact November 2012
In the latest year, payments to suppliers and employees were $29.2 million. In 2002 operational expenditure was much lower than currently, with operational expenditure of $14.4 million. There has been a gradual increase in operational expenditure from 2002 to 2006. In 2007, operational expenditure rapidly increased to $27.3 million, and again in 2009 to $35.0 million. Since 2009, operational expenditure has declined. Figure 8.4 shows the Port’s capital expenditures o ver the last ten years. Figure 8.4. Port Taranaki capital expenditure
Over the last ten years, the Port has spent $277.5 million on capital items. This is an average of $27.7 million each year. The distribution of capital expenditures has not been very smooth. There were peaks in 2002, 2006, 2007 and 2009. Conversely, there was low expenditure in 2004, 2010 and in the latest year, 2011. $0 $5 $10 $15
$20 $25
$30 $35
$40 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ($ m ) Source: Port Taranaki Annual Reports $0 $5 $10 $15
$20 $25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ($ m ) Source: Port Taranaki Annual Reports Document Outline
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