Taranaki industry projections
Table 3.3 Taranaki GDP, 2001 – 2006
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- Taranaki 4,028 4,283 4,415 4,379 3.1 -0.8 1.7
- Value Added or GDP (06, $m) source:BERL Regional Database, Statistics NZ %pa change
- Figure 3.7 GDP trend, 2001 – 2006
- Figure 3.8 GDP per capita trend, 2001 – 2006
- Figure 3.9 Comparison of GDP growth by industry, 2001 – 2006
- Sector G D P gr ow th 2 0 0
- Table 4.1 Taranaki oil and gas sector Taranaki Oil gas sector Total % of regional % of national oil
- Table 4.2 Taranaki oil and gas sector total inputs and outputs Taranaki Oil gas sector % of sector % of regional
- Table 4.3 Taranaki oil and gas major input industries
- Taranaki Oil gas sector % of sector inputs
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Table 3.3 Taranaki GDP, 2001 – 2006 Industry 2001 2004 2005 2006 2005 2006 2001 to 2006 Agriculture 408 411
416 415
1.1 -0.2
0.3 Forestry
24 27 29 30 6.6
5.9 4.6
Fishing 3 3 3 3 -9.9 5.6 -0.9
Mining (O&G) 881
771 794
741 3.0
-6.7 -3.4
Food processing 413
434 425
432 -2.0
1.6 0.9
Engineering 187
202 223
240 10.5
7.6 5.1
Other manufacturing 171
192 173
171 -9.7
-1.5 0.0
Utilities 152
149 158
115 6.4
-27.0 -5.4
Construction 126
180 203
207 12.5
2.1 10.5
Wholesale & retail trade 388
445 465
459 4.7
-1.4 3.4
Hospitality 44 48 55 55 15.5 -0.8 4.6
Transport & storage 112
139 141
143 1.6
1.5 5.0
Communications 82 109 137 128
25.3 -5.9
9.5 Business, finance & property svs 576 680
672 718
-1.1 6.9
4.5 Government administration 84 91
103 14.7
-1.4 4.3
Education 118
132 134
130 1.8
-3.2 2.0
Health & community svs 185
190 199
201 5.1
1.0 1.7
Cultural & recreational svs 42 44 44 49 0.5 12.1 3.2
Personal svs 34 37 39 38 5.3 -3.4 2.5
Taranaki 4,028 4,283 4,415 4,379 3.1 -0.8 1.7 New Zealand 130,236 147,128 152,541 155,885 3.7 2.2 3.7 Value Added or GDP ('06, $m) source:BERL Regional Database, Statistics NZ %pa change
Taranaki GDP growth over the last five years, at 1.7 percent per annum, has been below that of New Zealand (3.7 percent per annum). This is largely the result of slower employment growth, itself due to lower population growth. The fastest growth rate has been in the construction industry, which averaged 10.5 percent per annum, followed by communications, at 9.5 percent per annum. Major growth has also occurred in engineering (5.1 per cent per annum); transport and storage (5.0 percent per annum); hospitality (4.6 percent per annum); and business, finance and property services (4.5 percent per annum). GDP has decreased in three industries, namely utilities (-5.4 percent per annum), mining (- 3.4 percent), and fishing (-0.9 percent per annum) and has remained constant in one (other manufacturing). Interestingly, forestry (4.6 percent per annum) and agriculture (0.3 percent per annum) have both seen GDP rise despite falling employment, indicating a sharp improvement in labour productivity. Figure 3.7 shows the trend in GDP growth in the Taranaki region compared to New Zealand GDP growth between 2001 and 2006.
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Figure 3.7 GDP trend, 2001 – 2006 100
105 110
115 120
125 2001
2002 2003
2004 2005
2006 G D P in d ex 2001= 100 Taranaki
New Zealand Source: BERL
The GDP trend shows increasing divergence between New Zealand and Taranaki GDP growth. The region saw its GDP climb in line with national growth between 2001 and 2003, before seeing a fall over the next year. This fall coincides with lower employment growth during the 2004 year, a year in which the resident population began to fall after three years of growth. Taranaki’s GDP growth picture appears at odds with economic activity in the region, where you would expect a much better GDP performance relative to the rest of the country. However, this does not suggest poor performance and, in light of the region’s population and industry structure, suggests very good performance. The first factor is that Taranaki has a relatively static population and the labour market is therefore very tight. Hence, growth is coming more from productivity gains than it is from increased employment. In the long run, the productivity gains will provide the region, and its businesses, with a competitive advantage. Second, compared to nationally, Taranaki’s major industries have a relatively lower GDP per FTE ratio. It also has a smaller proportion of the economy involved in business and financial services, which is a high GDP sector. GDP growth in the business services and communication sector has been faster in Taranaki than nationally. But, because these sectors account for such a small proportion of the region’s total GDP, the gain has not been as high as nationally An alternate way of looking at GDP, taking into account population growth, is GDP per capita. This is presented in Figure 3.8, which shows changes in GDP per capita over the
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Taranaki Industry Projections 2006-2026 Venture Taranaki November 2007
last five years. Taranaki GDP per capita has remained substantially above that of New Zealand as a whole across the five years. In 2006, it stood at $42,000, compared to $38,700 for New Zealand. Figure 3.8 GDP per capita trend, 2001 – 2006 33 35 37 39 41 43 2001
2002 2003
2004 2005
2006 $' 06 p er cap it a (' 000) Taranaki
New Zealand Source: BERL
There has been some convergence in GDP per capita between Taranaki and the rest of the country. However this is due more to the faster growth in the rest of the economy than a slowing in the Taranaki region’s economy. Compared to nationally, Taranaki has performed well in most industries apart from population based ones such as retail, education, health and recreational services. Figure 3.9 compares the five-year annual average GDP growth rates of Taranaki and New Zealand for each industry.
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Taranaki Industry Projections 2006-2026 Venture Taranaki November 2007
Figure 3.9 Comparison of GDP growth by industry, 2001 – 2006 BERL Regional Databse; Statistics NZ 4.6
-0.9 -3.4
5.1 10.5
4.6 5.0
9.5 4.5
2.9 1.0
4.8 3.0
4.4 4.1
2.5 3.2
1.7 2.0
4.3 3.4
-5.4 0.01
0.9 0.3
3.7 5.4
3.8 6.1
3.7 3.5
8.6 0.6
2.9 0.8
0.5 -3.7
-1.0 -6 -3 0 3 6 9 12 Ag ric ul tu re Fo re st ry Fis hi ng M in in g (O &G ) Fo od p ro ce ss in g En gi ne er in g O th er m fg U til iti es C on st ru ct io n W ho le al e & re ta il H os pit al ity
Tr an sp or t &
s to ra ge C om m un ic at io ns Bu s, fi na nc e & pr op er ty G ov er nm en t a
dm in Ed uc at io n H ea lth & c om m un ity C ul tu ra l a nd re
cr ea tio na l Pe rs on al Sector G D P gr ow th 2 0 0 1 -2 0 0 6 (% p a ) Taranaki
New Zealand
Taranaki has managed above national average growth in GDP in several industries over the last five years. These include construction; communications; engineering; forestry; transport and storage; hospitality; and business, finance and property services. While GDP fell in three industries, this was at a lower rate than nationally in two. The fall in mining (oil and gas) was due to inactivity in the early 2000’s. This been arrested in the later years. In 2006, mining GDP grew by close to 17 percent. The utilities industry also grew faster than the national average in 2006. 3.4 Summary of Taranaki Industry structure and performance The employment and GDP figures reveal three main players in the Taranaki economy – agriculture, mining (oil and gas) and manufacturing (made up of food processing, engineering, and manufacturing). A large proportion of processing and engineering/manufacturing is related to the agriculture and mining industries. These
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industries (dairy and oil and gas in particular) are all recovering in the later half of the observation period driven by increasing global demand and the associated prices. While agriculture and mining continue to dominate the regional economy, significant growth in employment and / or GDP is occurring in services, such as business, finance and property services; communications, and hospitality. Slower growth in population-based industries such as education, health, cultural and personal services reflects the static population in the region.
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Taranaki Industry Projections 2006-2026 Venture Taranaki November 2007
4 Taranaki’s Key Sectors This section discusses eight key sectors in the Taranaki region. The discussion of each sector describes the: • sector‘s contribution to regional employment, GDP and business units • increase in total regional employment brought about by an increase of one FTE in each key sector (the key sector’s employment multiplier) • sources of the key sector’s inputs, such as from industries in the region, imports, and wages and other household income • allocation of the key sector’s outputs, such as to industries in the region, exports and consumption • industries that provide the most input into each key sector • industries most reliant on each key sector to absorb their outputs. 4.1 Approach Each sector’s contribution to employment, GDP and business units was determined using the BERL regional database. Definitions of each of the eight key sectors were decided in discussion with Venture Taranaki. These sectors are oil and gas, dairy, meat processing, engineering, other manufacturing, education, the public sector, and tourism. The tourism sector analysis uses a different approach. Because tourism cuts across a number of industries it could not be analysed the same way as the other industries. For the tourism analysis we use the Tourism Satellite account to determine the size of the sector in the region. Projections are based on those provided by the Tourism Research Council. Multiplier analysis 2 was used to calculate the economic impact of increasing employment by one FTE in each key industry. This allowed us to estimate that, for example, an increase in employment of one FTE in the dairy sector in Taranaki will create an additional 1.51 FTEs in the region (ie one FTE creates 2.51 FTEs in total). Input-output tables were used to determine the sources and allocation of the key industries’ inputs and outputs respectively.
2 Multiplier analysis is explained in the Appendices. 22
Taranaki Industry Projections 2006-2026 Venture Taranaki November 2007
For example, within the dairy sector in Taranaki, 47 percent of inputs come from industries in the region, 21 percent of inputs are imported from other parts of New Zealand or overseas, 18 percent comes from other inputs, and 15 percent comes from wages and other household income. On the dairy sector outputs side, 60 percent is exported out of Taranaki, 38 percent feeds into other industries in the region, 1.1 percent is consumed locally, and 0.6 percent is allocated to other outputs. Similarly, input-output tables were used to determine which industries provide the most input into each of the seven key sectors and how reliant those industries are on key sectors to absorb their outputs. For instance, as mentioned above, 47 percent of dairy sector inputs come from industries within the region. An immediate question is - which industries provide those inputs? Not surprisingly, 36 percent of all inputs are provided by the dairy cattle farming industry. This means that of all inputs required by the dairy sector in Taranaki, 36 percent comes from the dairy cattle farming industry. Knowing that the dairy cattle farming industry provides 36 percent of inputs to the dairy sector; a further question would be - how reliant is the dairy cattle farming industry on the dairy sector? The input-output tables indicate that 97 percent of the dairy cattle farming industry’s output feeds into the dairy sector. In other words, the dairy cattle farming industry is reliant on the dairy sector to absorb nearly all its outputs.
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Taranaki Industry Projections 2006-2026 Venture Taranaki November 2007
4.2 Oil and gas sector The oil and gas sector in Taranaki is made up of four industries at the 114 industry level. 3
other mining and quarrying. 4 Table 4.1 shows the contribution of the oil and gas sector to the Taranaki economy and to the national oil and gas sector in 2006. Table 4.1 Taranaki oil and gas sector Taranaki Oil & gas sector Total % of regional % of national oil and gas Employment (FTEs) 817
GDP ($mn) 741
Business units 57
The oil and gas sector directly employed 817 FTEs in the region in 2006. Regionally, it provided a relatively small proportion of all employment (1.8 percent) and business units (0.45 percent). However, its direct contribution to regional GDP was large, at $741 million, or 17 percent, in 2006. The Taranaki region is currently home to close to all New Zealand’s oil and gas production. As a result, it accounted for 90 percent of all the oil and gas sector’s employment and GDP in New Zealand in 2006. Growth in this sector is likely to be strong over the next several years as a result of ongoing project work and rising demand for fuel. The sector is expected to play an increasingly dominant role in the regional economy. More detail on likely rises in employment and GDP are introduced in the projections in section 5. The oil and gas sector has a particularly high employment multiplier of 3.66. This means that creating one additional FTE within the sector will result in a further 2.66 FTEs in the region. Table 4.2 presents the make-up of the Taranaki oil and gas sector’s inputs and outputs. It also shows the sector’s contribution to each category of regional inputs and outputs.
3 The 114 industries are based on the Australia and New Zealand Standard Industrial Classification (ANZSIC) codes, which classify the various industries in the economy.
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Table 4.2 Taranaki oil and gas sector total inputs and outputs Taranaki Oil & gas sector % of sector % of regional Inputs Intermediate inputs 20.34 2.55
Imports 17.35
4.16 Wages and other household income 6.45 3.87
Other inputs 55.87
24.92 Outputs Intermediate outputs 14.20 1.78
Exports 85.48
17.54 Household and government consumption 0.07 0.03
Other outputs 0.25
0.29 source: BERL, Butcher & Associates
Other inputs (which includes depreciation, taxes and profits) make up 56 percent of the sector’s inputs, and 25 percent of the region’s other inputs. A little over 20 percent of the sector’s inputs come from industries within the region, as explained in more detail below. A further 17 percent of inputs in the oil and gas sector in Taranaki are imported, accounting for 4.2 percent of all Taranaki imports. Wages and other household income accounts for 6.5 percent of inputs into the oil and gas sector. The oil and gas sector exports 85 percent of its output to the rest of New Zealand and overseas. Oil and gas exports account for nearly 18 percent of all Taranaki exports. The oil and gas sector supplied 14 percent of its outputs to industries in the Taranaki region. A number of industries provide inputs to the oil and gas sector. Table 4.3 presents the top ten industries by contribution to oil and gas sector inputs in Taranaki. Table 4.3 Taranaki oil and gas major input industries Oil & gas extraction 6.77 Ancillary services to construction 2.44 Non building construction 1.31 Oil & gas exploration 1.21 Other mining and quarrying 0.89 Wholesale trade 0.85 Technical services 0.84 Services to mining 0.82 Road freight transport 0.65 Electricity generation 0.63 source: BERL, Butcher & Associates Taranaki Oil & gas sector % of sector inputs
4 The reason for including services to mining and other mining and quarrying is that in the Taranaki region, 98 percent and 75 percent of these industries’ respective outputs feed directly into the oil and gas sector (ie exploration and extraction).
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Taranaki Industry Projections 2006-2026 Venture Taranaki November 2007
The oil and gas extraction industry provides the largest proportion of inputs to the oil and gas sector, at 6.8 percent. In other words, 6.8 percent of all inputs required by the oil and gas sector are provided by the oil and gas extraction industry. The second and third-largest contributors to the oil and gas sector’s inputs are ancillary services to construction and non building construction. These industries contribute 2.4 percent and 1.3 percent of oil and gas inputs respectively. The top-ten oil and gas input industries are rounded out by various mining, technical, business, and transport services, as well as wholesale trade. These trade-related industries are typically associated with primary industries. Together, the top ten input industries supply 16.4 percent of all industry inputs into the oil and gas sector. However, some industries are more reliant on the oil and gas sector than others in that a significant proportion of their outputs are purchased as inputs into the sector. Table 4.4 presents the ten industries most reliant on the oil and gas sector in terms of the portion of their total output contributed to the oil and gas sector in Taranaki.
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