Rotorua Lakes District Population Projections Draft report February 2015 www.berl.co.nz
Background Author(s): Hugh Dixon, Hillmarè Schulze, Mark Cox DISCLAIMER All work is done, and services rendered at the request of, and for the purposes of the client only. Neither BERL nor any of its employees accepts any responsibility on any grounds whatsoever, including negligence, to any other person. While every effort is made by BERL to ensure that the information, opinions and forecasts provided to the client are accurate and reliable, BERL shall not be liable for any adverse consequences of the client s decisions made in reliance of any report provided by BERL, nor shall BERL be held to have given or implied any warranty as to whether any report provided by BERL will assist in the performance of the client s functions. BERL Reference No: [5572] [February 2015]
Rotorua Lakes District Population Projections Making sense of the numbers Conventional population projections for any locality are based on assumptions about birth rates, death rates and migration. The economic performance of the locality does not come into it explicitly. However, the assumptions about migration will implicitly reflect how past economic performance has affected people s decisions about moving into or out of the locality. It is generally assumed that past patterns of migration will continue into the future. In recent decades, Rotorua has tended to experience net outward migration because the district s economy has struggled for a number of reasons. Conventional population projections for the District implicitly assume that the future will be much like the past and, consequently, they indicate that the number of people in the District will start to fall. The fall starts to happen in 10-15 years time because people of child-bearing age are expected to leave the District, causing the number of births to fall, while the number of deaths eventually increases as the population ages. BERL s projections explicitly relate future population levels to the performance of the economy. More specifically, our projections assume that a growing economy will generate increased employment. This will slow outward migration. At the same time, unemployment will fall and participation will increase. However, unemployment cannot fall below a certain level, and participation cannot increase above a certain level. Ultimately, net outward migration will cease and there will need to be net inward migration to sustain the growth of the economy. We have developed three alternative population projections for the District, based on the work that was completed for the Bay of Connections strategy, to which Grow Rotorua was a contributor. In all three cases, the population of the District is projected to continue increasing. However, population increase should not be taken as a given. If, for any reason, the economy fails to grow in the way expected, employment opportunities will fail to eventuate and young adults will leave the District, as they have in the past. This would cause the population to decline in the longer term. Making sense of the numbers i
Contents 1 Introduction... 1 1.1 Statistics New Zealand and NIDEA population projections for Rotorua Lakes District... 1 1.2 BERL s approach... 2 2 The findings... 4 2.1 Business as Usual employment growth scenario... 4 2.2 Reality Check employment growth scenario... 5 2.3 Strategy Stretch employment growth scenario... 6 2.4 Employment growth... 7 2.5 Population changes over the three scenarios... 7 3 Conclusion... 9 ii Rotorua Lakes District Population Projections
Tables Table 1: Business as Usual Scenario... 4 Table 2: Reality check Scenario... 5 Table 3: Strategy Stretch Scenario... 6 Figures Figure 1: Population growth for Rotorua... 8 Contents iii
Rotorua Lakes District Population Projections 1 Introduction 1.1 Statistics New Zealand and NIDEA population projections for Rotorua Lakes District 1.1.1 The Statistics New Zealand approach to population projection Statistics New Zealand (SNZ) population projections are derived from an assessment of historical, current, and likely future trends in births, deaths, and migration the three components of population change. Assumptions about future fertility (births), mortality (deaths), and migration are formulated after analysis of short-term and long-term historical trends, government policy, information provided by local planners and other relevant information. Assumptions are set first at the national level and used as a constraint for the subnational assumptions (this 'top-down' approach prevents implausible projections for any area). Fertility Fertility assumptions for each area are formulated in terms of age-specific fertility rates for each time period. The rates are based on the recent number of registered births in each area. The rates are then applied to the (female) population in each area to give the number of births for each time period. Mortality Mortality assumptions for each area are formulated in terms of male and female age-specific survival rates for each time period. The rates are based on the recent number of registered deaths in each area. The rates are then applied to the population in each area to give the number of people who survive each time period (the number of deaths is calculated indirectly). Migration The assumed net migration level and age-sex pattern for each area is based on a consideration of observed past patterns, the capacity of the area for further growth (for areas with net inflow), whether historical outflows can be sustained (for areas with net outflow), and information available from and about local authorities relating to current and future developments which may affect population change. Population projections released 19 February 2015 Statistics NZ released their new population projections on 19 February 2015 1. The projections indicate that the population of Rotorua will decline in the longer term under both the low and medium projections. Under the high projections the population will increase from 68,400 in 2013 to 75,700 in 2038. This is an increase of just over 10 percent for the period as a whole. 1.1.2 The NIDEA approach to population projection NIDEA adopted a different methodology to that employed by SNZ. The key difference is that rather than estimating a single net migration figure and applying that figure to a net migration profile, they estimate sex- and age-specific net migration rates which were then applied to the actual profile of 1 Statistics New Zealand s population projections are for 30 June in the years in question. 1 Introduction 1
population in each territorial authority. These rates can then be applied in a similar way to fertility and survivorship rates in projecting the future population The population of Rotorua District is projected to grow very slightly from 68,590 2 in 2013 to 69,127 by 2033 (0.8 per cent over 2013), and then decline to around 52,702 in 2063 (-22.4 per cent). The projected peak occurs in 2026 at 69,601 persons. The onset of decline reflects both an accelerated shift from natural increase to natural decline, beginning around 2039, and negative net migration across the entire period. Net migration is projected to average -385 per annum between 2013 and 2033, and -411 per annum between 2034 and 2063. It should be recalled from the methodology that these numbers are not forced as occurs when a numerical assumption is applied, but instead arise out of applying historical average net migration rates by single year of age, and sex. 1.2 BERL s approach 1.2.1 Baseline BERL takes a different approach in determining the population projections for Rotorua. BERL s projections explicitly relate future population levels to the performance of the economy. More specifically, our projections assume that a growing economy will generate increased employment. This will discourage outward migration. At the same time, unemployment will fall and participation will increase. However, unemployment cannot fall below a certain level, and participation cannot increase above a certain level. Ultimately, net outward migration will cease and there will need to be net inward migration to sustain the growth of the economy. 1.2.2 Assumptions BERL has used three co-efficient factors to determine the change in migration, unemployment and labour force. Migration, unemployment and labour force co-efficient factors were determined from analysing how historic New Zealand migration, unemployment and labour force rates change when there is a change in employment. Based on these changes BERL has calculated the following coefficient factors: Migration co-efficient factor = 0.24 Unemployment co-efficient factor = 0.48 Labour force co-efficient factor = 0.28. These co-efficients imply that every increase in employment of 100 people will be made up of 24 migrants, 48 people who were previously unemployed and 28 people who were previously not part of the labour force. BERL has also calculated a co-efficient for migrant families Family co-efficient factor = 1.75. In other words, every migrant joining the workforce will be accompanied by, on average, 0.75 other persons. 2 This figure is an estimate produced before the Census 2013 results were published and is, therefore, slightly different from the District s population, as enumerated by the Census. It is also slightly different from the mid-year baseline figure used for Statistics New Zealand s population projections. 2 Rotorua Lakes District Population Projections
Rotorua Lakes District Population Projections The base migration rate was determined by the average historic net external (-190 per annum) and internal migration (-337 per annum). As stated, BERL used Statistics New Zealand birth and death rate forecasts for Rotorua District for natural increases. From these calculations we have determined that the working Age Population (everyone aged 15 or older) as a percentage of total population will increase from 76.8 percent in 2013 to 80 percent in 2036 Within the projections we have also set limitations on the level of unemployment and labour force participation as these cannot practically fall below or above certain levels. Our model assumes that the unemployment rate cannot fall below 5 percent of the labour force. Once this occurs unemployed is determined exogenously of the model and the migration co-efficient factor is changed to 0.72. In effect once unemployment hits 5 percent; it is assumed that new workers will not be able to be drawn from the unemployment line and therefore they need to come from migration. Our model also assumes that the Labour Force Participation Rate cannot rise about 70 percent. When the labour force reaches 70 percent of the Working Age Population, workers will no longer be able to be drawn from outside the labour force into the labour force. In effect when the labour force participation rate hits 70 percent the change in the labour force becomes zero and since this occurs only after unemployment reaches 5 percent, the change in migration will equal the change in employment. 1.2.3 Three scenarios BERL has developed three scenarios to determine the changes in employment in the situational analysis work completed in 2014 for the Bay of Connections. These scenarios were modelled out to 2022. For this report BERL has extended the three scenarios out to 2036. The three scenarios that BERL has modelled were: Scenario 1: Business as Usual. Scenario one is Business as Usual and the majority of the assumptions were be based on well recognised data and forecasting sets. Scenario 2: Reality check. taking into consideration international and national externalities Scenario three is based on exogenous factors that will have an influence on the economic growth potential of the region. Scenario 3: Strategy stretch - realising the Bay of Connections Strategy. Scenario two is based on the sector growth strategies as identified through the Bay of Connections growth strategy. In order to measure the effect of the different scenarios, BERL used the baseline or business as usual benchmark scenario. This scenario was our comparator and was the outcome against which we compared the results of the other two scenarios. 1 Introduction 3
2 The findings 2.1 Business as Usual employment growth scenario Under his scenario, Rotorua is projected to have a slow growing workforce. Table 1 provides a year on year absolute growth numbers for employed, unemployed and total population under the Business as Usual scenario. The business as usual scenario will see: total employment will rise from 28,545 in 2013 to 36,731 in 2036 (meaning a total increase over this period of 1.3 percent per annum, or 8,186 jobs in total over the period); this rise in employment will lead to a population increase of just over 5,000 people between 2013 and 2036. Table 1: Business as Usual Scenario Year BAU scenario Total Employment Total Unemployment Total Population 2013 28,545 3,138 65,280 3 2014 28,841 2,996 65,620 2015 29,138 2,854 65,706 2016 29,434 2,711 65,735 2017 29,730 2,569 65,764 2018 30,026 2,427 65,793 2019 30,323 2,285 65,822 2020 30,619 2,142 65,852 2021 30,915 2,000 65,826 2022 31,212 1,858 65,799 2023 31,567 1,688 65,797 2024 31,922 1,684 66,087 2025 32,277 1,702 66,416 2026 32,631 1,720 66,692 2027 33,041 1,742 67,045 2028 33,451 1,763 67,398 2029 33,861 1,784 67,753 2030 34,271 1,805 68,109 2031 34,681 1,826 68,467 2032 35,091 1,847 68,827 2033 35,501 1,868 69,189 2034 35,911 1,889 69,553 2035 36,321 1,910 69,918 2036 36,731 1,931 70,285 3 65,280 is the District s population, as enumerated by the Census in March 2013. 4 Rotorua Lakes District Population Projections
Rotorua Lakes District Population Projections 2.2 Reality Check employment growth scenario Under this scenario, Rotorua is projected to have a growing workforce especially on the back of a recovery in the tourism sector. Table 2 provides a year on year absolute growth numbers for employed, unemployed and total population under the Reality Check scenario. The business as usual scenario will see: total employment will rise from 28,545 in 2013 to 42,110 in 2036 (meaning a total increase over this period of 1.5 percent per annum, or 13,565 jobs in total over the period); this rise in employment will lead to a population increase of nearly 14,000 between 2013 and 2036. Table 2: Reality check Scenario Year Reality Check scenario Total Employment Total Unemployment Total Population 2013 28,545 3,138 65,280 2014 29,043 2,899 65,705 2015 29,541 2,660 65,876 2016 30,039 2,421 65,991 2017 30,537 2,182 66,106 2018 31,035 1,943 66,222 2019 31,533 1,704 66,339 2020 32,031 1,692 66,855 2021 32,530 1,717 67,382 2022 33,028 1,743 67,912 2023 33,610 1,774 68,561 2024 34,192 1,804 69,211 2025 34,775 1,833 69,865 2026 35,357 1,863 70,465 2027 36,033 1,899 71,195 2028 36,708 1,933 71,926 2029 37,383 1,968 72,661 2030 38,058 2,002 73,399 2031 38,734 2,036 74,141 2032 39,409 2,071 74,886 2033 40,084 2,105 75,635 2034 40,760 2,139 76,718 2035 41,435 2,173 77,807 2036 42,110 2,208 78,901 2 The findings 5
2.3 Strategy Stretch employment growth scenario Under this scenario, Rotorua is projected to have a steady growing workforce with employment created in especially tourism, transport and logistics and forestry. Table 3 provides a year on year absolute growth numbers for employed, unemployed and total population under the Reality Check scenario. The business as usual scenario will see: total employment will rise from 28,545 in 2013 to 45,663 in 2036 (meaning a total increase over this period of 1.6 percent per annum, or 17,118 jobs in total over the period); this rise in employment will lead to a population increase of just over 20,000 between 2013 and 2036. Table 3: Strategy Stretch Scenario Year Strategy Stretch scenario Total Employment Total Unemployment Total Population 2013 28,545 3,138 65,280 2014 29,193 2,827 65,768 2015 29,842 2,516 66,003 2016 30,490 2,204 66,181 2017 31,138 1,893 66,361 2018 31,786 1,681 66,716 2019 32,435 1,715 67,502 2020 33,083 1,748 68,293 2021 33,731 1,781 69,031 2022 34,380 1,814 69,773 2023 35,097 1,852 70,614 2024 35,814 1,888 71,458 2025 36,531 1,925 72,306 2026 37,248 1,961 73,099 2027 38,090 2,006 74,067 2028 38,931 2,049 75,036 2029 39,773 2,091 76,010 2030 40,614 2,134 77,401 2031 41,456 2,177 78,798 2032 42,297 2,220 80,202 2033 43,138 2,262 81,613 2034 43,980 2,305 83,031 2035 44,821 2,347 84,456 2036 45,663 2,390 85,888 6 Rotorua Lakes District Population Projections
Rotorua Lakes District Population Projections 2.4 Where will employment growth come from? Tourism and Transport & logistics feature among the top fastest growing key sectors under each of the Bay of Connections scenarios, while Forestry comes to the fore under the Reality Check and Strategy Stretch scenarios. The tourism sector is well on its way to recover to pre-global financial crisis levels. MBIE forecasts show that visitor numbers will grow between now and 2020 with increases from established destinations such as Australia and increased numbers from markets such as China. Out to 2020 eighty percent of the extra visitors will come from Australia (385,000) and China (280,000) 4. Rotorua is an established tourism destination and will benefit from these increased tourism numbers through increased GDP and employment opportunities. The forestry and wood processing sector is one of the largest employment sectors in Rotorua and an important income generator for the district s local economy. The forestry sector is set to continue to grow over the forecasted period, creating new jobs. The Asia Pacific Forestry Commission 5 forecast demand for industrial round wood to increase from 317 million m3 in 2005 to 550 million m3 in 2020, with East Asia, especially China, accounting for most of this consumption. Similar analysis has shown that growth in construction is expected to be strong in China, the United States and India, with a 70% increase in construction output to $15 trillion worldwide by 2025, including the need for 270 million new homes in China and India by 2015 (Global Construction Perspectives and Oxford Economics 2013). The forestry industry is well established in Rotorua and has extensive transportation infrastructure and support services surrounding the industry. These transport and logistical services will expand along with the forestry industry to support increased demand for the region s wood. Therefore, even if the region continues on its current growth path, or expands beyond the current growth path, employment will increase over the forecasted period, with more people needed to enter into the labour market either through increased participation in the labour force, or from the unemployed or increased migration. 2.5 Population changes over the three scenarios The population changes over the three scenarios are shown in Figure 1. BERL projects that there will no population decline in Rotorua and that the population will increase to 2036 based on the three scenarios in the Bay of Connections strategy. In all three cases, the population of the District is projected to continue increasing. 4 MBIE (2014). Retrieved from http://www.mbie.govt.nz/news-and-media/news-from-around-mbie/tourism-outlookpositive 5 Asia Pacific Forestry Commission (2010). Asia-Pacific forests and forestry to 2020. Report of the second Asia-Pacific forestry sector outlook study. Bangkok: Food and Agriculture Organization of the United Nations. 2 The findings 7
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Figure 1: Population growth for Rotorua 90,000 85,000 80,000 75,000 70,000 65,000 BAU Strategy stretch Reality check 60,000 55,000 50,000 8 Rotorua Lakes District Population Projections
Rotorua Lakes District Population Projections 3 Conclusion This report provides alternative population projections for the District, based on the three scenarios in the Bay of Connections strategy. In all three cases, the population of the District is projected to increase, based on our forecasted future performance of the Rotorua economy. The scenarios indicate that employment will rise over the forecasted period by between 1.3 and 1.6 percent per annum. These increases in employment will lead to increased population as more people will stay in the region and more people will move into the region for employment opportunities. However, population increase should not be taken as a given. If, for any reason, the economy fails to grow in the way expected (for example, because of another period of contraction in global tourism), employment opportunities will fail to eventuate and young adults will leave the District, as they have in the past. This would cause the population to decline in the longer term. 3 Conclusion 9