Rotorua Lakes District Population ProjectionsBERL has used three co-efficient factors to determine the change in migration, unemployment and labour force. Migration, unemployment and

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]


Making sense of the numbers i

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.

Rotorua Lakes District Population Projections ii

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

Contents iii

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


1 Introduction 1

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 20151. 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.

Rotorua Lakes District Population Projections 2

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 68,5902 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 co-

efficient 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.


1 Introduction 3

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.


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 65,2803

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.


2 The findings 5

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:



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


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


2.3 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:



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


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


2 The findings 7

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 Commission5

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-outlook-

positive 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.

http://www.mbie.govt.nz/news-and-media/news-from-around-mbie/tourism-outlook-positive

http://www.mbie.govt.nz/news-and-media/news-from-around-mbie/tourism-outlook-positive


Figure 1: Population growth for Rotorua

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3 Conclusion 9

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.

Rotorua Lakes District Population ProjectionsBERL has used three co-efficient factors to determine the change in migration, unemployment and labour force. Migration, unemployment and

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