Going, Growing, Gone: The public sector in a 'new' New Zealand

Distinguished Professor Emeritus Paul Spoonley outlines the main changes in Aotearoa New Zealand’s projected demography and the impact of these changes on our public services.

This decade (2020–2030) is going to prove transformative for Aotearoa New Zealand as the demography of the country changes. As the 2030s unfold, the demographic profile of the country and of particular regions and centres will have changed significantly with implications for the way in which the public sector interacts with – and responds to – this new demography.

The shape of this ‘new’ New Zealand has been obvious for some time. However, certain shocks – notably the Global Financial Crises (GFC) (2008–2012) and the crisis period of the Covid-19 pandemic (2020–2021) – have altered the speed and impacts of demographic change. The somewhat puzzling aspect of public understanding is that there is seldom an appreciation of the various moving parts or the size of the implications.

An old-age-dominant society

That said, there appears to be a growing appreciation that the ageing of Aotearoa New Zealand is an important factor as we think about the provision of services and the costs of those services. The size of the Baby Boomer generation, born between 1945 and 1964, is now reconfiguring the population profile of the country. New Zealand saw one of the most prolonged spikes in fertility of any high-income country, with 4.7 births per female. We now measure the impact of that period by those reaching the age of 65 (please note that this is no longer the age of retirement for many), which began for the Baby Boomers in 2010 and will continue through to 2029.

Demographers talk about the numerical and the structural impacts of ageing. Both have considerable implications for the provision of services and, of course, paying for them. For example, the increase in the Long-Term Care (LTC) beds required will exceed GDP growth over the coming decades. Who pays for this and where should the care be provided?

In 1981, the over-65-year-olds made up 7 per cent of the population while 0–14-year-olds comprised 27 per cent. By 2033, the over-65-year-olds will constitute 21 per cent of all New Zealanders and 0–14-year-olds now 16 per cent (StatsNZ projections, 2022 base, median figures). This gap continues to widen further through the 2030s and 2040s.

Fertility decline

The ageing of society is compounded by the decline in fertility. The Total Fertility Rate required to replace an existing population is 2.1 births per woman. At the end of the GFC, New Zealand’s rate was still at replacement level but a year later, in 2014, it had dropped to 1.92 and then by last year, was down at 1.58 births per woman.

This means that natural increase (the number of births minus the number of deaths) is less of a factor in terms of population growth. In 2023, New Zealand grew by 105,900 people, but most of this came from net migration, with natural increase contributing 19,100. It also means fewer births: 64,341 in 2008 compared to 58,887 in 2022. That is why the Ministry of Education is forecasting 30,000 fewer in the compulsory education sector by 2030.

Superdiversity

What is transforming New Zealand, both in terms of ethnic and faith diversity as well as where people live, is immigration. More than 80 per cent of New Zealand’s population growth now comes from net migration. What should be noted is that the immigrant arrivals, along with departures (we are currently seeing a return to the net loss of New Zealand citizens at very high levels) and net migration gains fluctuate a lot. The most recent comparison is between the Covid-19 years: in the year to February 2021, total immigrant arrivals numbered 60,524 (so not a completely closed border then) with a net gain of 9,489 compared to November 2023 when arrivals numbered a historic high of 249,504 with a net gain of 127,400.

Given that the three most common source countries for these recent arrivals are India, the Philippines, and China (in that order), there are major current and future impacts on cultural diversity, especially for the school and working-age populations. Add in the still high population growth of Māori, and young New Zealand looks very different over the coming decades. By 2043, StatsNZ (September 2022) estimated that 21 per cent of the population would identify as Māori, 24 per cent with one of the Asian communities, and 11 per cent with one of the Pasifika communities. But what is interesting is that the 0–14 age groups would now be 33 per cent Māori, 25 per cent Asian, and 19 per cent Pasifika.

Very different regional trajectories

The final element is where New Zealanders will live. We have long been forecasting either population stagnation (no or little population growth) for many Territorial Authorities or population decline (depopulation) for some. In contrast, a significant proportion of future population growth will occur in the top half of the North Island.

Given that Auckland tends to be the main beneficiary of immigrant arrivals and settlement, we should anticipate that the city will see growth of another 500,000 to 700,000 over the next two decades, and it is possible that 40 per cent of New Zealand’s population will be Auckland residents by the late 2030s. This could change, but will it?

Public service impacts

The question now becomes how does the public service adjust to these new demographics? As a recent Goldman Sachs report made clear, the ageing of societies and workforces, combined with declining fertility and a reliance on immigration, all reshape the macro-economic and public investment landscape.

(a) Workforce implications

As a long-term judge for the Diversity Awards, it is rewarding to see many parts of the public sector thinking about what they need to do to adjust policies and practices given the ever-growing diversity of the country. As an author of annual surveys of employers for Diversity Works (up until recently), I would note that public service managers and leaders have led the private sector in terms of gender, ability, ethnicity, and tangata whenua recognition. But there are significant gaps and a lot more to do if community and national diversity is to be fully recognised and incorporated into the public sector.

There are particular gaps and tensions. The journey to more adequate recognition of Te Tiriti o Waitangi and the significance of tangata whenua in this future Aotearoa New Zealand appears to have produced what can only be labelled as ‘white anxiety’ and a political reaction. Politicians and the public sector seem to have either misread or failed to adequately address issues such as the reasons for co-governance or the incorporation of Te Tiriti or te Reo in what they do – or plan to do. The recent emergence of a much more assertive denial politics might have underestimated how embedded some of the changes of the last 40 years have become or how important the future demography and economy of tangata whenua will be to Aotearoa New Zealand.

(b) Ageing

A second gap concerns ageing. The size and longevity of New Zealand’s older population is going to put new fiscal stresses on the state as well as significantly shift a range of economic dynamics. Think of the dependency ratio (those in work compared to those who are not in paid work and are beneficiaries of state support) or the entry/exit ratios (those entering the workforce compared to those exiting). How the state generates income, how it distributes that income, and what it prioritises will all fundamentally change.

The issue is often political – a reluctance to factor in median and long-term considerations given the exigencies of a three-year political cycle or the willingness to consider and respond to good-quality data. But there is also the fact that a number of employers, including those in the public sector, acknowledge that ageing is an issue but then do not develop workplace and delivery policies to address the issues.

(c) Ethnic diversity

Thirdly, there is the superdiversity that continues to change communities. We should expect that about one in five of us will self-identify as tangata whenua, a similar proportion as a member of one of New Zealand’s Asian communities, and another 10–11 per cent as Pasifika. All these percentages increase by quite some margin if we are talking about the percentages of indigenous and ethnic groups in our education system, certain parts of the country, or in relation to the workforce. What sort of investments and policies address growing diversity and enhance social cohesion?

(d) Regional disparities

Finally (and there are many other matters to consider, such as generational differences in wealth accumulation, and debt or labour market opportunities) there is the vexed question of the demographic trajectories of different regions and centres. Many New Zealanders (especially local politicians) seem unwilling to confront the possibility that their part of the country will face significant ageing (possibly hyper-ageing) or that they will experience population stagnation or depopulation.

Some concluding thoughts

The nature and extent of New Zealand’s demographic changes are such that many of our existing policies and approaches will simply not work. But how do we have the discussion about what will work? And where will the innovative policy and political leadership come from? How do we renegotiate existing social contracts to reflect these new demographics?

I also want to echo former New Zealand Statistician (1992–2000) Len Cook’s concerns that we need to have a robust population data collection system – which is in some danger at the moment – and we need to develop a better understanding of the medium- and long-term implications of population change and what this means for public service investments.

This article is published in the Public Sector Journal - Autumn 2024, Issue 47.1.