Economic contribution of local government

Commissioned by Local Government New Zealand (LGNZ), this research assessed the economic contribution of local government to the overall economy and estimated the impact of local and regional councils on economic development and growth.

Local government’s contribution to the economy in 2024 comprised:

• $2.2 billion (0.5 percent of GDP) from local public administration
• $20.1 billion (4.8 percent of GDP) in operational and capital spending and expenditure
• Up to $0.5 billion (0.1 percent of GDP) in long-term productivity benefits to the wider economy.

This estimated contribution of local government is conservative.

Summary of the economic flows and contribution of local government, by impact

Local government contributes wider economic and other benefits that were not quantified, through community and development services and place-making, over and above the economic benefits from providing local roads, public transport, water, waste, and flood protection. For example, our estimated contribution to economic growth does not include the impact from managing natural hazards and floods, because those benefits are avoided consequences to the economy.

Contextual factors also suggest that the estimated contribution of local government is conservative. The New Zealand economy is currently recovering from a period of economic stagnation, and public infrastructure investment returns are larger during periods of slower economic growth. Finally, higher planned infrastructure investment (compared to historic levels) by local government over the coming decades will lift local government’s contribution to the economy further.

Our strategic recommendation is to mutually reinforce 1) planning and coordination of growth to 2) maximise return from capital investment, while 3) better managing the political economy and local political efficiency for infrastructure investment funding and delivery.

Local government opportunity for supporting economic growth

To give effect to this overall strategic opportunity, we advise the following:

• Central and local government measures – Better alignment, planning, and coordination between central and local government would improve the consistency, predictability, and delivery of infrastructure with more efficiency and higher overall returns to the economy. Further, we support expanding funding and financing tools available to local councils
• Local government measures – There are opportunities for local government itself to support growth of their local districts more effectively and efficiently. Recommendations include more efficient investment delivery, maximising private investment returns by matching asset and population growth, and more systematically assessing the costs and benefits of investments.

You can view LGNZ’s release here, and the full report is also available here.