NEW ZEALAND

New Zealand, a unitary country, is a constitutional monarchy with a parliamentary system of government and two tiers of subnational government. The country has a unicameral parliament, with approximately 120 members elected every three years by universal suffrage through proportional vote. The head of the government is the Prime Minister.

New Zealand (Aotearoa) has no written constitution. The constitution is found in legislation, legal documents, common law derived from court decisions and conventions. The functions and dual purpose of local governments are defined in the Section 10 (Part 2) of the Local Government Act 2002, as enabling “democratic decision-making and action by, and on behalf of, communities” and meeting “to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future”.

The subnational level of government consists in 11 regional councils, and 67 territorial authorities at municipal level. Regional and local councils have similar structures, with members elected to represent their communities for three-year terms. Local councils are headed by Mayors, directly elected for a three-year term. The leader of the regional council is the Chair, who is elected by regional councillors from among their own ranks, and who can be removed from office by them. In total, the number of councillors amounts to approximately 1,600 elected members. Local authorities are primarily accountable to their communities rather than to the central government, with information about local authorities’ activities required to be shared in line with the Local Government Official Information and Meetings Act (1987).

Councils can establish committees (usually a standing committee appointed for the term of the council), sub-committees and other decision-making bodies that they consider appropriate. Many councils have second tier or sub-municipal bodies, which may also be elected, and are known as community boards or local boards (in Auckland). Auckland has a governing body of 21 members that are responsible for the overall direction of the council. It shares responsibility with 21 local boards that represent the interests of municipal areas within the greater Auckland region.

Many measures were introduced in the late 1980s and early 1990s to reform local governments in New Zealand. They were often aimed at amalgamating and restructuring local authorities, increasing governance flexibility and efficiency, increasing the transparency and accountability, and improving access and quality to local public services. This led to the passing by the Parliament of a series of Acts that provided councils with more flexible powers and tools to work with and for their communities, such as the Local Electoral Act 2001, the Local Government (Rating) Act 2002 and the Local Government Act 2002 (LGA 2002). The latter was a large reform of local governments’ functions that broadened and redefined local governments’ powers, roles and responsibilities, by separating policy making from policy implementation and providing subnational governments with a general power of competence. A major objective of this reform was also to increase accountability and introduce collaborative and citizen-centred processes. The LGA 2002 has since been amended a number of times.

While local governments are independent from the central government on political, financial and administrative levels, specific statutes may establish responsibility or accountability relationships between local authorities and central government agencies or ministers, in particular the minister of local government, supported by the Department of Internal Affairs. Inter-governmental coordination is supported through various forums, including formal meetings between the Prime Minister and cabinet members (particular the Minister for Local Government), and Local Government New Zealand (LGNZ), a body that supports and advocates for local governments.

In 2021, the Minister of Local Government established a Review into the Future for Local Government. The review is tasked to ‘reimagine the role and function of local government’ in order to build a sustainable system that delivers enhanced wellbeing outcomes for communities. The review will provide recommendations covering the roles, functions, partnerships, representation, governance, funding and financing of local governments. An interim report was released in September 2021 and outlined five questions to guide the review, covering the governance system, functions and roles of local government, partnerships under the Te Tiriti o Waitangi (Waitangi Treaty), local leadership, and funding and financing. A final report will be provided to the Minister for Local Government and LGNZ in 2023.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
67 territorial authorities (incl. city councils, district councils, unitary authorities)		11 regional councils
Average municipal size: 75,885 inh. (based on 2018 census)
67		11	78

[1] Name and number of sub-municipal entities:
110 Community boards, 21 Local Boards

OVERALL DESCRIPTION: New Zealand has a two-tier system of subnational government. In 2022, there were 11 regional councils and 67 territorial authorities. New Zealand’s local territorial arrangements were significantly reformed in 1989, through a strong consolidation process. Before the 1989 reform, the local government sector was characterised by high fragmentation and enormous disparities in size and activities, both at regional and local levels. At local level, there were around 850 structures, including around 200 local authorities with different statuses (counties, municipalities, independent town districts, district communities) and numerous elected “special purpose bodies” (harbour boards, catchment boards and drainage boards, etc.).

As part of the 1989 reform, the number of local authorities was reduced to 74 “territorial authorities” (subsequently to 67). The municipal reform was also a regional reform, as 12 “regional councils” were created (subsequently 11). Authority over the reform process was delegated to an independent commission, the Local Government Commission.

REGIONAL LEVEL: New Zealand has 16 regions including 11 administered by regional councils and five others that are administered by territorial authorities (city or district councils) who also perform the functions of regional councils (e.g. Auckland Council, Tasman District Council, Nelson City Council, etc.). Population size for regions ranges from 32 000 inhabitants in West Coast to 1 571 000 inhabitants in Auckland (2018 census).

Regional disparities in terms of GDP per capita have decreased in New Zealand in recent years, after a period of widening disparities between 2007 and 2014. In 2018, New Zealand had the lowest regional disparities among 29 OECD countries with comparable data, taking into account the richest and poorest regions representing at least 20% of the population.

MUNICIPAL LEVEL: There are three types of territorial authorities: city councils, district councils and unitary authorities. City councils have a population of more than 50 000 inhabitants and are predominantly urban-based, while district councils have a smaller and more widely dispersed population. In 2022, there were 12 city councils, 54 district councils and the Auckland Council. Six of the territorial authorities also have the powers of a regional council, making them unitary authorities (Auckland Council, Gisborne District Council, Chatham Islands Council, Nelson City Council, Marlborough District Council and Tasman District Council). In 2010, the regional council and seven territorial authorities, which had made up the Auckland metropolitan area, were amalgamated further to form the Auckland Council unitary authority.

The average population size of territorial authorities was, as of the 2018 census, around 70 145 inhabitants. Excluding the Auckland Council Region, the average population of territorial authorities is 47 394. Some 95% of territorial authorities have populations that exceed 5 000 inhabitants, and 67% more than 20 000.

At sub-municipal level, there are “community boards” and “local boards”. They are elected and operate in both urban and rural areas. Both forms advocate for, and represent the interests of, designated communities. Community boards may also undertake functions delegated to them by their councils. Currently, there are 110 community boards across the country. As part of the consolidation of the Auckland councils in 2010, a co-governance model was created, and 21 local boards were established. Local boards are similar to community boards, but have a wider range of responsibilities.

HORIZONTAL COOPERATION: Councils (local and regional) and local boards can co-operate with each other and form joint committees through formal arrangements, to address certain issues of common interest. These include for examples the management of emergency measures and civil defence, but also the provision of services such as waste management, tourism and economic development.

The Local Government Act 2002 (LGA) defines subnational government responsibilities. It provides a general clause of competence and charges local governments with promoting social, environmental, economic and cultural wellbeing. The LGA outlines that the purpose of local government is “(a) to enable democratic local decision-making and action by, and on behalf of, communities; and (b) to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future”. The LGA has been amended multiple times. It was amended in 2014, in line with the Better Local Government New Zealand reform, in order to further clarify the division of responsibilities between regional councils and territorial authorities. Another major component of reforms in New Zealand was a move towards greater ‘corporatisation’ of government-owned commercial activities, either through privatisation or the creation of public (or semi-public) subnational State-Owned Enterprises (corporations) to carry out local services.

As activities of subnational governments must be approved through public consultation within their communities, the list of their responsibilities varies widely from one council to another. There is also a high degree of co-operation between regional and territorial councils, which have complementary roles. Regional councils are primarily responsible in sectors related to environmental protection and natural environment, transport, green areas and water management (the boundaries of most regions are based on catchment areas). Responsibilities of regional councils in resource management are further detailed in the Resource Management Act of 1991, amended in 2017, which promotes the sustainable management of natural and physical resources (coastal marine areas, water allocation, soil conservation, etc.). Territorial authorities generally have responsibilities related to local development, service delivery, local infrastructure, community development and amenities.

In response to increasing pressures on water infrastructure, services and the environment in many council areas, the New Zealand government is progressing a Three Waters Reform Programme to centralise drinking, waste and storm water responsibilities. This will amalgamate the current 67 council-owned water entities into four new state-owned enterprises. These entities will be jointly owned by councils, will have joint strategic direction and oversight, will be financially separate from councils and will have independent boards.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Regional regulations	Local regulations
2. Public order and safety	Civil defence in case of emergency; Regional emergency management	District emergency management and civil defence preparedness
3. Economic affairs / transports	Regional transport (including public transport); Harbour navigation and safety; Regional land management	Local land-use management; Local roads; Community development; Tourism; Water supply
4. Environment protection	Water quality; Contaminant discharge and coastal management, river and lake management; Flood and drainage control; Environmental protection; Resource management; Air quality; Pest control,Regional parks and public spaces	Environmental health and safety; Sewerage; Storm water; Solid waste management; public health inspections.
5. Housing and community amenities	Water networks management	Town Planning; Water supply; Parks and reserves; Social housing; Building control
6. Health
7. Culture & Recreation		Libraries; Theatres; Concerts; Museums; Sports and leisure
8. Education
9. Social Welfare		Pensioner housing

Scope of fiscal data: Regional Councils at the regional level, and City Councils, District Council and Auckland Council (all referred to as “territorial authorities”) at the municipal level; a structured sub-municipal level made of community and local boards.

SNA 2008

Availability of fiscal data: High

Quality/reliability of fiscal data: High

GENERAL INTRODUCTION: New Zealand is among the most centralised countries in the OECD with regard to spending responsibilities; however, subnational governments have a certain level of autonomy in terms of spending in their specific fields as they rely less on transfers from the central government (compared with the OECD average) and more on land property-related taxation, user charges and property income. A heavy reliance of councils on user fees and charges, however, can pose challenges for the financing of long-term infrastructure and some specific responsibilities (transport, culture and recreation), which may have contributed to infrastructure investment shortfalls.

While the central government accounts for differences in local government financial capacity in the allocation of road infrastructure capital grants, it does not have a proper system of fiscal equalisation. This can pose challenges for local governments in remote, rural and lower socio-economic regions who may have higher infrastructure costs per capita and lower income populations than in metropolitan regions and have a lower tax base, especially from the main revenue source (property rates).

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	1 859	4.2%	10.3%	100.0%
Inc. current expenditure	1 213	2.7%	7.5%	65.3%
Compensation of employees	372	0.8%	9.5%	20.0%
Intermediate consumption	613	1.4%	25.7%	33.0%
Social expenditure	0	0.0%	0.0%	0.0%
Subsidies and current transfers	125	0.3%	4.2%	6.7%
Financial charges	104	0.2%	17.6%	5.6%
Others	0	0.0%	0.0%	0.0%
Incl. capital expenditure	645	1.5%	34.4%	34.7%
Capital transfers	10	0.0%	5.5%	0.5%
Direct investment (or GFCF)	635	1.4%	37.6%	34.2%

EXPENDITURE: In New Zealand, subnational government spending ratios as a share of public expenditure and of GDP are below the OECD average (respectively 36.6% and 17.1% in 2020). The level of subnational government staff spending is particularly low (9.5% of public expenditure in the category, vs. the OECD average of 61.2%) as subnational governments do not play a role in broad areas such as education, social protection and health. Instead, their responsibilities mainly cover local infrastructure and services.

DIRECT INVESTMENT: Subnational governments play a significant role in public investment, especially compared to their low level of spending decentralisation. In 2020, one-third of their expenditure was dedicated to investment (transport and utilities), which represents 1.4% of GDP (vs 1.9% in the OECD countries on average). Transport investments, which represent almost 40% of local authority capital expenditure, are co-funded through the National Land Transport Fund (LTF) overseen by the NZ Transport Agency. Co-funding is allocated on the basis of Regional Land Transport Plans, which list the projects councils are seeking funding for, and are assessed through an Investment Prioritisation Method, overseen by the NZ Transport Agency. Other main areas of capital expenditure by local authorities are water and wastewater (22% of capital expenditure), recreation and sport (12%) and property (9%).

Broadly speaking, infrastructure investments have lagged behind the needs stemming from rapid population growth, particularly in the Auckland region. To help address the infrastructure gap, a New Zealand Infrastructure Commission (Te Waihanga) was created in 2019 with the aim to identify infrastructure gaps, prepare an infrastructure project pipeline and support government agencies and local authorities deliver major projects. Most recently, the government has implemented an Infrastructure Funding and Financing Act 2020, which seeks to provide opportunities for local councils, Māori indigenous people, iwi Māori communities and developers to partner and deliver infrastructure. The act establishes an infrastructure levy model and supports the use of a Special Purpose Vehicles (SPV) as a financing tool that enables debt financing to be raised from the private sector and ring-fenced from a council’s balance sheet, with the aim to avoid an impact on local government debt levels or credit rating. The model involves the central government taking on contingent risks relating to the SPV through a tailored Government Support Package.

Subnational government expenditure by functional classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure by economic function	1 859	4.2%	-	100.0%
1. General public services	588	1.3%	30.4%	31.6%
2. Defence	5	0.0%	1.4%	0.3%
3. Security and public order	2	0.0%	0.2%	0.1%
4. Economic affairs/transports	525	1.2%	16.8%	28.3%
5. Environmental protection	261	0.6%	65.6%	14.0%
6. Housing and community amenities	230	0.5%	46.5%	12.4%
7. Health	0	0.0%	0.0%	0.0%
8. Recreation, culture and religion	247	0.6%	58.7%	13.3%
9. Education	0	0.0%	0.0%	0.0%
10. Social protection	0	0.0%	0.0%	0.0%

After general public services, economic affairs and particularly transport is the main category of subnational government spending (28.3%). In this sector, subnational governments contribute up to 16.8% of total public spending (1.2% of GDP), which is higher than the OECD average for this type of expenditure (13.6%) but lower than the OECD average for GDP (2.2%) indicating lower public spending in this category in New Zealand. Other major categories of subnational government spending include environmental protection (including waste and waster), housing and community amenities (including water distribution and sewerage) and recreation and culture. Transport and water are, by and large, the responsibility of local governments in New Zealand, which weighs heavily on their budgets.

Since 2016, the share of subnational government spending dedicated to general public services has increased (from 22.2%, and 0.9% of GDP in 2016), while their contribution to housing and community amenities and environmental protection has decreased. Although the share of subnational governments spending on economic affairs and transport has decreased significantly (from 33.8% to 16.8%), this has stayed stable as a percentage of GDP reflecting increased central government spending in this category. New Zealand subnational governments exercise no responsibilities in defence and public order, healthcare, education or social protection.

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	1 779	4.0%	11.3%	100.0%
Tax revenue	993	2.3%	7.5%	55.8%
Grants and subsidies	392	0.9%	-	22.0%
Tariffs and fees	321	0.7%	-	18.0%
Income from assets	74	0.2%	-	4.1%
Other revenues	0	0.0%	-	0.0%

OVERALL DESCRIPTION: While being a centralised country regarding the role of subnational governments in public spending and revenue, subnational governments have a certain level of autonomy in terms of revenue-raising capacity. More than half of local and regional council revenue is composed of own-source tax revenues (55.8%), essentially land and real estate property taxes (council rates), over which they have great autonomy. This is much higher than the OECD average in 2020 (42.4%). Subsidies and grants represent 22.0% of subnational revenues (almost half the OECD average of 41.2%), and are primarily dedicated to the transport sector. Councils also rely heavily on tariffs and fees (18.0%), over which they have some discretion to set levels. The reliance on tariffs and fees is also much higher than the OECD average in 2020 (9.1%)

In response to rising costs and pressures faced by local governments, in 2018 the New Zealand government commissioned its Productivity Commission to assess local government funding and financing. The subsequent 2019 report concluded that the rates-based system remains appropriate for New Zealand, but outlined that there are areas of funding pressure for local governments. In particular, it outlined challenges relating to funding adaptation to climate change, the passing of unfunded mandates from central to local government, demand for infrastructure in high growth areas and tourism growth. It outlined that pressures are highly uneven across councils, and recommended targeted solutions in cases where (1) local government activities have national-level benefits, (2) communities are subject to damaging shocks and (3) councils in low‑income communities struggle to fund essential services. Following the report, the New Zealand Government enacted the Infrastructure Funding and Financing Act 2020, which supported the use of Special Purpose Vehicles for investments.

TAX REVENUE: Unlike subnational governments in many other countries within the OECD, the funding of New Zealand local governments largely relies on a single type of taxation, property taxes or rates (83.0% of subnational government tax revenue in 2020), as allowed for in the Local Government Act 2002. In 2022, the property tax amounted to 1.9% of GDP (above the OECD average of 1.0%). Typically, councils determine total rates annually, and this amount is allocated among ratepayers. Subnational governments have a large degree of discretion over this tax: Property taxes can resemble general rates (based on the land, capital or rental value), targeted rates (calculated based on a particular feature of a property and used to fund a specific service), a differential rate (based on land use) or uniform annual general charges (UAGC i.e., a standard cost per property, unrelated to property value). Although rates on property are the primary source of income for both regional councils and territorial authorities, the percentage of income from rates can vary substantially between councils. The heavy reliance on rates can create particular pressure on small, rural, and lower-income local authorities, who may face higher costs to provide infrastructure and services. In 2018, rates per person as a percentage of median adult income were 5% in rural areas, but less than 3% in metro areas.

Other minor tax revenues include a small share of the fuel tax that is redistributed to city and district councils. Local councils do not share revenues generated by local economic activity (such as VAT income).

GRANTS AND SUBSIDIES: More than half of grants and subsidies received by subnational governments are for capital expenditure (63.2%), which is in line with the substantial infrastructure responsibilities of local governments. The main transfer mechanism from national level to subnational governments corresponds to a share of the road taxes and charges raised on petrol, diesel and vehicle registration, earmarked for the construction and maintenance of local roads through the intermediary of the New Zealand Transport Agency (NZTA). The National Land Transport Fund overseen by NZTA provides co-funding that covers an average of 53% of the cost of local transport programmes, based on a defined ‘funding assistance rate’ (FAR) calculated for each approved organisation. The FAR aims to allow funds to be distributed to organisations that would otherwise have difficulty raising their local funding share. It is based on a formula that considers the capital value of a district’s property, local road kilometres, its road and public transport investment programmes and a regional index of deprivation. subnational governments may receive co-funding of up to 75% of the costs of a given project.

In April 2022, the government announced a NZD 2 billion Better off funding agreement for local authorities to accompany the planned three waters reform. The funding is being provided for investments to build resilience to climate change and natural hazards, enable housing development and support local place-making and improvements in well-being.

OTHER REVENUE: Councils receive income from a diverse range of additional sources, including a variety of service charges and fees (swimming pool charges, parking fees and infringements, fees for issuing permits and licenses, fees for conducting inspections, and water charges). This represents 18.0% of subnational government revenue in 2020, up from 16.6% in 2016.

Local councils, and particularly regional councils, also receive property income (interest earned from investments and dividends; 4.1% of local revenue), as they can own profitable assets, such as ports. The Auckland Council performs many of its activities through its four substantive Council-Controlled Organisations (CCO). In 2020, an independent review of the Auckland Council CCOs considered the use of the CCO model, the accountability of CCOs and culture within CCOs. The review provided 64 recommendations, including to merge CCO bodies, to identify sustainable funding opportunities, to update strategic planning and to improve accountability.

To be able to meet the financing needs for transport infrastructure, some councils are currently looking at additional options for congestion pricing and road network pricing. Similarly, regional councils have been requesting to be allowed to institute a regional fuel tax, but this was repealed in 2013. Since 2017, only Auckland council is allowed to apply a regional fuel tax. A recent productivity commission report has called for giving government powers to levy volumetric wastewater charges and road-congestion charges. It has also called for giving power to local councils to create a vacant-land tax to improve the supply of available housing for New Zealanders.

Finally, “development contributions” are widespread in New Zealand (approximately 2% of subnational government revenue), which councils impose on property developers in exchange for building permits. This forces developers to contribute to the cost of new infrastructure (roads, water and wastewater infrastructure, and community facilities). LGA 2014 increased transparency for development contributions.

Subnational government fiscal rules and debt
2020	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt (consolidated)	3 070	6.9%	13.4%	100.0%	-
Financial debt	2 622	5.9%	15.7%	85.4%	100%
Currency and deposits	0	-	-	0.0%	0.0%
Bonds / debt securities	0	-	-	0.0%	0.0%
Loans	2 622	-	-	85.4%	100%
Insurance pensions	0	-	-	0.0%	-
Other accounts payable	448	-	-	14.6%	-

FISCAL RULES: The Office of the Auditor General is in charge of the financial oversight of local government forecasting and use of resources. According to the LGA, subnational governments must set financial strategies based on quantified limits on rates, rate increases and borrowing. Subnational government budgets must be balanced. In 2014, new prudential requirements were introduced through the Local Government Regulations (Financial Reporting and Prudence), which also introduced new benchmarks and indicators for financial management. The Local Government Act 2002 first required councils to set, in consultation with citizens, financial strategies that include a statement describing the local authority’s quantified limits on rates, rate increases and borrowing. Since 2010, councils have been required to determine, through public participation, their own fiscal limits. Those limits can be exceeded, but then councils are accountable to their residents.

As part of a review of infrastructure funding and financing in 2020 and in response to the COVID-19 crisis, the Local Government Funding Agency temporarily loosened the net debt/revenue ratio for local councils with a long-term debt rating of ‘A’ from 250% to 300%.

DEBT: New Zealand subnational governments can borrow to fund capital expenditure programmes that can help to spread the cost of infrastructure across generations. Under the LGA 2002, they must adopt “revenue and financing” policies stipulating the funding of capital expenditure as well as “liability management” policies, outlining their interest rate exposure, liquidity, credit exposure and debt repayment schedule. Subnational governments can only borrow in New Zealand Dollar (NZD) currency, except for the Auckland Council, which can borrow in foreign currencies. SNG debt is composed for 85.4% of financial debt, and for 14.6% by other accounts payable.

The Local Government Funding Agency (LGFA) was created in 2011 by 30 local governments and the central government. This debt vehicle groups 72 out of 78 councils to issue bonds on financial markets and lends to their members at competitive interest rates. Aside from the New Zealand Government, it is the largest issuer of bonds in New Zealand. In the 12 months to 30 June 2021, LGFA lent NZD 2.8 billion to local governments, through 241 loans. As of 2021, LGFA had issued over NZD 18 billion in bond maturities.

TERRITORIAL MANAGEMENT OF THE CRISIS: In early 2020, the New Zealand Government closed its international borders, implemented a national lockdown and created a Managed Isolation and Quarantine (MIQ) program for international arrivals. This response helped to largely prevent the spread COVID-19 in New Zealand throughout 2020 and 2021. Outbreaks were managed through domestic travel restrictions, stay-at-home orders and/ or distancing rules. Quarantine restrictions were lifted 18 March 2022, which allowed borders to open for citizens and international visitors.

A Whole-of-Government response was adopted during the crisis. The Department for Internal Affairs established a COVID‑19 Local Government Response Unit in early 2020, which brought together the Department of Internal Affairs, the National Emergency Management Agency, Local Government Professionals Aotearoa and Local Government New Zealand. Priority work streams of this unit were on essential services, inter-agency governance, local government finance, social wellbeing and the COVID-19 Protection Framework Guidance for Local Government. The Response Unit provided a conduit for getting essential information to local governments and provided daily and weekly updates to local governments.

Central government was responsible for the vaccination strategy, while the 11 centrally administered District Health Boards were responsible for implementing the vaccination roll-out. There was significant variation in the roll-out of vaccination program across DHB areas.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: In comparison to other countries, local governments in New Zealand had a relatively minor role in managing the health impacts of the crisis, because of their absence of responsibilities in this sector. Local government civil defence and emergency management structures were activated at various stages of the crisis, particularly during early phases and during outbreaks. These emergency operations helped to coordinate across territorial authorities, emergency services and charities.

Local governments support was mainly focused on providing welfare to citizens during lockdowns, supporting businesses to access national government services and funding, and investing to manage the economic impact of the crisis. For example, when the Auckland region faced higher restrictions due to an outbreak in October 2021, Auckland Council created the Activate Tāmaki Makaurau program to connect businesses with national government business support programs, expanded mental health and wellbeing support programs, and waived fees for applications for street trading licences.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: Local government expenditure, revenue and debt all increased during the first year of the COVID-19 crisis (comparing 2020 to 2019). Total local government expenditure increased by 10% (real terms), which was driven by a 14% increase in capital expenditure (partly as a response to the economic impact of the crisis) and a 14% increase in compensation of employees. Financial debt increased by 17%, which is in line with the increase in capital expenditure. As the New Zealand economy remained open for most of 2020 and 2021, there was limited impact of the crisis on local government revenue. In 2020, total local government revenue increased by 7%, driven by a 6% increase in tax revenue, an 11% in grants and subsidies, and a 10% increase in tariffs and fees.

The COVID-19 Local Government Response Unit assessed the potential financial implications of the crisis on local governments at three stages during the crisis (April 2020, May 2020 and August 2020). It found that the financial implications on local authorities did not fall evenly among councils, in particular it highlighted councils with significant exposure to the tourism industry and the Auckland Council. This assessment note that the main financial response has been for councils to substantially increase their borrowing and the Local Government Funding Agency was noted to have borrowed more than usual on behalf of local councils.

The crisis may also have longer-term impacts on subnational government finance in some regions as it has (so far) led to lower and changing population growth patterns. The national population growth rate decreased from 2.2% to 0.6% due to lower levels of international migration. Over the same period, the population decreased in Auckland, which had experienced annual population growth of 1.8% for 20 years, and population increase was concentrated in a few regions (Northland, Tasman, Bay of Plenty, Waikato). These changes may lead to revenue, expenditure and investment challenges for local governments in more affected areas.

ECONOMIC AND SOCIAL STIMULUS PLANS: Between March 2020 and February 2022, the New Zealand Government allocated NZD 74.1 billion to support the recovery, including NZD 62 billion through the COVID-19 Response and Recovery Fund (CRRF). The initial CRRF funding included over NZD 2.6 billion for “shovel ready” infrastructure projects, including for transport, community, housing and environmental projects some of which were delivered by local governments. The initial funding also included NZD 1.1 billion for environmental conservation programs with the aim of addressing the impact of Covid-19 and creating regional jobs. Part of this funding was allocated to charitable trusts, such as QEII and Landcare Trust, which work directly with local communities on environmental projects and biosecurity, and weed and pest control. Many local governments also increased their levels of investment, resulting in a 14% increase in subnational government capital expenditure between 2019 and 2020.