"Two New Zealands" emerging under flawed growth model: report

New Zealand is at risk of splitting into "two New Zealands" with a well-off core focused on the biggest city of Auckland while outlying regions get a "bad deal," according to a major report that criticizes the government' s economic development model.

The report from the Salvation Army on Tuesday warns that 40 percent of New Zealand's population will live in Auckland in the next 25 to 30 years and Aucklanders will be "younger, wealthier, better skilled, and more ethnically diverse than the rest of New Zealand."

"Based on current trends, it is apparent that New Zealand is on a divergent growth path and that this path risks the creation of two New Zealands -- Auckland and the rest," said the report.

"Even now there is building pressure on local government across New Zealand to continue to afford to maintain infrastructure and to sustain local institutions. Local government is becoming increasingly indebted and is proving less and less able to maintain infrastructure."

The problems would likely be exacerbated in towns and small cities with rapidly aging populations living on government transfers such as state superannuation.

It criticized a growth model defined under the government's Business Growth Agenda policy of encouraging private investment that showed "little or no regard for distributional issues."

"There is no indication within the media material surrounding the Business Growth Agenda that any thought has been given to how the wealth and additional incomes created by business growth will be shared," it said.

The report called for a threefold national response: the development of national sustainability goals to ensure the progress of all regions; a national plan to meet the challenges of an aging population, resource scarcity and rising inequality in the regions; and accelerating the adoption of new technologies and social arrangements that particularly benefited struggling regions.

"The future fortunes of New Zealanders will be very mixed if we continue to ignore these regional differences in economic and social well-being," report author Alan Johnson said in a statement.

Economic Development Minister Steven Joyce said New Zealand fared better than most OECD countries in terms of difference between regions and main centers.

The government was aware of the challenges and the solution lay in encouraging investment into these communities facing challenges, Joyce told Radio New Zealand.

However, opposition lawmakers and trade unionists accused the government of neglecting the regions in favor of the major towns and cities and failing to have any growth plan for the regions.

"Growing our regions requires smart thinking, a focus on diversification and investment in regional infrastructure. It is not about mixed fortunes, or the advantaged versus the disadvantaged. It's about growth that flows into long-term prosperity for every New Zealander," leader of the main opposition Labour Party Andrew Little said in a statement. Endi