Impacts of growth on groups in New Zealand society
What the standard requires
- Achieved requires "an explanation of the impacts of changes in economic growth on various groups in New Zealand society and/or the environment".
- Excellence requires comparing and/or contrasting the impacts on different groups.
- So the exam asks things like: "Compare and contrast the impact of astrotourism on government revenue and expenditure, and on residents and hospitality businesses."
Workers and households
Benefits
- Employment rises. Producing more output requires more labour, so unemployment falls.
- Incomes rise. A tight labour market gives workers bargaining power, so real wages tend to rise.
- More choice of jobs and better conditions.
Costs
- Inflationary pressure. If growth is demand-driven and the economy is near capacity, the price level rises and can erode real wage gains.
- Longer hours and more intense work in a booming sector.
- Rising house prices where growth is regionally concentrated, which harms renters and first-home buyers even as it enriches owners.
Firms
Benefits
- Higher sales and profits as household incomes rise.
- Confidence to invest, which raises future productive capacity.
- Economies of scale as output grows.
Costs
- Rising input costs — wages, materials and land all cost more when everyone is expanding at once.
- Skill shortages, which can constrain firms that cannot match the wages the booming sector pays.
The government
Revenue rises
- Income tax — more people employed, earning more.
- GST — more spending.
- Company tax — higher profits.
Expenditure falls in one large category
- Transfer payments fall as people move off unemployment benefits into work.
But some expenditure rises
- Infrastructure, schools, health and housing in growing regions.
Net effect: the operating balance improves, usually quickly, because revenue responds immediately while expenditure obligations arrive later.
Regional distribution
- Growth is rarely spread evenly. A new industry, a major event or a resource boom concentrates in one region.
- The growing region gains jobs, incomes and services — but faces higher house prices and rents, congestion and pressure on infrastructure.
- Other regions may see workers leave, reducing their local demand and shrinking their services.
- Different regional growth rates are examinable, and were asked directly in 2024.
Income distribution
- Growth can make distribution more equal: more jobs and higher wages help those at the bottom most, because employment is the main route out of low income.
- Growth can make distribution less equal: if the gains flow mainly to owners of capital and land through profits and rising asset prices, while wage growth lags, the gap widens.
- Which happens depends on where the growth comes from — labour-intensive growth spreads gains widely; asset-price-driven growth does not.
Worked ExampleTwo groups, one boom
A New Zealand town becomes internationally popular for a form of specialist tourism. Visitor numbers rise sharply over several years.
Compare and contrast the impact of this on: (i) businesses in the town's hospitality industry (ii) long-term residents of the town.
Step 1 — Group (i): hospitality businesses
Revenue rises. Visitor spending in New Zealand is an export of services, so it enters the circular flow as export receipts — new money from the overseas sector to producers.
Employment and incomes rise. Cafés, restaurants and accommodation providers hire more staff, and pay more to attract them in a tight local labour market.
Investment rises. Expecting continued demand, owners expand premises and upgrade facilities — raising the town's productive capacity.
But costs rise too. Wages, commercial rents and land prices all increase as every business expands at once, and staff are hard to find. Some of the revenue gain is absorbed by higher costs.
On balance, hospitality businesses gain clearly.
Step 2 — Group (ii): long-term residents
Some gain. Residents who work in hospitality or own property see higher incomes or higher house values. More visitors support more shops, restaurants and services than a small town could otherwise sustain.
But many bear costs, and they come from the same visitor numbers.
- Housing costs rise. Demand for short-term visitor accommodation removes houses from the long-term rental market, and higher local incomes bid up prices. Renters and first-home buyers are worse off, even though homeowners gain on paper.
- Congestion and pressure on infrastructure. Roads, water, waste and parking were built for a smaller population; visitors use them without contributing local rates.
- Higher prices locally. Cafés and shops price for visitors, not residents.
- Character and amenity change, which residents may value even though it has no market price — a net social welfare cost that GDP does not record.
Step 3 — Compare
Both groups are affected by the same rise in visitor numbers, and both see higher incomes in parts of their group — hospitality owners and staff, and property-owning residents.
Step 4 — Contrast
The direction of the net effect differs, and it differs because of what each group buys and sells.
Hospitality businesses sell to visitors, so more visitors means more revenue. They are on the earning side of the boom.
Residents buy in the same local market that visitors have inflated — housing, food, services, road space. They are on the paying side of it. Their costs rise whether or not they receive any of the visitor income.
The distribution within the resident group is also uneven: a homeowner in hospitality gains twice, while a renter working outside tourism pays higher rent and higher prices and receives nothing.
Step 5 — Judge
Hospitality businesses gain unambiguously; residents' outcomes depend entirely on whether they own property and whether they work in tourism.
This is why real GDP rises clearly in a town like this while net social welfare is contested — the output gain is measurable and the congestion, housing and amenity costs are not.