Idealog's Guide to Dunedin: Lifting up

Due to a combination of good luck and good planning, Dunedin’s economy is starting to grow—and diversify—after many years in the doldrums. Caitlin Salter looks at the city’s economic prospects and sees some positive signs.  

When the Dunedin left Port Chalmers bound for London with the first shipment of New Zealand frozen meat in 1882, it was a turning point in lifting the country out of economic depression.

This technology paved the way for the growth of the country’s primary sector and in the 130 or so years since that voyage, Dunedin has continued to prove itself as a hotbed of innovation.

The city’s rise is partially thanks to the globally-acknowledged calibre of the University of Otago, New Zealand’s oldest university and the South Island’s biggest employer.

The university sets Dunedin, and Dunedin’s economy, apart in New Zealand. Thousands of fresh-faced students flock to the city at the start of each year (22 percent of the total population is made up of students), yet the resident population growth is well below the national average and between 2006 and 2013, Dunedin’s population grew just 1.3 percent, compared to a 5.3 percent increase nationally.

This growth is slower than five years previously. Between 2001 and 2006, the population grew 3.8 percent. But it’s starting to improve and Dunedin’s population is projected to increase by about 5,500 people, or 4.4 percent, by 2031, bringing the total population to 130,300.

Economically, the past eight years in Dunedin have been stagnant, with an average growth rate of just 0.2 percent. But, according to a report by Business and Economic Research Ltd (BERL), it is now growing at 1.3 percent a year per capita. This is still behind Otago and the rest of New Zealand on most economic indicators, but there is a definite sense of optimism among the powers that be—and some of the residents—that the city is starting to emerge from its funk.

View from the chair

Chartered accountant and professional director Stuart McLauchlan is chair of Scott Technology and sits on a number of boards in the public and private sector and says that while the economy was only improving slowly, it hadn’t got any worse.

The traditional sectors in Dunedin of education and health have remained stable, although international students are down right through the education sector.

In the next ten years, $800 million will be spent developing Otago University, which will have a major positive impact. And the Otago Polytechnic is also becoming stronger. But issues surrounding the Southern DHB have had a flow-on effect to the wider economy, he says.

Stuart McLauchlan.

In line with the rest of the country, the tourism industry is getting stronger and the covered Forysth Barr Stadium has attracted a host of big events to the city.

Importantly, the economy is diversifying, with the information and communication technology sector, hi-tech manufacturing and the meat sector leading growth across the rest of Otago.

“The IT sector is making moves,” he says. “… There’s a number of small IT startups that are starting to have a bit of prominence.”

As the city becomes more appealing for lifestyle reasons, the property market is also on the up for the first time since 2007, with the median sale price increasing by more than 10 percent in a year to $310,000. Despite the property boom in Central Otago, Dunedin has not seen as much flow on effect.  

Due in part to this relative affordability, there is also a growing emergence of the arts, culture and creative sector (the BERL report showed that the number of jobs in the creative sector grew by eight percent and GDP grew by six percent in 2014).

Big employers in Dunedin outside the University include Dunedin City Council, Cadbury, Fisher & Paykel, Allied Press and Scott Technology.

A former big employer was the Hillside Workshops, which closed in 2012 after more than a century of business. There have also been sizeable job losses at Fisher & Paykel, Summit Wool and the Dunedin Mail Centre (manufacturing jobs have declined from 6,930 in 2005 to 3,892 in 2015).

“It’s indicative of Dunedin’s problems. There aren’t many large employers any longer.”

Despite this, unemployment in Otago is the fourth lowest in the country, and the employment rate is the fourth highest.

Like many cities in New Zealand, Dunedin has a problem with youth unemployment, but the biggest issue is the city’s skilled job shortages, particularly in engineering, accounting and health.

“The traditional magnets getting people to Dunedin, the university and the DHB, can have spin-offs for people’s partners,” McLauchlan says. “People might bring with them a partner with different skills, but there is a shortage of jobs.”

Wages in Dunedin tend to be lower than other cities, but McLauchlan says that was by virtue of the types of jobs in the city. Tourism jobs, while being crucial to the economy, tend to be low-wage.

However, housing and living costs tended to be cheaper than further north.

One major upside of living in Dunedin, a city with a small residential, but large student population, is that it has theatres, art galleries, museums and a cultural scene not found in other cities of a similar size. So the opportunities are not only of the economic variety.

New money

Fraser Liggett, economic development programme manager of the city council arm, Enterprise Dunedin, says Dunedin’s economy generates almost $5.7 billion annually, or about half of Otago’s GDP (Otago is New Zealand’s second largest region in terms of land area and is home to more than 200,000 people).

“While our traditional sectors remain critical to the success of the city, we are conscious of the importance of developing a range of new innovative alliances,” he says.

Dunedin City Council’s partners already include Ngai Tahu, the Chamber of Commerce, Employers Association, Otago University and the Otago Polytechnic. And creating better linkages and opportunities to get tertiary students into the Dunedin job market is crucial to supporting the economy, he says.

Fraser Liggett.

One the areas those students are increasingly attracted to is technology, with NZTech research showing the sector is now worth $330 million to the Dunedin GDP.

Dunedin’s economic development strategy is a 2013-2023 blueprint to increase skills, incomes and job opportunities in the city. Major economic goals include two percent growth in employment each year (roughly 10,000 extra jobs over ten years), and a 2.5 percent rise in income per capita per year (an average of $10,000 per person).

The BERL report released earlier this year showed 1,770 full-time equivalent jobs have been created in the city in the past two years. And while Liggett says this shows good progress is being made towards achieving those goals, it is a long game.

“We are currently working to develop better reporting matrices to gain a better understanding of how the city and our partners deliver on the strategy. We want to do this so we can gain a better insight into opportunities or threats to our goals.”

A city in transition

Forsyth Barr senior investment adviser and Gig City chairman John Gallaher says Dunedin has a lot going for it.

“There’s a lifestyle and life-balance available in a city like Dunedin,” he says. “We have assets and resources that are not typically available in a city of this size.”

John Gallaher.

Dunedin is one of only five destinations in New Zealand with jet services, so it is well linked to the rest of the country and the world. And Gig City will become an important part of the city, connecting Dunedin digitally, growing existing businesses and bringing in opportunity for new businesses.

He says Dunedin has an opportunity to build a world-class city and make it an appealing prospect for those looking for a better work/life balance.

“We consider this a permanent change to the infrastructure of the city. What it does is enable people to choose a lifestyle and work effectively in their careers because we’ll be able to engage so easily with the world.” 

While Dunedin’s economy had suffered in previous years, the city is now in a phase of transition, Gallaher says. Restoration projects are underway to repair historic buildings, creating a strong cultural fabric in Dunedin is gaining significant momentum and the long-term economic signs are increasingly positive.

“The city is really starting to show what its strengths are. We are trying to be one of the world’s great small cities and that’s starting to emerge. It’s all about the aspirational stuff now. Changes like this don’t happen in five minutes, but it’s definitely starting to happen.”

It was New Zealand Land company local manager Thomas Brydone’s grit and determination that led to the Dunedin’s successful voyage. His first attempt to transport carcasses from the slaughterhouse ended abruptly when the freezing plant aboard the ship failed.
Undeterred, he had the plant fixed, and a further 5,000 carcasses were frozen.  And that same determination has kept Dunedin afloat for more than a century.

*****

BRAINS OVER BRAWN

Once fuelled by gold, and then by steel and steam, Dunedin was a city built on manufacturing. But in recent years it has lost many large manufacturers—and, as a result, many manufacturing jobs.

In 2008, Fisher & Paykel Appliances closed its Dunedin plant, which affected 430 jobs, and Tamahine Knitwear announced its closure on the same day. 2012 was also a rough year, with KiwiRail selling Transtec Hillside Engineering - previously Hillside Railway Workshops – to Australian company Bradken, which then made most of the 90 staffers redundant.

Nigel Bamford.

As is the case all around the developed world, larger manufacturers have found greener—or, more accurately, cheaper—pastures overseas. But Dunedin’s manufacturing heritage lives on in a more specialised form, as evidenced by companies like Scott Technologies, Farra Engineering, McKinlays Footwear, Ellis Fibre and luxury fireplace maker Escea.

Escea has grown its revenue at a rate of 10-20 percent most years since it established its factory in Dunedin in 2002. With over $16 million in revenue last year, CEO Nigel Bamford’s decision to start a business in Dunedin with co-founders Alan McGregor and Garth Milmine has paid off.

“I chose Dunedin as a base because there was a good number of skilled suppliers to enable us to get going,” says previously Nelson-based Bamford. The company, a regular on the Deloitte Fast 50 list, slowly acquired its own machines and moved into a purpose built 4,000 square metre factory in Green Island in 2009. Since finishing the $4 million development, Escea’s revenue has more than doubled and the number of staff employed has doubled to 80. Many of Escea’s skilled employees previously worked at Fisher & Paykel.

Escea’s sleek designs appreciate gas and wood fireplaces as furniture. The fireplaces, which range from $4,000 - $10,000, are snuggly fitted in designer homes and hotels worldwide. Bamford jokes his rule in Dunedin is to only drink or eat in places with an Escea fireplace, which leaves “plenty of options”.

Bamford says Dunedin’s isolated position from the global fireplace industry pushes innovation and he says it has created a “new genre” of heating with its DX Series of ducted fireplaces, which use vent technology to move warmth throughout the house. Customers can even turn their fireplace on while heading home with an app Bamford believes to be a first of its kind.

“Down here, you don’t actually see the competition,” says Bamford. “Especially down in Dunedin, you don’t have local industry people to get obsessed with … so you get obsessed with the customer.”

R&D is “critical” to the market leader’s success, with eight full-time R&D employees. And this attitude also applies to Fisher & Paykel, which was bought out by Chinese company Haier in 2012. The manufacturing may have been taken away from Dunedin, but the brains remain and the design and engineering centre above the Wall Street Mall in the central city currently employs around 135 staffers, 80 percent of whom hail from outside Dunedin, according to the Otago Daily Times. This department is responsible for developing and supporting all cooking and dishwashing products for Fisher & Paykel and the DCS brand and is increasingly delivering products and technology to its parent company.

Escea’s lead designer Alex Hodge says the focus has shifted from engineering to consumers’ needs. He moved to Dunedin from Auckland 14 years ago and, as he says, “the only downside to Dunedin is the temperature, and you can solve that with a fireplace”.