The ultimatum
Local Government Minister Simon Watts and RMA Reform Minister Chris Bishop have given New Zealand’s 78 councils three months to submit amalgamation proposals. If they don’t, the government will impose restructuring. Whatever emerges will be in place before the 2028 local elections.
Bishop’s framing left no room for ambiguity: “Our message to councils is simple: lead your own reform, or we will do it for you. Either way, change is coming.”
Watts specified the shape of acceptable proposals: “larger, more efficient unitary authorities that streamline functions, reduce duplication, and improve decision-making.” There’s no fixed target number of councils, but the criteria are clear: practicality, simplicity, value for money, and compatibility with the new resource management system.
The numbers that killed the status quo
The Auditor-General’s 2024 audit of council performance in 2022/23 is damning. Total operating expenditure hit $15.8 billion, a 23% increase over two years. Employee costs ran 8% above budget across all councils, with metropolitan councils blowing through at 18% over. Finance costs came in 20% above budget as interest rates climbed.
Rates revenue was $8 billion, representing 44.2% of all council income. That means business ratepayers are absorbing most of the cost blowout. And for what? Only 3 out of 78 councils processed 100% of building consent applications within statutory timeframes. Only 13 met resource consent targets. Water supply performance measures were achieved by fewer than 60% of councils.
For any business that has waited months for a consent while watching its rates bill climb double digits, the question is not whether reform is needed but why it took this long.
What business wants from this
EMA Head of Advocacy and Strategy Alan McDonald was direct: “Fewer layers of governance and clearer regional coordination should translate into lower costs and more coherent infrastructure and planning decisions.”
McDonald pointed to Auckland’s amalgamation as a cautionary but ultimately instructive precedent: “While not everyone is a fan of the amalgamated Auckland Council, few would argue for going back to the previous fractious system.” The massive legal bills from the old Auckland City Council and Auckland Regional Council fighting each other in court were a key driver behind that merger.
The strongest practical case for reform isn’t cost savings. It’s regulatory consistency. Businesses operating across regions face fragmented planning rules that impose real compliance costs. A smaller number of unitary authorities with consistent rules would reduce that burden directly.
Infrastructure New Zealand Chief Executive Nick Leggett backed reform but flagged the structural funding gap: “Councils own around 35% of New Zealand’s public infrastructure but receive only about 11% of total tax revenue.” Amalgamation without fixing the funding imbalance risks creating larger councils with the same inadequate revenue base.
The inconvenient evidence on scale
The government’s case has a weakness it needs to confront honestly. A 2022 Infrastructure Commission report found council size has no bearing on cost efficiency. Infrastructure Commission strategy general manager Peter Nunns said: “Larger entities don’t necessarily perform better on average. They don’t perform worse when it comes to the cost of providing those services, they’re about the same on average.”
Auckland itself is the cautionary tale. Staff numbers climbed higher than the eight separate councils pre-amalgamation, and household rates bills climbed 85%. Scale didn’t deliver savings. It delivered a bigger bureaucracy.
This doesn’t mean reform is wrong. It means the case for amalgamation rests on regulatory coherence and consenting capability, not on a naive assumption that fewer councils automatically means lower costs.
The clock is ticking for everyone
Several regions were already moving. Northland, Waikato, Bay of Plenty, Wellington, Wairarapa, and Hawke’s Bay had progressed discussions before the ultimatum landed. Otago’s mayors issued a joint statement saying the announcement “certainly sharpens the focus” while acknowledging the complexity involved.
Bishop’s specific instruction to councils not to hire “hordes of expensive consultants” suggests the government knows the transition itself could become a cost centre. The Commerce Commission will eventually oversee whether rates provide value for money, adding an external accountability mechanism that councils have never faced.
Business owners have the same three-month window as councils to shape what comes next. The question is whether the new structures will actually deliver faster consenting, consistent regulation, and cost discipline, or simply rearrange the same dysfunction at a larger scale. Auckland’s experience says the answer depends entirely on execution.
Sources
- Government gives councils amalgamation ultimatum (2026-05-05)
- Part 2: Councils’ performance in 2021/22 and 2022/23 – Office of the Auditor-General New Zealand (2024)
- Simplifying Local Government Will Make It Easier To Do Business (2026-05-05)
- Local Government reforms: Shake up could prompt amalgamation, but is bigger better? (2026-05-05)
- Mayors receptive to reform (2026-05-06)