As the centre of economic gravity moves to a resurgent Auckland, Wellington risks becoming a "backwater", former prime minister Sir Geoffrey Palmer warns.

He said his final report, as head of a panel advising on the future of local government in Wellington, was unlikely to recommend the region's councils become a "super-city".

But the panel believed issues such as the environment and transport should be dealt with region-wide.

Auckland's super-city had created an advocacy function that was "established and powerful", he told a business audience in Wellington yesterday.

"The Auckland economic powerhouse has got going without any of the inhibitions that it used to have from its warring factions of local government," Sir Geoffrey said.

Significant government spending was also being directed towards Christchurch as part of a post-earthquake rebuild.

"What the panel is concerned about is where does that leave Wellington? And we think it leaves it in a rather unfortunate position. We do think that the [Wellington] economy is not in a good position at the moment and the region is struggling to maintain its competitive advantage."

The panel is set to issue a report on its findings to the Greater Wellington and Porirua councils by the end of October. It will then issue a recommendation to the Local Government Commission.

Sir Geoffrey said Wellington's position was slipping, with economic growth, employment and retail spending all lagging behind the rest of the country.

He said many ratepayers had made it clear that they opposed a complete council merger because they feared a loss of local representation.

Trips to Auckland had uncovered a "loss of democratic control at local level", he said, with 21 community boards, representing about 80,000 people each, holding no statutory power, and no funds to spend "except that which the mayor gives them".

"It seems to the panel that that is perhaps not a satisfactory structure, and we don't think that the Auckland model could be transported to Wellington in the form that it's in.

"One thing that Auckland proves beyond any doubt is that one size does not fit all.

"You really have to devise a system that allows people at the grassroots to have their say."

- © Fairfax NZ News

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