NZ in ‘crisis of confidence’ But Bay has factors in its favour
But, he said, while farmers and orchardists were getting good returns they had a lot of cost pressures too.
“Their margins are good enough but they are not as good as the high commodity prices would suggest.
“There is reason to believe that high commodity prices will be sustained even with global demand being affected by the recession and that is simply because of geopolitical factors such as the war in Ukraine.”
Europe was also starting to think about how it could ensure the resilience of its supply chain from a food security perspective, he said.
“Those factors will help . . . and there will be parts of the Bay that should go okay.”
The Bay economy was “diversified” and, overall, the region was one that was less vulnerable to a recession.
“But that doesn’t mean there will be individual sectors that won’t be severely challenged by the current environment.”
The flexibility of households and businesses to adapt to changing environments and make the most of opportunities despite challenges would help soften the blow, he said.
There were also more people working remotely for employers in bigger cities and even internationally, he said.
“That is something we didn’t see during the GFC, we didn’t have a proportion of people who were bringing in good incomes from outside.”
The latest Westpac Mcdermott Miller Regional Economic Confidence Survey showed Bay of Plenty household confidence rose 6 points over the June quarter but remained in negative territory at minus 8.
In the latest Westpac Regional Roundup, industry economist Paul Clark said economic activity in the Bay reflected a mixed picture.
Clark said the weakening of house prices, especially in Tauranga and Rotorua, as interest rates rose and demand from Auckland buyers tailed off was likely to have impacted spending in the region.
That was not the only factor likely to act as a drag on spending.
“With interest rates rising, higher debt servicing requirements will weigh on discretionary spending over the coming year. Expected cost-ofliving increases are likely to further dampen spending.”
However, he said, spending could be supported by gains elsewhere in the local economy. “For example, kiwifruit growers in the region should see their incomes rise over the coming year following this year’s bumper harvest.”
NZ Kiwifruit Growers Inc said the industry contributed nearly $1.8 million to the Bay this season. Clark said opening the borders to overseas visitors was likely to be a boon to tourist hotspots like Rotorua.
It was expected log prices would remain modest before a pickup in the Chinese economy as Covid restrictions eased meaning higher log export prices later in the year.
The MYOB Business Monitor 2022 data showed, in the year since the first quarter of 2022, 74 per cent of small-to-medium businesses in the Bay believed New Zealand’s economy would decline — six percentage points higher than all SMES surveyed nationwide. Only 9 per cent believed it would improve in the next year.
A total of 41 per cent said their revenue was down on the same time a year ago and just 15 per cent said it was up. A total of 35 per cent expected their revenue in 12 months’ time to be down but nearly a quarter (22 per cent) expected it to increase.
MYOB head of go-to-market Jo Tozer said its 2022 Business Monitor showed a significant drop in confidence across all regions compared to last year. Reasons included operating under economic pressures, staffing shortages or tighter cash flow.
“With discretionary spending tightening as the cost of living increases, many businesses in the Bay and across the country will be closely
monitoring consumer confidence, as well as their own price points, as they seek to manage increases in expenses and likewise forecast or plan for the months ahead.”
Small businesses have had to be innovative and adaptive, not only to continue operating, but to maintain sales and improve their competitive edge.
“We have seen that digitisation has played a big role in helping to boost the financial health of some businesses.”
Tozer said many businesses would be bracing themselves for more headwinds while making up lost ground as further economic challenges arose.
“Those businesses which have been able to creatively attract and retain customers will need to pull out all the stops again, as rising inflation puts another dampener on consumer spending.”
Tauranga Business Chamber chief executive
Matt Cowley said profitable
businesses had been more flexible to the extreme demand peaks and supply disruptions.
“They may have also been able to increase prices to cover increasing costs.” Cowley said profitable business leaders had prioritised working on their business, rather than being caught within operations. “Standing still, or not reevaluating plans, will unlikely
be bad news for many vulnerable businesses if they keep doing the same things expecting things to change.”
Cowley said while New Zealand was starting to feel the hangover after two years of Covid stimulus, the Western Bay would likely remain one of the top-performing economic regions.
“Western Bay’s population growth is defiant of economic downturns, we have low unemployment, and we have strong primary sector exports.
“Borders are opening to tourists, and we hope that immigration processes
improve so skilled migrants can fill critical roles across a number of sectors.
“Some businesses may close, but their staff will be snapped up by other employers pretty quickly.”
Rotorua Business Chamber chief executive Bryce Heard said was a wide variation of confidence in different sectors.
“We are seeing a diverse range of views, with the majority erring on the side of an economic slowdown.
“The onset of winter is also a factor, so we expect the slowdown to last for a while.”