Optimism in short supply around NZ
Confidence down everywhere, but lowest in Auckland and Northland
Confidence in the economy is deflated nationwide, with all regions reporting more pessimism than optimism in the June quarter, according to the latest Westpac Mcdermott Miller Regional Economic Confidence survey.
Aucklanders and Northlanders were the most downbeat, while those in Otago perked right up with the prospect of tourists returning.
Westpac senior agri economist Nathan Penny said everyone was taking a knock, as living costs rise and house prices fell.
With inflation expected to remain elevated for some time, he expected confidence to remain low in most regions over coming quarters.
Northland
Net confidence: -32 per cent
Confidence in Northland was the second lowest in the country.
“The region’s sheep and beef sector battled meat processing capacity issues as worker absenteeism spiked during the Omicron outbreak,” Penny said.
“Meanwhile, activity in the region’s forestry sector is at a low ebb, with some contractors downing tools on the back of low sector returns.”
As the Omicron peak passes,
economic confidence may
start to recover, although ongoing
cost-of-living concerns may slow any recovery.
Nathan Penny, Westpac
Auckland
Net confidence: -37 per cent
Confidence plunged 31 points between the March and June quarters — the steepest plunge nationwide.
“The Auckland housing market is at the forefront of the price declines, dropping nearly 10 per cent over the past six months,” Penny said.
“Cost of living increases are also hitting Aucklanders hard with the squeeze on household budgets ongoing. From here, we expect these trends to continue over the year.”
Waikato
Net confidence: -7 per cent
“The autumn drought was a likely catalyst for the dip in sentiment,” Penny said.
“Similarly, the cooling housing market and meat processing capacity issues may have also weighed on sentiment.
“On the positive side, we expect agriculture to perform strongly over the remainder of the year and for tourism (think Hobbiton and Cathedral Cove) to pick up steadily through to the summer and beyond.”
Bay of Plenty
Net confidence: -8 per cent
Confidence in the Bay of Plenty rose six points in the June quarter, partly thanks to kiwifruit crops being successfully picked and packed despite labour shortages and Covid19.
However, the housing market had cooled and there were few signs the forestry sector would improve.
Gisborne/hawke’s Bay
Net confidence: -5 per cent
Confidence also improved in this region, jumping 12 points from the March quarter.
“Good autumn growing conditions, including a lack of drought, have boosted sentiment in the sheep and beef sector,” Penny said.
“At the same time, the region’s apple industry struggled with labour shortages and a significant proportion of this year’s crop was left unpicked.”
Taranaki/manawatu-whanganui Net confidence: -8 per cent
Confidence rebounded a few points, as the region’s key industries — dairy, sheep and beef, and energy continued to perform well on the basis of strong prices.
“With this strong foundation, household confidence in the regional economy may outperform the rest of the country over coming quarters,” Penny said.
Wellington
Net confidence: -17 per cent
Penny said the key driver of ongoing pessimism in Wellington, which was largely unchanged from the March quarter, was the housing market.
The capital led the country in terms of house price falls, with prices falling more than 11 per cent since late last year.
“As the Omicron peak passes, economic confidence may start to recover, although ongoing cost-ofliving concerns may slow any recovery,” Penny said.
Nelson/marlborough/west Coast Net confidence: -12 per cent
“With the region’s housing market holding up better than most, we put the dip down to the ongoing cost of living increases,” Penny said.
But any buoyancy in the housing market was likely to abate. On the upside, Penny said returning tourists should boost activity for the West Coast and in the Nelson region to a lesser degree.
Meanwhile, this year’s wine harvest was a bumper one, so that should boost incomes in Marlborough.
Canterbury
Net confidence: -17 per cent
Confidence in Canterbury fell 10 points from the March quarter, most likely due to rising living costs.
“The Omicron outbreak may have led to reduced capacity in the region’s manufacturing industry as well as at retail and hospitality businesses,” Penny said.
“Looking ahead, with Canterbury’s housing market more resilient than much of the rest of the country and the primary sector firing, we anticipate that the region’s economy and thus household confidence will outperform over coming quarters.”
Otago
Net confidence: -2 per cent
Confidence in Otago jumped a big 17 points in the June quarter.
“No doubt the promise of returning international tourists, on top of the actual return of Auckland-based travellers in greater numbers, were the catalysts for the jump,” Penny said.
“From here, we expect further improvements in regional economic confidence as the border fully reopens and tourists gradually make their way back to the region.”
Southland
Net confidence: -16 points
Confidence in Southland plunged 30 points on the back of the autumn drought.
“A lack of processing capacity in the region’s meat processing facilities is likely to have also weighed on sentiment,” Penny said.
But he maintained the underlying picture of the region’s agriculture sector remains healthy, and the outlook for the region should improve throughout the rest of the year.