Regions still outperforming big cities

Canterbury and Auckland hit hard as economy slows

New Zealand’s regions continue to outperform the big cities as the economy slows, according to two economic reports. But some of the provincial regions that had been booming are now also starting to slow, according to both KiwiBank’s Regional Heat Map and Westpac’s Regional Roundup.

“We think economic conditions are going to get worse before they get better, especially for regions with big exposures to tourism, dairy, forestry and manufacturing,” said Westpac chief economist Dominick Stephens.

The sharp fall in log prices was starting to hit employment in regions like Northland and the East Coast, Westpac said.

And sentiment in key dairy regions such as the Waikato, Taranaki, Manawatu and Southland was fragile amid ongoing concerns about the impact of government policy.

International tourism had also started to slow, particularly affecting the South Island’s economy.

No region will be completely immune to the general economic slowdown, Stephens said. Auckland and Canterbury were the most downbeat as their housing markets, and Canterbury’s construction sector went into reverse.

“Economic activity in Wellington is expected to remain upbeat, in large part because of spending by the Government,” Stephens said.

Kiwibank’s regional analysis also showed the regions running hotter than Auckland. The hot spots on the KiwiBank regional heat map were Southland, Wellington, Whanganui/ Manawatu and Gisborne.

Fortunately, not all regions are experiencing tough times, KiwiBank senior economist Jeremy Couchman said. Some smaller regions, such as Gisborne, Whanganui/Manawatu¯ and Southland had maintained or even seen a rise in their regional score — which were already decent, he said.

“Housing markets in these regions have surged as they catch up to the larger centres, and investors hunt for decent rental yield.”

“Construction activity has responded and people in these regions seem generally happy to open their wallets and spend.”

The outlook for GDP growth over the next year or so was more positive, Westpac said.And a long-awaited lift in government spending was starting to kick-in via transfers to households, higher pay for many state employees, and the provision of additional services.