South faces rough road to recovery

The South Island will have a more rocky road to economic recovery over the next 12 months compared to the North Island, Westpac economists are forecasting.

‘‘Regions that rely on overseas tourism are going to struggle, with Otago expected to be particularly hard hit,’’ said Westpac chief economist Dominick Stephens.

‘‘Regions that are heavy on agriculture, forestry and ex-food manufacturing are also likely to feel the effects of the coming global recession, albeit to a lesser degree,’’ he said.

While Auckland was hard hit during the Covid-19 lockdown because so much of its economic activity was not deemed ‘‘essential’’ by the Government, it would bounce back faster, Stephens said.

‘‘Urban areas should recover faster over the coming year because they are the best placed to take advantage of the increase in digitisation that Covid-19 has brought,’’ Stephens said.

That included the growing strength of online shopping, which would result in distribution hubs in large towns and cities getting an economic boost.

Urban areas that would recover fastest included Auckland, Hamilton, Palmerston North and Christchurch, as well as Wellington, which was propped up by the taxpayer-funded government sector.

Every single region would experience a ‘‘severe’’ recession, but Wellington’s would be less severe than most other regions.

Leeann Watson, chief executive of the Canterbury Employers’ Chamber of Commerce, said the region’s businesses had been concerned by the slow exit from lockdown, but were now frustrated by quarantine failures, and the lack of an overall economic recovery plan for the country.

‘‘The bigger picture is also important about how we are going to leap out of this situation, so we have a long-term economic framework to come out of the other side of this.

‘‘We haven’t really seen a lot of that yet.’’

‘‘What are we going to do to reposition the tourism sector. What do we need to do to make sure we have a really strong and robust manufacturing sector?’’

‘‘It’s one thing to talk about a jobs-based budget, and that we need to do everything we can to protect jobs, but jobs are provided and created by business. Unless we are supporting the business community those businesses, those jobs don’t exist,’’ Watson said.

After lockdown was lifted, a wave of economic activity created by pent-up household demand, combined with Government wage subsidies buoyed businesses, she said.

‘‘We’ve seen reasonably strong May and June so far, but what we’re hearing from businesses, and particularly from manufacturers, is the forward order books are beginning to look a bit skinny,

‘‘We’re also awaiting that second wave of restructuring and redundancies, and we are certainly receiving a lot of calls about that as the first wage subsidy comes to an end, and some businesses meet the criteria, but not all.’’

There was debate among South Island businesses about whether the country should have moved down through the alert levels faster, and whether some parts of the country, and the economy, couldn’t have been opened up sooner, she said.

Australia had kept its construction sector open and allowed much more economic activity to continue.