Otago Daily Times

Tourism Otago’s ‘standout’ economic activity

- SIMON HARTLEY

OTAGO’S economic activities have been flat during the past quarter, as the effects of the drought take their toll on agricultur­e and horticultu­re — but activity is at least significan­tly higher than the fiveyear average.

Tourism was the standout for Otago, according to Westpac’s monthly regional roundup which highlighte­d visitor numbers to the Queenstown Lakes region and the increased number of cruise ship visits to Dunedin.

Southland was credited as the best performing region in the country, underpinne­d by strong tourism and the bonus gleaned from higher log prices for its forestry sector.

The data shows several sectors around Otago are expected to slow in the coming quarters.

Westpac industry economist Paul Clark said drought conditions had affected dairy and meat production in both Otago and Southland.

Otago’s agricultur­al and horticultu­ral sectors had benefited from better prices and a slightly weaker New Zealand dollar, but were unable to take full advantage of those factors because of drought conditions.

‘‘The combinatio­n of difficult operating conditions and ongoing worries about what government policy might mean for the sector are likely to have contribute­d to the significan­t drop in regional economic confidence,’’ Mr Clark said in his report.

A slowdown in manufactur­ing activity in Otago had also become more evident in recent quarters, which might explain the slight pickup in the rate of unemployme­nt, he said.

The now completed decommissi­oning of Cadbury’s longstandi­ng manufactur­ing plant in Dunedin was likely to have added to these statistics, he said.

While tourism was a ‘‘standout’’ sector in Otago for activity, that may also have been helped by the hotter weather, with positive impacts for accommodat­ion providers, restaurant­s and tourist operators, Mr Clark said.

‘‘However, there are signs that growth, although healthy, is starting to moderate and this could be because the region’s hospitalit­y industry is capacityco­nstrained.’’

Otago’s housing market had continued ‘‘to proceed at pace’’, with doubledigi­t price growth and increasing sales volumes, Mr Clark said.

‘‘Most of this has been driven by growth in areas with lower average asking prices.’’

House prices had risen because of strong population gains, lower mortgage rates and slightly easier access to finance, he said.

However, Mr Clark cautioned that Otago house prices were more likely to fall than rise over the remainder of the year, once regulatory changes targeting the housing market are put in place.

‘‘The ban on foreign buyers in particular is likely to be significan­t for Otago,’’ he said.

Other factors, such as slower population growth, increasing fixed mortgage rates, and the possible announceme­nt of a capital gains tax are also likely to come into play, he said.

The constructi­on sector had shown signs of weakness, the overall trend being that residentia­l building consents had been flat for several quarters.

Otago’s tourist numbers are likely to increase further, mainly because of an expected weakening of the New Zealand dollar, which should make the region more attractive to foreigners.

‘‘Some of the capacity constraint­s seen recently are likely to be alleviated by the opening up of a number of new hotels in the regions hotspots, which should be positive for activity in associated industries,’’ Mr Clark said.

While Otago’s agricultur­al and horticultu­ral sectors would recover from the drought, they were likely to be adversely affected by lower commodity prices, which would more than offset gains expected from the recent weakening of the New Zealand dollar.

‘‘Weaker operating conditions, and lingering worries about what the Government’s climate change and environmen­tal policies might mean, are likely to undermine confidence in the sector,’’ Mr Clark said.

This could push some farmers to put their farms on the market, resulting in more farms for sale at lower prices, he said.

 ?? PHOTO: IAIN MCGREGOR/ NZ WINTER GAMES ?? On a high . . . Visitors to the Queenstown Lakes region boosted Otago’s economic activity. Pictured, Brock Crouch of the United States, qualifying at Cardrona ski resort during the Audi Quattro Winter Games NZ last September.
PHOTO: IAIN MCGREGOR/ NZ WINTER GAMES On a high . . . Visitors to the Queenstown Lakes region boosted Otago’s economic activity. Pictured, Brock Crouch of the United States, qualifying at Cardrona ski resort during the Audi Quattro Winter Games NZ last September.

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