Local experts react to surprising slump in Bay of Plenty regional economic confidence

Confidence in the Bay of Plenty region's economy has fallen sharply, according to a new survey.

A technicality may be mainly to blame for drop, and a local economic development expert said the Bay's economy was expected to remain strong for a while yet.

A Tauranga City Council councillor, however, says businesses should start preparing for an economic downturn.

The Westpac-McDermott Miller Regional Economic Confidence survey for the September quarter found a net 29 per cent of households in the region expected its economy to improve over the next 12 months.

This was a big drop - the biggest of New Zealand's regions - from the 45 per cent result recorded in June.

Westpac chief economist Dominick Stephens said the drop "reversed almost all of the gains achieved in the previous quarter".

"This is a surprising result given that business is booming, unemployment is falling, and government investment and spending is on the up."

While a slowdown in house-price growth and flat-lining tourism numbers may have been factors, he put the main reason for the decline down to a technical aspect of the survey.

"A relatively large number of respondents that previously stated they had confidence in the region's economic future opted not to respond in the most recent survey.

Priority One chief executive Nigel Tutt said he would not read too much into the survey "for the technical reasons they state and also because it's a household survey, not a business one".

"Our economy is going very well at the moment, and we expect it to remain strong for a while yet. Our main industries are performing well, unemployment is low, and businesses are expanding.

"We expect that we'd also start to get some benefits from Government promises to boost their investment in regional cities such as Tauranga."

Councillor Max Mason, chairman of the council's economic development committee, said that, while expert opinions on whether a recession was coming were split, his feeling was that a downturn was coming.

"What we do know is that we are experiencing an extremely long economic high and, in my opinion, the probability of a downturn is growing."

Mason said it had been "heartbreaking" to see hundreds of local businesses go under in the last recession.

"Many hardworking business owners lost everything because they thought the good times would go on forever.

"Smart business owners and managers at this point in the economic cycle should be looking to see where they can cut fat, and limit their risk."

Mason said he thought it was possible that Tauranga's economy could become "increasingly patchy" with some sectors doing really well, and others slumping.

"Business owners should become more proactive about the future uncertainty and a chat to their accountant about limiting their risk would be a good start," Mason said.