Bay's economy still showing good growth

David Norman, industry economist, Westpac. Photo / David Porter

The Bay of Plenty is well-positioned in the current economy, says David Norman, industry economist for Westpac Institutional Bank.

Mr Norman told a recent presentation organised by BDO Tauranga that the Bay of Plenty had been the most confident region in the country for the past four quarters in Westpac surveys.

"The Bay is still way ahead of everyone else except Gisborne and Hawke's Bay, which has recently almost caught up," he said.

The key reasons for economic confidence were the increasing population, falling unemployment, increased construction activity and house price rises, and strong local economic activity in key sectors such as kiwifruit and forestry. And importantly, the Bay of Plenty was hedged against the current dairy downturn.

"If you're a dairy farmer things are very bad," said Mr Norman. "They've had three bad seasons in a row."

For the Bay, with strong kiwifruit and forestry sectors, the exposure to dairy risk was only about 1.2 times the national average, whereas in key dairy sectors the risk rose to more than four times.

"The Bay has industries that are driving growth. We know kiwifruit is an incredible success story."

In addition, New Zealand prices for forest products had remained remarkably strong. "Forestry has held up. China mostly takes the low-end exports for boxing with higher quality exports going to the US and Australia and we are seeing higher value forestry exports stay up."

Mr Norman said one of the key factors underpinning economic activity was increased population growth generally, which was partly being driven by the fact that New Zealanders were not leaving in such large numbers.

"The world is becoming less about building stuff and more about consumption of services. The attractiveness of Australia as a labour market is a lot lower."

The Bay now had the highest population growth since the 1970s. While Auckland got the bulk of new migrants from China, India and the Philippines, which make up the top three categories of new arrivals, the Bay was seeing population growth from within New Zealand, both from Auckland and other regions.

And more people meant more demand for services, schools and houses, he said.