The Bay of Plenty's economic confidence has topped the country for the fourth quarter running, reflecting the region's rapid growth but it comes with a warning - Tauranga will become a more expensive place to live.

The Westpac McDermott Miller Regional Economic Confidence report for the March 2016 quarter put the Bay of Plenty's rating at 34.7 per cent, down 6.3 per cent on last quarter but still higher than any other region.

It was closely followed by the Gisborne/Hawke's Bay region on 33.4 per cent - the only region where confidence increased during the quarter.

Tauranga mayor Stuart Crosby said the result reflected the strong economy in Tauranga and the rest of the bay but offered a word of caution.


"We have to support our growth with sustainable businesses that provide higher incomes. Tauranga is going to become a more expensive place to live because of the economy," he said. "It's going to require a lot of forward planning and commitment by many to retain the growth."

Work would be needed to make sure the infrastructure could handle the growth and regulatory systems were user-friendly to assist developers, he said.

Crosby said there were more than 11,000 small businesses in Tauranga and they had the ability to grow.

Westpac industry economist David Norman said: "Tourism is booming with guest nights approaching 3.5 million a year, huge growth in population is driving new dwelling construction activity, and the horticulture sector is enjoying a purple patch. Although the forestry outlook is not so good, the region is far less exposed to dairy, which is in dire straits."

Norman said confidence in Tauranga came down to strong growth in tourism, higher levels of service sector businesses working with the Port of Tauranga, population growth and increasing house prices.

Norman said he expected much of the same for the rest of the year.

"In terms of Tauranga itself, we don't expect house price rises to continue unabated. There might be a bit of a slow down later in the year. We don't expect it to go negative."

Tourism Bay of Plenty head of marketing and communication Kristin Dunne said it had been a "booming summer" in the tourism sector.

"It's been a hive of activity with accommodation being booked out in the peak and on long weekends."

She said tourism businesses in the region were feeling more confident and were willing to grow and take risks.

"People are feeling more confident and less risk averse which generates more momentum. That absolutely needs to be happening in tourism," she said.

Tauranga Chamber of Commerce chief executive Stan Gregec said the Bay was "humming" across the board.

"We are in for another record kiwifruit season and likewise with other horticultural crops.

"I think people know that the good times can't last forever, and so will be looking at things ahead with a pinch of salt ... I don't see the bubble bursting anytime soon - but there may be grounds for caution."

Priority One chief executive Andrew Coker agreed the horticulture industry, tourism and record levels of commercial and residential consents were fuelling the confidence in the region while export businesses were doing well despite the strengthening exchange rate.

"I think there's a palpable air of optimism here that we just don't feel in other parts of the country."