By Susan Edmunds of RNZ
Bay of Plenty has taken the top spot in ASB’s latest regional economic scorecard for the first time in almost a decade, but Wellington has slumped to the bottom.
The bank’s economists said the Bay of Plenty region had outperformed the national average in most categories in the second quarter, including consumer confidence, employment growth, new car registrations and the housing market.
A strong kiwifruit season had also helped boost incomes.
Southland was in second place. Strong commodity prices had helped its income which had also driven momentum in the housing market, ASB said.
The Central Lakes District was third.
Chief economist Nick Tuffley said there was a general theme of South Island areas doing well and some divergence in the bigger centres.
“Auckland has crept up a bit whereas Wellington, which was previously 15th out of 16, has dropped down to last place after hanging on by its fingernails in 15th for some time now.”
He said economic conditions overall were muted in the second quarter, with both inflation and unemployment increasing, while tourist arrivals and export volumes fell and annual net migration eased.
“There are, however, a few positive indicators: retail trade volumes have remained fairly resilient, and consumer confidence has shown slight improvement.”
Retail trade volumes were up 0.5% in the quarter, with annual growth of 2.3%.
But values were only up 0.1%, which Tuffley said suggested some discounting was being done to get people to spend.
Wellington was suffering from persistent weakness in consumer confidence, house prices, house sales and population growth.
“The Government’s move to reprioritise spending has seen well-publicised cuts and halts in the expansion of public services - which Wellington is most vulnerable to. However, the underlying data on this are mixed - public administration employment figures look broadly resilient and recent data showed Wellington’s unemployment rate actually decreased over the June quarter.
“Still, many things can augment the unemployment rate, and news headlines continue to highlight the hardship the region is going through.
“We expect the recovery in Wellington to be the slowest of the hubs. Public servants and policymakers may prefer the broader horizons of Auckland or across the ditch, further weighing on an already fragile housing market recovery.”
Tuffley said the result was not a surprise for the capital and the outlook generally was for a slow improvement.
“More export-focused regions are generally doing fairly well and you’d expect they will continue to do okay. The earnings growth that they’ve been seeing may sort of flatten off.
“You’ve had good recovery in dairy, good recovery in meat, fruit’s done pretty well. But some of that’s been higher volumes, a lot of it’s higher prices, which we wouldn’t expect will continue. The main shift in some of those areas, particularly the dairy intensive areas, is at the moment farmers have tended to sit on the cash and not spend it.
“So there’s still a bit of scope for some spending to start coming out of the woodwork. With the larger urban areas, what we really have been lacking a lot of so far is just follow through on lower interest rates. So there’s the early signs creeping through that retail spending has started to increase a little bit, but housing markets have remained pretty muted as well.
“As we start to see more people be prepared to take some risk in terms of entering the housing market, and just have a bit more confidence to spend as their cash flows improve, we should start to see those more urban-dominated areas lift up a bit. But Wellington is likely to keep underperforming for the near term, whilst you have got the Government needing to try and get the books to better shape. And it’s still mainly going to be doing that by keeping a lid on spending growth and reprioritising spending and just trying to get more efficiency out of the civil service.”
He said a recovery driven by the rural sector could look different this time than it might have in the 1990s.
“We’re in a different environment to what we used to be in. Higher prices just meant people just rushed out and tried to expand production. Whereas this time it’s more nuanced.
“You’ve got more climate change focus coming through and other environmental focus to think about. So a lot of shifts are more going to be about improving efficiency more so than necessarily trying to push production up… it’s perhaps not the same powerful rural stimulus that we’ve traditionally had, given that there’s a different look at the outlook for some of those industries like dairy and meat.”