Big drop in economic confidence surprises

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

ECONOMIC confidence has dramatically fallen in Gisborne-Hawke’s Bay in a survey result that has taken Westpac Bank by surprise.

The Westpac McDermott Miller regional economic confidence survey for June shows only 4.2 percent of Gisborne-Hawke’s Bay households believe the region’s economy will improve over the next year. That compares to 33.4 percent of households holding a similar belief in March.

“This is a surprisingly weak result for Gisborne and Hawke’s Bay,’’ said Westpac chief economist Dominick Stephens.

“The horticulture sector is strong. Beef and forestry are holding up well and low interest rates are stimulating growth in house prices. These economic factors don’t explain the large fall in confidence.

“It will be interesting to watch how confidence figures change over the next few quarters.’’

Gisborne-Hawke’s Bay was one of five regions of 11 in the survey to record a fall in confidence.

This region’s decline in confidence of 29.2 percent points compared to much smaller falls in the other four regions.

Regional economic confidence lifted in regions with large dairy industries such as Waikato, Taranaki/Manawatu/Whanganui and Southland.

Bay of Plenty is the most optimistic region — at 40.6 percent — for the fifth quarter in a row.

The survey also examines consumer confidence, with Gisborne-Hawke’s Bay again recording a fall.

The region’s confidence index was rated at 95.5. A score under 100 indicates there are more pessimists than optimists. The national average was 106.

Gisborne-Hawke’s Bay recorded 110.9 in March.

Mr Stephens said the scale of the decline in consumer confidence on the East Coast was “a bit of a shock”.

“This is the weakest reading in five years and is driven most strongly by a huge fall in long-term positivity. The proportion of people who believe New Zealand’s economy will worsen over the next five years has grown sharply.

“Perhaps consumers are concerned about the unsustainable nature of rising house prices and rising debt levels.”