Economic growth slows

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

The national economy bounced back in the second quarter of 2022, but an even stronger recovery was prevented by the capacity challenges facing regional economies, Infometrics' latest Quarterly Economic Monitor showed.

However, further Infometrics data released by Trust Tairāwhiti shows this region's economic growth slowed in the June 2022 quarter, as continued disruptions combined with high inflation to limit activity.

“Regional annual growth has been restricted to 2.9 percent pa but remains considerably higher than the national average of 0.9 percent,” Trust Tairāwhiti commercial manager Sarah Homer said.

“Key primary sector activity in Tairāwhiti has been under pressure in recent months, with forestry prices down 10 percent pa. Primary sector employment has also declined, with a 4 percent pa drop in the number of local residents employed in the agriculture, forestry and fishing industries. An increasing net migration outflow may be a contributing factor.

“Despite challenges in the primary sector, overall employment remains up on a year ago but is still only half of the national average. Heightened labour market disruptions have hampered activity recently, although construction employment remains a key source of growth.

“This rise in construction employment has been needed to resource the sustained momentum across the building sector. Residential consents remain 37 percent pa higher than a year earlier and are holding. Non-residential consent values are also up considerably, rising 34 percent pa, as investment into the region continues.

“However, households remain under pressure, with inflation hitting hard. While quarterly spending is up, it remains lower than the national average. With inflation at a 32-year high of 7.3 percent pa, the lower spending growth in Tairāwhiti suggests price rises have driven spending higher, rather than actual increases in real underlying spending.

“Total tourism expenditure in Tairāwhiti decreased, compared to a year earlier, but was still up 3 percent on New Zealand overall. This period includes half a year of Delta restrictions followed by half a year of Omicron disruption. Compared to a strong boost in spending post Level 4 lockdown at the start of 2021, these factors make tourism activity look weak. However, the last quarter was relatively upbeat with more international tourism starting to filter in.

“House values were still up, with growth still higher than the national average. The average house value in the region was $660,459 in June 2022. House sales, meanwhile, have decreased by 16.3 percent, with a total of 505 houses sold in Tairāwhiti in the 12 months ended June 2022.

“The economy is currently walking a tightrope between weak confidence, high inflation, higher interest rates, a tight labour market, and ongoing supply chain disruptions on one side, and the border reopening and a rebound from ‘Red' and the Omicron peak on the other.”

Infometrics principal economist Brad Olsen said the path ahead for regional economies remained uncertain, with New Zealand facing a range of negative influences including weak confidence, high inflation, rising interest rates, a tight labour market and ongoing supply chain disruptions.

“However, these negatives will be mitigated by the border reopening, reduced Covid case numbers, and less restrictive trading conditions.”