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I was in Invercargill for two days this week and it was a slightly strange experience. The province is one of two top-performing regions in New Zealand for economic activity – Otago being the other – so there was a sense of optimism I haven’t encountered further north.
It almost felt like I was in another country, where dairy and seafood exports are on the up, and where there’s more certainty, thanks to a long-term power supply deal that will keep the Tiwai Point aluminium smelter open until 2044.
The Airbus A320 plane we took south had just two empty seats; people were returning from their Pacific Island holidays or from seeing family and friends in New Zealand’s north. Out of town workers from the Waikato were arriving to fix heavy machinery at the smelter and nearby coal mine.
One woman told me she was visiting Invercargill for the first time, a mini holiday, three days looking around before heading back to Auckland. Maybe this is the answer to the Aussie exodus. Forget Sydney, Melbourne and the Gold Coast, try Invercargill instead.
Sure, the temperature was just 3°C, but the sun was out, there were heaps of car parks, no queues, no traffic jams, people everywhere said hello, and they have their first shopping mall and two new hotels. One of the hotels has five bars, including a very hip rooftop spot with a view of, um, Invercargill Central. Later in the day, it hit 5°C. Someone might want to tell Rolling Stone Mick Jagger (or Keith Richards; reports vary) that no longer is our southernmost provincial centre “the arsehole of the world”.
The Southland businesspeople I met were upbeat about the region’s prospects. It was almost like I was in another country. Even stranger, they left their Auckland jokes and parochialism at the door, and were genuinely interested and concerned about what’s happening further north where, according to Kiwibank’s most recent regional insights report, released in July, economic activity remains in the doldrums.
Being in the deep south momentarily made me forget how tough things are in our bigger cities. Now we need to convince farmers to visit and spend their money in central Auckland or on Wellington’s Lambton Quay.
Either that or the Reserve Bank has a cathartic moment and cuts the official cash rate by 50 basis points next time round. They might have cut the OCR by 25 basis points – it’s now at a three-year low of 3% - and its Monetary Policy Committee might be hinting at further cuts to come, but I say fat chance to any more marked response.
Yet former prime minister John Key says New Zealand desperately needs lower interest rates. Prime Minister Christopher Luxon and Finance Minister Nicola Willis must pray each morning for a drop.
After all, isn’t it the Reserve Bank that engineered this prolonged and deeply frustrating recession? It started as a deliberate slow down, in response to inflation after the Labour government’s Covid spending, but surely the Reserve Bank never intended the recession to last this long. I hold our central bank largely responsible for slamming this economy through the floorboards.
No one is spending or investing. Anyone with surplus funds at the end of the week (is that a joke?) puts it under the mattress for fear they’ll lose their job or have hours cut. Additionally, we’re all warned to expect higher rates bill from local councils living beyond their means – and not funded adequately in the first place – higher power bills, and higher grocery bills.
It’s easy to blame successive governments, but it’s this government that said it could – would – fix things and they will be held to account. That’s fair; it’s how it works. All the powers that be in the Reserve Bank and the Beehive appear clueless about how to reignite consumer and business confidence and kick this economy into life.
Willis looks lost and more like she is making it up as each day passes, while Luxon’s big call that 2025 was the year of economic growth has bitten him firmly in the backside. He must surely have realised that just because you say something, doesn’t mean it happens. They started the year with a goal, but no one had written a reform agenda and no one in National has been willing to take the big and tough decisions to get growth happening. The coalition is spending more than Labour did; it’s still running deficits and will do until at least 2029, and has re-spent most of the cost savings by reprioritising it into other areas.
There has been no major shakeup of welfare, superannuation or health. Despite the coalition’s intent to get on and build, dig and mine, and attract overseas investment, just one project has been consented under fast-track legislation. More should be underway by the next election, late next year, but this stuff takes time and Luxon and co are fast running out of that.
So things might be going well in Southland and Otago, and Wellington might be thawing a little, but elsewhere there’s a sense that people are treading water, businesses are not investing, and the housing market has stalled. It’s like we’re all possums in the headlights, afraid to do anything in case it backfires.
