The diversity of Whanganui's economy would be a strength if we were to go into an expected recessionary period. Photo / Bevan Conley
Whanganui business advisers say local businesses should diversify and examine how sustainable their practices are ahead of a potential recession.
Earlier this month the Reserve Bank of New Zealand hiked the Official Cash Rate by 50 basis points to 5.25 per cent.
The 11th successive hike took the OCR to its highest level since December 2008 and economists believe it is likely to push the New Zealand economy into a recession.
Whanganui Chamber of Commerce chief executive Helen Garner said economic data suggested the recession would come and possibly last until 2024.
However, how it would affect the Whanganui economy was yet to be determined.
“We would definitely expect to see some contraction in our economy, in that it would affect our manufacturing sector,” she said.
There had already been a slowdown in the manufacturing sector, she said, and companies had already been quietly making staff redundant, with others preparing themselves for a downturn.
As well as this, she expected businesses involved in discretionary spending, spending on non-essential items to take a hit, like retail and services.
With these expectations, she said ideally businesses would have been preparing for a recession for a while, but the next best time to start would be right now.
“What they are doing is looking at their outgoings and their operations to make sure that in a downturn they would be sustainable,” she said.
This should be done in an effort to make businesses as productive and economically efficient as possible.
However, she said businesses shouldn’t only focus on loss minimisation but also look at investing in the right places.
“It’s not just a time to be focusing on contraction, what you need to be doing is looking to diversify, it’s the thing your granddad said about not putting all your eggs in one basket,
“So this is not necessarily a time to be cutting back on marketing budgets and resources, because you need to be looking at new markets and opportunities,” Garner said.
Diversity was a strength of the Whanganui economy in the eyes of Whanganui & Partners’ acting chief executive Jonathan Sykes.
“Whanganui is fortunate in that we have a diverse economy, which is ideal when facing economic adversity,” he said.
In particular, he said Whanganui had strong manufacturing, agriculture and forestry, construction and retail sectors as well as a growing visitor industry.
It meant Whanganui wasn’t reliant on a single sector, as opposed to somewhere like Queenstown, which relies heavily on tourism.
“This diversity gives Whanganui a clear advantage, which was apparent during the significant impacts of the pandemic when we saw business confidence remained steady in Whanganui.”
Like Garner, Sykes said industries which involve more discretionary spending would feel more of a sting.
“Whanganui people tend to be very supportive of local businesses though, and understand how impactful their spending habits are on their favourite retailers and cafes.
“We know this local loyalty will continue to be important as spending habits change.”
Garner said the Covid-19 lockdown made the sectors resilient and left it well prepared for similar economic hardships a recession would bring.
“We’ve been through these unprecedented Covid times and we’ve learned some good skills from that so we’ve become super resilient and able to pivot when we’ve needed to.”
On whether unemployment would increase, she said most companies would want to hold on to as many staff as possible as Whanganui was in a deficit of skilled workers.
“There is a reluctance from employers to let staff go and they are looking for every opportunity to retain them because this recession, as with all of them, it will be temporary and we don’t know how temporary it will be,” she said.
Owner of The Orange Café, Vik Handa, said the rising prices of food and produce were already putting the squeeze on the café's customers.
“People are still buying the coffee and all the stuff, but when it comes to the cabinet food or the menu items it’s slightly decreasing day by day,” he said.
“With all the cafés in the winter sales always go down. In the summertime, we got loads of tourists in Whanganui and you could see that but now I think there will be not many tourists in the town,” he said.
He was already having to work more hours to account for increased labour costs and if a recession was to occur, he suspected things would be difficult in a similar way to how they were in the Covid-19 lockdowns.
He hoped the Government or council would step in to provide some form of an assistance package to businesses worst affected.