Economic confidence in the regions around New Zealand fell sharply in the June quarter according to the latest Westpac McDermott Miller Regional Economic Confidence survey.
The survey, released every quarter, claims it’s the lowest level since March 2013 with only 10% of New Zealanders optimistic about their region’s economic prospects compared to a peak of 37% at the start of last year.
Westpac Senior Economist Michael Gordon says with Fonterra lowering its farm-gate milk price last season to an 8-year low of $4.40/kg of milk solids, and this season's opening forecast of $5.25/kg, this is well below the average of recent years.
“Not surprisingly, the biggest drops in regional economic confidence were in the most dairying-intensive regions, the likes of Taranaki, the Waikato, Canterbury, and Southland.”
He says the main urban areas of Auckland and Wellington saw only a slight drop in economic confidence, while a few of the smaller regions bucked the trend with a modest lift in confidence, which may reflect the stronger performance of other sectors such as viticulture and tourism.
For the first time in 3 years, Canterbury lost its spot as the country’s most confident region, being toppled by the Bay of Plenty now claiming the right to be New Zealand’s most optimistic region.
“Low dairy prices and dry conditions are an obvious concern for the Canterbury region,” Mr Gordon says. “But the fall in confidence is also a reminder that the post-quake rebuild won’t be a driver of growth forever.
"Not only is the level of rebuild activity nearing its peak, but the nature of the work is evolving and becoming more complex. Those workers and businesses without the right skill sets will find themselves left out of the construction boom.”
Mr Gordon says so far this year, the Bay of Plenty has seen strong growth in retail spending, house prices, and construction, although the job market has been relatively subdued.
“The kiwifruit industry has bounced back from the Psa virus, and the harvest is expected to be up significantly this season.”