A clear divergence is beginning to emerge around economic confidence in regional New Zealand: those exposed to the dairy sector, and those with more diverse economies.
Latest figures in the quarterly Westpac McDermott Miller Regional Economic Confidence survey (September 2015) released recently show a net 10% of New Zealanders are optimistic about their region’s economic prospects, compared to a peak of 37% in March 2014.
The net percentage is calculated by the difference between the negatives and positives from a total sample size of 1,550 participants.
Dairy-centric regions falling behind
Westpac Industry Economist David Norman says Southland, Taranaki, Manawatu-Wanganui, and to a lesser extent Otago and the Waikato - all regions exposed to the dairy sector - are well below the national average in terms of regional economic expectations.
“Taranaki in particular has experienced the double whammy of poor dairy fortunes and a sharply falling oil price,” says David. “This means that not only are dairy farmers being a lot more cautious about spending, but exploration activity in oil and gas is down, with immediate impacts on support services and jobs.
“Southland is a region with just 2.1% of New Zealand’s population, but it has 10% of dairy employment. This level of exposure to an industry with a lot of current uncertainty is going to weigh on confidence.”
He says the low dairy price has meant tough times for farmers and support services.
Higher confidence in economically diverse regions
Alternatively, Northland, Bay of Plenty, Hawke’s Bay, and Gisborne - regions with large rural hinterlands but less exposure to dairy - saw high or improving confidence in their regional economic outlook.
“The Bay of Plenty continues to be spared from some of the economic woes affecting other regions. The kiwifruit industry has bounced back remarkably well from the ravages of the PSA outbreak.”
David says the three main urban centres with their service-based economies, have retained regional confidence figures above the national average despite falls in confidence in Auckland and Wellington.
“Some regional aggregates, such as Nelson, Marlborough, and the West Coast have results that are skewed by their mix of dairy and other industries, such as viticulture, fruit growing and seafood, which makes it hard to read too much into the results there.”