Westpac Bank’s latest report indicates that while signs of economic recovery are emerging, the majority of the country still faces a period of economic chill.
The bank’s most recent assessment of regional economies places Otago—the top performer—just above the midpoint, rating it as “mild.”
The scale ranges from frosty to hot.
Eight regions, comprising the entire North Island and the northern part of the South Island, were rated at the lowest level, frosty, and the second lowest, cold.
According to senior economist Satish Ranchhod, most regions continue to struggle with weak demand, especially in the retail and construction sectors, although there are signs of progress.
“While conditions remain challenging, businesses have told us that they aren’t going backwards like they did over the past year.”
Initial indications of a thaw in these wintry conditions are appearing in certain areas, as several businesses report a slight increase in demand, though it remains from a low starting point.
Ranchhod noted that Otago, which includes the popular tourist destination of Queenstown and an extensive rural area, was the top-performing region.
“Conditions in the region have been buoyed by both the firmness in the agricultural sector, as well as increases in international tourist spending,” he said.
Canterbury and Southland followed as the next strongest regions.
“Rural regions, especially those in the south with large dairy sectors, are seeing firmer conditions than elsewhere.”
The North Island, especially the major cities of Auckland and Wellington, was facing difficulties.
“Ongoing pressure on household finances and related low levels of confidence are continuing to weigh on spending.”
The labour market remained weak, with businesses holding onto employees but hesitant to recruit new ones.
Companies continued to experience cost pressures, mainly from insurance and rates, but wages were not a concern, and profit margins remained relatively stable.
Ranchhod said that gradually, falling interest rates are anticipated to ripple through the economy, eventually boosting consumer spending and wider economic growth.