Regional economic confidence survey reveals two-nations phenomena

Westpac chief economist Dominick Stephens says Auckland’s pessimism has spilled over into neighbouring regions.

A deep divide has emerged in new survey of regional economic confidence in the North and South Islands.

The Westpac-McDermott Miller Regional Economic Confidence index shows a drop in six of the 11 regions.

The most confident regions are in the southern half of the South Island and the middle of the North Island.

Southland posted by far the biggest advance with a net 36-point jump in the September quarter compared with the previous quarter.

It was followed by an 11-point gain by Otago, with Gisborne/Hawke’s Bay closely behind on 10-point rise.

Taranaki/Manawatu-Whanganui and Waikato were up seven and three points respectively.

By contrast, households in the upper North Island have become less confident, with Bay of Plenty dropping 16 points, Northland by 10 and Auckland by six.

Auckland is the only region where a majority of respondents (net 14%) expect conditions to deteriorate over the coming year.

Further south, Nelson/Marlborough/West Coast dropped 16, Canterbury fell 10 and Wellington shed nine points.

Westpac chief economist Dominick Stephens says Auckland’s increased pessimism reflects the impact of a sluggish housing market and rising fuel prices, including the recent implementation of a regional fuel tax.

“It’s possible that negativity in this region has spilled over into neighbouring regions,” he says.

Rural-urban divide
A feature of the latest survey is the emergence of a rural-urban divide.

“The consumer spending side of the economy has slowed and this is reflected in waning urban confidence,” Mr Stephens says.

“Meanwhile, agricultural exports and tourism are going gangbusters, and this is showing up in economic buoyancy and better confidence in many rural regions.”

Weaker housing price growth was cited as negative factors in several regions, notably in Northland, Bay of Plenty, Waikato and Wellington.

However, it was the opposite in the central North Island and the southernmost regions where house values are rising.

A drop in tourism numbers affected confidence in Nelson/Marlborough/West Coast, while Otago and Southland reported booming visitor activity.