Upbeat dairy farmers lift regional economic confidence

A lift in mood amongst dairy farmers helped boost New Zealand regional economic confidence during the December quarter.

The Westpac McDermott Miller Regional Economic Confidence Survey shows increased optimism across all regions except Northland in the final three months of last year.

Westpac industry economist David Norman says there had been an expected bounce in sentiment after it floundered in September when dairy farmers were faced with low milk prices from Fonterra.

He says in some cases the sentiment bounce has been "surprisingly large."

The survey balances households expecting good or bad economic times in their region over the coming year as a percentage of households in that region. It was conducted from December 1-11, and sampled 1565 households.

Dairy-exposed regions reported increased optimism after Fonterra's payout was revised up to $4.60 per kilogram of milk solids, from $3.85/kgMS in September.

Southland's mood improved 52 percentage points to a net 16% of respondents positive about the region's economic outlook.

Taranaki/Manawatu-Whanganui rose 24 percentage points to net 9% positive, Nelson/Marlborough/West Coast was up 10 points to net 26% positive, and Waikato moved up five points to net 4% positive.

Urban centres also became increasingly upbeat, with Canterbury up 1.6 percentage points to 25%, Auckland rising eight points to 21%, and Wellington gaining 12 points to 28% net optimism.

Mr Norman says Wellingtonians' views were helped by "signs of life" in house price growth and high incomes compared to the cost of living, while Auckland was positive despite house price growth slowing as residential construction booms and the size of the city keeps consumers insulated from commodity price weakness.

The most optimistic region was Bay of Plenty, with a net 41% of respondents upbeat in December. Bay of Plenty has been the most positive region for the past three quarters, which Mr Norman ascribed to the resurgent kiwifruit industry, strong house price growth, particularly in Tauranga, and falling unemployment.

The west of the region "is looking a lot rosier" than the east, which may suffer from a tepid forestry sector, he says.

Otago saw the biggest upswing in confidence, with a net 37% of respondents optimistic compared with a net 4% who were pessimistic when the survey was last conducted in September. This was down to increasing property values and more tourism in the Queenstown-Lakes area, Mr Norman says, with guest nights and house prices up.

(BusinessDesk)