The region saw one of the largest turnarounds in regional economic confidence in December, from 4% net pessimists to 36% net optimists, according to the latest Westpac regional roundup.
Growth was being facilitated by expansion of Queenstown Airport and industry sources suggested visitor accommodation was "bursting at the seams''.
Occupancy rates at the resort's three to five-star hotels averaged 79% in 2015.
House prices had seen strong growth, up 8.3% in the year, more new building work was occurring and more houses were selling, the report said.
The unemployment rate was up slightly at 4.6%, compared to 4.3% in the previous quarter.
The positivity was flowing through to more big-ticket purchases by householders, with passenger vehicle purchases up 10% on the previous quarter, despite falling across most of the country.
Tourism in the region was expected to grow steadily over the next year "at least''.
The addition of night flights at Queenstown Airport, from July 1, should support further growth.
However, limited accommodation was likely to limit that growth although yields on hotel rooms should continue to rise, the report said.
Part of the improvement in confidence would have come from an improved dairy outlook at the time of the December survey and the deterioration of that outlook since then might see economic confidence "fall back a bit''.
Otago Chamber of Commerce chief executive Dougal McGowan said the report's findings matched comments he was hearing in November-December when speaking to businesses.
There had been some changes since then, including the drop in milk price forecasts and also in the red meat sector.
There were reports from some service towns there was already an effect on spending.
Farmers were realistic they had to keep investing in their assets but they were also going to be more wary about what they chose to spend money on, Mr McGowan said.
However, there was some "really cool'' data in the report, with house sales, house prices and guest nights all well up and a continued increase in the number of consented new dwellings.
The key was to determine the effects on Dunedin, as Queenstown was "like a great big rock that gets dropped into the water'', with a ripple effect from there, he said.
In the report, industry economist David Norman said the outlook for New Zealand was being driven by weak commodity prices, particularly exposure to dairy, a stronger service sector, particularly tourism, and construction activity.
Milk price forecasts would hit the dairying regions of Southland, Waikato, Taranaki, Taranaki, the West Coast and Manawatu-Whanganui hardest.
Regions with a stronger services focus - particularly tourism - had a much stronger outlook.
Southland was the region most exposed to the meat and wool and dairy industry downturns, the report said.
The dairy downturn would hit Southland 3.7 times more heavily than New Zealand overall.
Along with lamb prices, the impacts would reverberate across Southland much more strongly than elsewhere in the country.
The unemployment rate plunged in the December quarter but that fall might be hard to sustain short of a substantial recovery in the fortunes of the dairy sector.
The reduced dairy payout would mean less money in the pockets of Southland dairy farmers, less discretionary and investment spending, and more efforts to cut on-farm costs, which would flow on to other sectors.
Gains in house prices were likely to be muted and new building activity might be similarly weak.
Southland recorded a dramatic turnaround in regional economic confidence in December.
The switch was largely the result of improved dairy prices, which did not bode well for the March survey.
Regional employment confidence also took a step up as conditions improved, which again might be short-lived.
