Chamber talks up positives in Otago

Dougal McGowan.
Dougal McGowan.
There was still plenty of good news in Otago, despite a survey this week showing a sharp drop in confidence, Otago Chamber of Commerce chief executive Dougal McGowan said yesterday.

Tourism data was still positive with year-on-year growth and the building and construction sector continued to improve, with increasing numbers of consents being submitted and issued.

The population continued to grow, creating a mini real estate revival throughout the region, he said.

However, Mr McGowan did acknowledge the Westpac McDermott Miller survey of regional confidence did reflect the continuation of quarterly economic volatility seen in the region in the past year.

The survey showed regional confidence in Otago fell from 36.6% in December to 11.9% in March, a fall of more than 67% in percentage terms.

The result was a reflection of the lower primary sector prices experienced over the period, he said.

There were three global dairy price reductions in the January and February sales.

"This, combined with a lower dairy payout signalled by Fonterra in early March, may contribute to some of the fall in sentiment.''

Many manufacturing, engineering and local businesses in Otago and other regions were starting to feel the flow-on effects of the reduced spending in the rural sector and were predicting a contraction in forward orders, Mr McGowan said.

Consumer confidence was down after a higher than predicted December quarter, with households' own financial situation and their expectations for the New Zealand economy as a whole declining.

Households had not seen the full flow-on effects of the latest official cash rate reduction due to banks getting a proportion of their lending offshore, he said.

The lower OCR did affect those living off savings and there would be "considerable tightening'' of incomes for that group now and into the foreseeable future.

The size and diversity of the Westpac regional report made it hard to drill down into the detail but the chamber was expecting future updates and would compare those to what it was hearing from businesses and chief executives throughout the region, Mr McGowan said.

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