Westpac's regional roundup for March found Otago, Auckland and the Bay of Plenty had the strongest economic outlook of all the provinces. Westpac industry economist David Norman noted Otago had one of the lowest unemployment rates in the country and its economic confidence remained well above the five-year average. ‘‘Tourism is the big story in Otago, and especially in the Queenstown Lakes District. We expect the sector's good run to continue,'' he said.
The residential building boom, again driven by the Queenstown Lakes District, would continue unabated and the ‘‘wave of consents'' approved in the quarter to March would translate into construction activity over the next few months, creating jobs. However, he said a key point of the Otago data was that the buoyant results were skewed towards one part of the region, the Queenstown Lakes District.
‘‘The outlook for Dunedin and Clutha, for instance, is not nearly as rosy,'' he said.
As an example, while the Queenstown Lakes District had a population one-quarter the size of Dunedin, it was consenting twice as many new dwellings.
‘‘Similarly, Clutha and Waitaki have far larger dairy industries, meaning the outlook there is likely to remain subdued for some time,'' Mr Norman said.
He expected house prices would rise in the Queenstown Lakes District, although there might be some moderation in the rate. Rising house prices around the country were generating a ‘‘wealth effect'', where property owners tended to spend some of their capital gain, which would buoy activity in many regions, he said.‘‘However, we caution that this dynamic cannot be sustained forever, especially as much of the increase in spending is by increasing household debt,'' Mr Norman cautioned.
Across the country, the most notable economic themes for March were the continued weakness in dairy and strength in construction activity, tourism and other services.‘‘However, an additional factor that is now playing an increasingly important role is low interest rates,'' Mr Norman said.
As fixed mortgage rates reached successive lows, people became more willing and able to bid up house prices.
The dairy industry was facing a third consecutive season of sub-$5 per kilogram of milk solid payouts in 2016-17, which was dampening rural regions dominated by dairy, such as Southland, West Coast, Taranaki and Manawatu-Wanganui.
‘‘However, the impact varies depending on the productivity of the land involved, and how new to dairying the region is,'' he said.
Mr Norman said that during the past five years, for the month of March, Otago guest nights had risen the equivalent of ‘‘a dozen more medium-sized hotels'' being filled. Annual guest nights for Otago grew 28% over the five years, with 3400 more guests per night this March than in March five years ago.
Mr Norman said high-season occupancy rates stood at 67% and low-season had risen to 34%. In perspective, excluding holiday park accommodation, Otago's low-season occupancy rate of 49% was the equivalent of the high-season rate for Taranaki and Manawatu-Wanganui.
