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However, both will continue to lag other regions because of the lack of international tourists.
That said, Otago was one of the few regions in the country that stood to really benefit from the recently formed travel bubble with Australia, especially with the winter skiing season about to properly kick in, the report from Westpac industry economist Paul Clark and acting chief economist Michael Gordon said.
The region’s sheep and beef farmers also stood to benefit from rising farmgate prices.
Prime meat prices and horticultural products were set to accelerate over the course of the year as the Covid-19 vaccine rollout gathered pace in the United States, Europe and the United Kingdom and people headed back to the restaurants.
A high-yielding grape harvest boded well for wine production over the coming year.
House prices in the region were expected to stabilise over the next year given changes to the tax treatment of investment properties and slowing sales volumes.
However, there was potential for the housing market in Otago to do better than in other regions given relative price gains over the past year.
Residential construction activity was also likely to plateau given the pace of building consent approvals in the region.
"On balance, we think that a better economic outlook is unlikely to be reflected in a substantive improvement in the region’s labour market," the report said.
"Indeed, the key driver for consumer spending is much more likely to be still rising house prices, which we expect to do relatively well over the coming year."
In Southland, the Tiwai Point smelter should also get a lift from still-rising commodity prices over the next year, the report predicts.
After posting a loss for the 2020-21 year, the region’s largest employers were likely to move into the black over the coming year as rising global demand underpins the price for high quality aluminium.
House prices should also stabilise, though residential construction activity should strengthen over the coming year, with a large amount of work still in the pipeline.
"Improving economic fortunes should translate into more jobs and with demand for labour having ticked up recently, that is likely to mean a further drop in the jobless rate.
"That in turn should feed into consumer spending, implying better times ahead for Southland’s retailers."