Otago among gloomiest regions

Households in Otago are the second most pessimistic in the country, the Westpac-McDermott Miller regional economic confidence survey for the March quarter shows.

In contrast, economic confidence in Southland picked up sharply in the quarter, reflecting a ‘‘hot’’ housing market.

A net 2% of households in Otago expected their economy to worsen over the coming year, a small deterioration from the December quarter when optimists managed to equal pessimists.

That lack of confidence reflected the absence of international visitors during the peak summer period and ongoing uncertainties about when borders might open, Westpac acting chief economist Michael Gordon said in a statement.

Sentiment in the region would have been supported by a stronger housing market, increases seen in both sales and prices in recent months, he said.

In Southland, a net 14% of households expected their economy to improve over the coming year. The region’s housing market continued to have strong sales growth and escalating property prices.

It was also likely to reflect the strong performance from the region’s agricultural sector with soaring dairy prices a key driver, a Westpac report said.

Sentiment was also likely to have been further boosted by news of an investigation into the potential for a large-scale renewable hydrogen production plant as well as plans to build a huge cloud computer data centre in the region.

Regional economic confidence edged lower with six of 11 regions — Auckland, Bay of Plenty, Gisborne-Hawkes Bay, Wellington, Nelson-Marlborough-West Coast and Otago reporting a fall in the March quarter. That came after big gains were reported in the previous December quarter.

Auckland was the most pessimistic region in the country. Confidence would have been hit by lockdown restrictions that temporarily disrupted economic activity and heightened uncertainties in the region.

A lack of international visitor arrivals during the peak summer season was also likely to have weighed heavily on the region’s hospitality sector.

Households in regions that had a large rural backbone and a strongly performing agricultural sector were among the most confident.

By contrast, larger metropolitan centres that were more vulnerable to the community spread of Covid-19 and/or relied heavily on international tourism were among the least confident.

The report said there was little doubt the strong housing market had had a direct bearing on regional economic confidence.

It would be interesting to see how recently announced tax changes targeting property investment would affect regional confidence over coming quarters, the report said.