Otago tops economic confidence index

Dougal McGowan
Dougal McGowan
Regional economic confidence of Otago households about the year ahead has increased sharply, in what can be seen as an unusually optimistic result.

The Westpac McDermott Miller Regional Economic Confidence Index showed a net 52% of Otago households expect the regional economy to improve this year, a 20-point, or 67%, jump on the September result of 30%.

The region was rated the most optimistic in New Zealand, well ahead of Wellington on a net 35%, an eight-point rise on September. Westpac chief economist Dominick Stephens said confidence was sharply higher during the quarter largely because of record tourism numbers and higher horticultural prices.

Increasing construction activity, low unemployment and still strong house price growth were also likely to have supported a more optimistic outlook.

Recent dry weather conditions in the region did not seem to have affected economic confidence in the region but could do in the future as the impacts on agricultural production became more apparent, he said.

The survey also examined consumers’ views on their own economic situation, producing an index summarising responses to questions including how respondents viewed their own financial situation.

The Westpac McDermott Miller Consumer Confidence Index for Otago was 109 in December, down from  114  in September.

Most households in the region expected the New Zealand economy would continue to improve over the coming year, Mr Stephens said.

However, households noted more concern about the outlook for their personal finances.

As a result, many households in the Otago region were apprehensive about making large purchases, he said.

The survey contained more bad news for Southland, which slipped to a net 24% of its households being optimistic about the region’s economy compared with 45% in September.

Earlier this week, Southland households were the most pessimistic in the country about their region’s employment prospects.In the latest survey, Southland households were still more optimistic than Canterbury (19%), Taranaki-Manawatu-Whanganui (17%), Bay of Plenty (13%), Waikato (18%), Auckland (-16%) and Northland (18%).

Mr Stephens said Southland had often been one of the most optimistic regions in the country.

The fall could partly be explained by a growing sense of unease about what Government policy might mean for agriculture in the region.

The potential impact of recent dry weather in the region on agricultural production and  hydro-electricity generation was a key consideration.

Southland’s consumer confidence fell to 104.6 points from 110.3 in September.

Otago Chamber of Commerce chief executive Dougal McGowan was in Invercargill yesterday talking to exporters about their prospects when contacted by the Otago Daily Times.

Low confidence in Southland had an effect on the whole region, and was one of the reasons exporters were shipping their products through Port Chalmers rather than Bluff, he said.

The chamber prepared export documents for a large number of Southland exporters and there had been a shift in their optimism outlook.

It appeared the Government was  unlikely to come close to its  target of planting one billion trees in 10 years, which would affect Southland. Also, the uncertainty about whether any state houses would be built was also hurting optimism in Southland, Mr McGowan said.

Tourism was keeping optimism high in Otago but there were still no clear figures on how many visitors had visited the region or how much they spent.

"[An] increasing number of tourists tends to make businesses feel more optimistic about their futures, particularly if they are small to medium-sized."

Mr McGowan said he felt uncomfortable about the level of optimism shown in the Westpac survey. The chamber had received a high number of responses to its survey, which was being collated yesterday. Usually, that indicated more people than usual were feeling unhappy.

The chamber survey results would be released next week, he said.

Mr Stephens said the close of 2017 revealed some "very different trends" in economic confidence across New Zealand.

Confidence rose in six regions in the December quarter but was down in five regions. In many cases, the drop in confidence was substantial.

Auckland stood out. Negativity was driven by developments in the housing market and concerns about what the new Government’s policies might mean for it.

The impending imposition of a regional fuel tax to fund public transport projects might have been a contributing factor, he said.

 

At a glance

Otago the most optimistic in the country on economic prospects.

• Southland takes another fall in optimism.

• Government policy worries affecting confidence.

• Buoyant tourism is helping southern optimism.

Comments

Perhaps, only the Chamber of Commerce would be 'uncomfortable' with confidence.

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