Otago's economic indicators are flattening, not because conditions are weakening but because they remain at elevated levels rather than continuing to rise.
The latest Westpac Regional Trends highlight capacity constraints continuing within a tourism sector already creating challenges.
Regional economic confidence in Otago had surged after a positive, but much weaker, result in June. A net 24% of respondents believed the region’s economic outlook was better.
Similarly, regional employment confidence had lifted strongly after a weakness in the past quarter.
The unemployment rate remained one of the lowest in the country about 4%, with numerous anecdotal examples among people Westpac spoke to in the region about shortages of staff. That was particularly so in the Queenstown-Lakes District, where a lot of the growth was occurring.
Surprisingly, guest nights had fallen in the latest quarter. It was too early to tell if it was a trend, possibly resulting from capacity constraints, or if it was simply a blip which would pass, Westpac industry economist David Norman said.
The building boom in the region, driven by demand for holiday homes, investment properties and owner-occupied dwellings, continued unabated. Nearly 500 new buildings were consented in the three months to September.
"We would be surprised to see guest nights fall again next quarter but limited accommodation space and the resultant rise in prices will be a negative for the reputation of the region if it goes too far."
With horticulture booming, dairy recovering and wool facing a "reasonable" outlook, Mr Norman expected conditions more broadly across the region to also remain positive.
Unemployment was expected to remain at about 4%. There would be significant amounts of work for the construction sector which would face some of the challenges Auckland was having in attracting workers, given the increasingly high costs of living in the Queenstown area, he said.
Southland’s key economic indicators remained weak despite a return to greater confidence in the September quarter. Digging a little deeper indicated the headlines overstated the challenges.
There was a lot more work to be done in the Canterbury rebuild, particularly with regard to commercial and anchor projects, and the region remained "exceedingly positive", he said.
