Tourist spend solid but locals spending less

International tourists are responsible for an increase in spending in the South. PHOTO: WYATT RYDER
International tourists are responsible for an increase in spending in the South. PHOTO: WYATT RYDER
Spending might be on the rise in Otago and the Central Lakes region thanks to the resurgence of international tourist numbers, but those businesses reliant on domestic customers are finding it tough.

Westpac’s latest regional confidence survey said spending had continued to lift at a solid pace, bucking the trend seen in other regions, but demand conditions were very mixed.

Those businesses catering to international tourists, especially those from higher-spending markets like the United States, were seeing solid demand as visitor numbers continued to rise. But retailers and other businesses who were more reliant on domestic customers were finding it very difficult.

Demand for workers in some industries was still outpacing supply which had kept the pressure on employers to offer incentives like accommodation to attract and retain, the report said.

While inflationary pressures had been easing, businesses were still facing cost increases and the ability to pass those on was diminishing quickly.

The pressure on margins had been more pronounced for those businesses focused on the lower to middle end of the discretionary spending market.

Businesses had also reported challenges navigating the rules around hiring workers from overseas. The need to pay workers from overseas a higher wage had also pushed up wages for local workers.

Some of the heat had come out of Southland’s economy in recent months, although the softening had been more modest than in many other regions.

Unemployment remained low at 3.2% and builders, engineers and those supplying the trades were still seeing good demand and forward orders.

Dairy farmers also remained chipper as recent rains and strong pasture growth supported milk production in the region.

Rain had alleviated some of the pressure on sheep farmers, allowing them to put weight on livestock before sending them for processing. Those higher weights helped soften the impact of low lamb prices. Some caution was now creeping into farmers’ spending appetites and discretionary spending was starting to ease off.

MYOB’s annual business monitor report showed 46% of small and midsize enterprise (SME) owners surveyed in Otago and Southland believed New Zealand’s economy would grow over the next 12 months — up on the 37% nationally — while 24% expected it to stay the same and 28% expected a decline.

Business leaders in the two regions were less positive when it came to their own performance with one in five reporting revenue up on a year ago while 31% reported revenue had stayed the same and 48% reported a decline.