Northland takes top spot for regional economic growth

Friday, 18 December 2020

Forestry and a surge in population has been a boon for the Far North’s economy recently.

A strong economic performance from Northland has seen the region take the lead in ASB’s quarterly regional economic scoreboard.

Solid population growth, employment, retail and new car sales figures pushed Northland up to first place, after coming eighth last quarter.

The region was also boosted by its heavy exposure to forestry, a standout sector in the post-pandemic economy.

“It’s an impressive performance, given the region would have been more exposed than most to Auckland’s move to Covid Alert Level 3 in August,” ASB senior economist Chris Tennent-Brown said.

New Zealand's regional economies have bounced back from Covid-19 better than expected Figures to September produced by Infometrics show an economic activity bounce in regions such as Tasman and Northland, which were both up at least three percent o

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A solid outlook for milk prices has provided dairying regions with some economic insulation.

However, he noted Northland’s figures – which are compared to the previous year – were helped by comparison with a tough September quarter last year.

“This quarter’s result reflects an upswing, though there is still a way to go, with the unemployment rate above the national average. Still, it’s positive to see some catch-up momentum getting underway.”

Forestry exports have performing strongly thanks to a rapidly recovering China and the booming domestic construction outlook. Logs are one of the few commodities where prices largely match last year.

While the main centres were quieter this quarter, rural New Zealand was holding up well. Bay of Plenty and Waikato were the second and third fastest growing regions, after tying for sixth last quarter.

A lack of tourists has hit the South Island hard.

‘’It’s not surprising to see regions that are more reliant on agriculture and exports experiencing the benefits,” Tennent-Brown said.

A stronger dairy outlook and a record kiwifruit season had helped the Bay of Plenty, while Waikato was enjoying low unemployment and strong retail sales, although non-residential construction looked to be slowing slightly this year.

All regions with exposure to dairy would benefit from the recent lift in farmgate milk price forecasts to $7 a kilogram, Tennent-Brown said.

“The primary sector’s resilience is really pleasing to see. Most obviously, food production is an essential service, so farmers have just kept doing a great job while their peers in the service sector dealt with the fear of further lockdowns.’’

However, regions with heavy tourism were hurting from the closed borders and it was flowing on to other sectors like retail.

This was particularly clear in the South Island, with Otago, Southland and Canterbury all at the bottom of the ladder.

Southland, which fell five spots to 14th, was thought to have been affected by pessimism over the potential closure of Rio Tinto smelter at Bluff.

Manawatu-Whanganui, the previous top region, slid to seventh place, more because other regions were doing better.

The region still had good retail sales, less exposure to tourism, and very strong job and house price growth, but there were signs of a slowdown in the construction pipeline, particularly housing.

The worst performer was Taranaki, sliding eight spots to 12th place. Although dairying was expected to give the region a boost in future months, its other big industry was going in a different direction, Tennent-Brown said.

‘’The energy sector faces an uncertain future as energy prices trundle along historic lows. That’s having a wider flow-on effect in the region and, last month, we saw Methanex announce it would shut its methanol plant in Waitara, after failing to secure new gas supplies.”

Among the main centres, Wellington came in at 11th (previously 10th), Auckland fell to 13th (11), and Canterbury was static at 14th.

The scoreboard is based on 11 measures, including employment, construction, retail trade, and house prices.