Housing keeps confidence afloat as Auckland sentiment wobbles

Wednesday, 31 March 2021

Auckland’s economy has been eroded by localised lockdowns in February and August last year.

Economic confidence is mixed around the country, with regions reliant on tourism or subject to Covid-19 outbreaks feeling the most unsettled.

Westpac’s regional economic confidence survey has found six out of 11 regions reported a fall in the March quarter, following big gains in the previous three months.

Auckland was now the most pessimistic place in the country, with a net 5 per cent of households feeling negative about the coming year, as repeated lockdowns disrupted economic activity and heightened uncertainties.

‘’A lack of international visitor arrivals during the peak summer season is also likely to have weighed heavily on the region’s struggling hospitality sector,’’ acting chief economist Michael Gordon said.

The Monitor looks at how individual parts of New Zealand's economy have rebounded since the Covid-19 pandemic hit. Video first published in April 2021.

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The prospect of a large hydrogen renewable energy plant in Southland may have helped boost economic optimism in the region. (Artist impression)

Offsetting this was the strength of the housing market – up nearly 23 per cent in the last year – which had boosted confidence in all regions, Gordon said.

''Given this, it will be interesting to see to how recently announced tax changes targeting property investment will affect regional confidence over coming quarters.''

Strong export returns had also come into play, keeping confidence high in regions with a strong rural backbone, such as Taranaki/Manawatu-Whanganui, Gisborne/Hawkes Bay, Waikato, Southland and Canterbury.

In Northland, a hot housing market and rising dairy and forestry prices saw a net 4 per cent of households feeling optimistic about the region’s economy.

The closure of Whakatāne’s mill is thought to have weighed on the Bay of Plenty’s optimism.

Optimism in Waikato rose to a net 12 per cent of households, boosted not only by housing and agriculture but stronger activity in its manufacturing, particularly food, healthcare and construction sectors.

On the other hand, confidence was lower in areas like Auckland or Otago, regions which were either vulnerable to community spread of Covid-19 or where a lack of international tourism was deeply felt.

Sentiment also wobbled in Wellington, although a net 9 per cent of households remained positive as the region grappled with a housing shortage and negative press about council issues.

On the other hand, the city retained its robust housing market and continued stable employment in the public sector.

In the Bay of Plenty, labour shortages in the kiwifruit industry were believed to have weighed on sentiment, although a net 7 per cent of households still expected economic improvements this year.

The closure of Whakatāne Mill was also thought to have dampened spirits, but it was offset by strong property prices and strong export incomes from forestry and horticulture.

In Southland, optimism rose to a net 14 per cent of households, as house and dairy prices escalated. The possibility of a large-scale renewable hydrogen production plant in the region, and plans for a huge cloud computer data centre, were also thought to have boosted sentiment.

The biggest jump in positivity in Canterbury, where a net 22 per cent of households were feeling good about the future, up from a net 5 per cent in December.

That was likely based on rising export demand for its agricultural and manufactured goods, and a sharp acceleration in house prices ''which are now catching up to those of other regions''.

The most confident regions were Taranaki/Manawatu-Whanganui and Gisborne/Hawkes Bay where a net 23 per cent of households were expecting conditions to improve in the coming year.

Both were boosted by forestry, record house prices, and in Taranaki, increasing world oil and gas prices. But optimism in Gisborne/Hawkes Bay had been even higher in December when it was a net 33 per cent.