“Interest rates have come down, which is starting to ease pressure, but many households and businesses are still doing it tough.”
Kiwibank General Manager Troy Sutherland said “The further south you go the better the business climate seems… That pretty much sums up our latest look into the regions.”
Southland retained its top spot, buoyed by sustained construction and a regional building boom.
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Otago, meanwhile, leapt to a score of 5 thanks to a sharp rebound in international tourism and an 8% increase in employment – the strongest growth in the country.
“Our friends from across the ditch are lacing up their boots and hitting the ski fields,” said Sutherland.
“The few Americans that have a map beyond the USA are exploring the edge of the Earth. And Chinese visitor arrivals are finally recovering.”
Economic activity has improved across most of the country, with the average score lifted from 3/10 to 4. Image / Kiwibank
Canterbury’s economy remains steady at 4 out of 10, with post-earthquake infrastructure works and a relatively strong housing market driving momentum.
House prices there are up 1.5% year-on-year, compared to the national average decline of 0.3%.
Despite strong commodity prices and a weak New Zealand dollar boosting rural incomes, Kiwibank notes many farmers remain cautious.
“Like many other households and businesses, crawling out of a recession means rebuilding equity. That’s step one,” Sutherland said.
“Once balance sheets are in better shape, there’s reason to spend. And once demand in the economy strengthens, there’s reason to invest. We’re not quite there yet.”
The story in the North Island is less rosy.
The average economic score across Te Ika-a-Māui is stuck at 3.2, with a wide range of performance.
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Taranaki, Northland and Gisborne all saw their scores decline, with Taranaki posting the country’s largest drop in employment at -8%.
“Regions like Taranaki, Northland and Gisborne are going backwards,” said Kerr.
“These regions are grappling with falling employment, softer housing markets and softer activity across the board.”
Otago and Southland are New Zealand’s economic bright spots. Photo / Mark Mitchell
Gisborne saw the weakest housing activity, recording no growth in house sales in the three months to May.
Northland experienced a double-digit drop in new dwelling consents and scored just 2.6 out of 10, making it one of the worst-performing regions in the country.
Not all is bleak in the north. Manawatū-Whanganui was crowned “Most Improved,” with strong employment growth and infrastructure investment lifting its score nearly two points.
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Auckland rose to 4, buoyed by continued population growth, and Wellington improved modestly from 2 to 3, though employment and housing remain soft.
“Retail sales remain subdued,” said Kerr.
“Wellington recorded the steepest annual decline at -3.3%, but some regions like Waikato and the Bay of Plenty showed signs of improvement.”
Even in cities where the numbers improved, underlying challenges persist.
Wellington’s score may have risen, but its unrounded score is just 2.7, and house prices in the capital have fallen more than anywhere else in the country.
With interest rates falling and a wave of mortgage refixing expected, Kiwibank economists are hopeful this will free up household budgets and spur an eventual broader economic rebound.
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“There’s a Nazaré-type wave of mortgage refixing due,” said Sutherland.
“The move onto lower rates should help improve household disposable incomes, boosting consumption, supporting the housing market and wider business activity. But we may have to wait until summer for things to heat up.”