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A Tale Of Two Islands As The Rural And Tourism Sectors Divide The North And The South
The North Island continued to outperform the south in the final quarter of 2020, fuelled by a booming primary sector while the tourism impacts of Covid-19 continued to bite in the south.
Northland claimed its second consecutive top spot in the latest ASB Regional Economic Scoreboard, followed by major primary producers Bay of Plenty, Gisborne and Hawke’s Bay in joint second place thanks to bumper summer crops and strong results across most other indicators.
At the other end of the spectrum, and the country, Tasman, Canterbury, Marlborough, Southland and Otago occupied the bottom five spots on the scoreboard.
ASB chief economist Nick Tuffley says several factors contributed to Northland holding onto its crown.
“This quarter we were particularly impressed by the region’s job growth, which topped the poll at 4.8 percent year on year. The region was in the upper half for most other indicators too, like retail sales, residential construction, and house sales.
“All-in-all, it’s good comeback story for a part of the country that still has pockets of real hardship. We suspect the strength of the forestry sector, aided by solid demand from China, might be one factor that’s helping,” says Mr Tuffley.
Despite the glowing review, Mr Tuffley warned summer drought conditions may hinder the region in 2021.
Mr Tuffley says this quarter is another strong result for some of New Zealand’s horticulture leaders but housing is also playing a part in the lift being seen at the top of the scoreboard.
“Solid annual house price growth and residential consents were the star of the show in the Bay of Plenty, and over in Gisborne, annual house price growth outstripped the rest of the country at 31 percent compared with the same time last year.
“Primary producing regions are really seeing the benefit of strong export demand during a period when some other industries are struggling, and we expect this trend to continue,” says Mr Tuffley.
“We would have expected the Southland region to have performed better this quarter as a primary producing area, but it’s likely the flow-on effect from Otago is dragging things down.”
Otago has been relegated to the bottom of the scoreboard for the second consecutive quarter, still suffering from the lack of international travel, with Marlborough dropping eight places to second to last on the table.
“Unsurprisingly, Otago locals weren’t feeling as optimistic as the rest of the country and the region ended the quarter with the lowest level of consumer confidence. On a positive note, with the vaccine roll-out underway we may see tourism pick up in future, particularly if any ‘bubbles’ appear soon.”
Housing supply and demand are high across the board, with residential building consents and house prices both climbing to new highs over the fourth quarter and continuing into 2021.
“It’s a perfect storm of low interest rates and the hot housing market fuelling activity. All up, residential consents were up 15 percent and house prices are up 11.8 percent on the same time in 2019, when the market was already hot. House prices in some regions are up 20 to 30 percent, with the chronic housing shortage fuelling the fire,” says Mr Tuffley.
“We think construction and house price growth both have a bit further to run before cooling later in the year, though the Government’s recent housing announcement will slow the housing market a bit quicker than we recently anticipated.”
The full ASB Regional Economic Scoreboard, along with other recent ASB reports covering a range of commentary, can be accessed at our ASB Economic Insights page: https://www.asb.co.nz/documents/economic-insights.html
@ASBBank @ASBMarkets www.asb.co.nz
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