Westpac Regional Roundup, April 2024

This report summarises feedback from our teams across the country to give an ‘on the ground’ view of how households and businesses are dealing with the major changes that are occurring in New Zealand’s economic landscape, and how different regions are faring.

While we’ve had some mixed feedback in our latest round of talks, the comment that best summarises conditions around the country is ‘tough’.

The latest GDP figures showed that the economy slipped into recession in the latter part of last year, and the feedback we’ve received from households and businesses is that conditions have remained challenging in the early part of 2024. In the household sector, we’ve seen continued pressure on living costs and growing concern about the labour market. Those factors have contributed to a downturn in retail spending right across the country. We’ve also had many businesses in sectors like construction and manufacturing reporting a fall in forward orders. And in the agricultural sector, many farmers have been struggling with low export prices and continued increases in operating costs.

However, it’s not all bad news. The continuing recovery in international visitor arrivals has been a welcome relief for many businesses in the hospitality sector. We’re also seeing firmer conditions in parts of the horticultural sector.

On the labour front, businesses right across the country have told us that it has become easier to find staff and that staff turnover has fallen. A number of businesses also noted that there has been reduced pressure on wages. Even so, businesses are still finding it hard to find and retain staff with more specialised skills.

Pressure on margins remains widespread. While prices and costs aren’t rising at the same pace as they did in recent years, we’re still seeing some sizeable increases. However, with demand weakening, it’s becoming increasingly hard to pass on those increases into output prices.

Looking across regions, Auckland’s service-oriented economy has remained more resilient than other parts of the country. Booming population growth is helping to support demand in the face of other headwinds. The recovery in international tourism is also providing a welcome boost to spending in the hospitality sector.

That recovery in international tourist numbers has also been a boon for Otago with many businesses in Queenstown reporting solid demand as the number of visitors from high spending markets like the US continues to rise. However, conditions in the region have been mixed, with weaker spending by locals.

In many other parts of the country like Northland, Waikato and in regions at the top of the South Island, economic conditions have been tougher. Households have been reining in their spending. At the same time, in many of our regions with strong agricultural backbones, the combination of dry conditions and weakness in export prices is weighing on farm earnings and spending. That’s flowing through to softer demand in regional economies more generally

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