Kiwibank’s Latest Report Reveals Economy Slowly Recovering In Every Region Except Wellington

SOUTH ISLAND SCORES AHEAD OF NORTH ISLAND IN KIWIBANK’S LATEST ANNUAL REGIONAL NOTE

• A new report from Kiwibank shows that each region is starting to recover economically, with the exception of Wellington, which is recoiling from ongoing public sector cuts.
• Southland scores the highest economic score in the country, led by a construction boom.
• House prices are starting to recover in all regions, although unemployment is set to rise in the months to come.

10 AUGUST 2024: The latest Annual Regional Report released by Kiwibank today paints a tentatively optimistic picture of the national economy. Each region of the country increased its economic score—with the exception of Wellington, which is in economic decline.

“2024 is shaping up to be a better year for most regions — just,” said Kiwibank Chief Economist Jarrod Kerr. “We’re still very much in a challenging economic environment. But the overall outlook continues to improve, particularly with the anticipated interest rate cuts expected to breathe new life into a rather deflated economy.”

SOUTHLAND HIGHEST SCORING, WELLINGTON THE LOWEST

The report named Southland as the region with the highest-scoring economy ­– a 5 out of 10. “Murihiku / Southland’s construction sector has ramped up,” added Kerr, “with residential building consents growing this year by an impressive 46%, leading to the region’s standout result compared with the rest of the country.”

Wellington recorded the lowest economic score in New Zealand – a 2 out of 10 ­– with the impacts of government spending and headcount reductions flowing through to the local economy.

MORE LAYOFFS LIKELY

“Unemployment rates tend to lag economic scores by about nine months,” added Kerr. “We’ve seen nearly all regions just start to improve their scores, meaning unemployment rates will likely continue to worsen in the coming months before they get better.”

Some regions have seen employment growth rates improve over the past year, led by Taranaki with a rate of 6.2%, with new jobs created due to the diversification of its local economy. Gisborne and Hawke’s Bay region are also creating more jobs with the ongoing repairs and rebuilding after Cyclone Gabrielle.

All other regions have seen employment growth soften, with Wellington the only region that has already slipped from growth into decline (-2%).

The report confirms that the current national unemployment rate is 4.3%, with Wellington’s being 4.6% and Auckland’s 4.8%.

HOUSE PRICES STARTING TO RECOVER, FEWER HOUSES BEING BUILT

“After house prices stabilised in 2023, we’re now seeing modest house price growth across every region of Aotearoa,” said Kerr.

“Auckland and Wellington experienced the deepest house value declines during the downturn – 23% and 25%, respectively. Auckland has seen a sluggish improvement of 1.3% from the bottom of the market, while Wellington is up 3%.”

By comparison, Canterbury’s house prices had a significantly softer decline of 7.8% during the downturn and have recovered to now be just 4.7% below peak levels.

Most regions of New Zealand (bar Southland and Canterbury) have recorded a decline in building consents. “Fewer houses are being built, which could lead to further supply constraints over time – resulting in upward pressure on house pricing in the future,” added Kerr.

RETAIL SALES CONTINUE TO DECLINE

Retail sales across the country contracted by 2.6%, marking the sixth consecutive nationwide annual decline.

Wellington’s retail sales have experienced the most significant decline (-3.3%), with public sector job cuts “weighing heavily on job security, and in turn, household consumption,” said Kerr.

Bucking the overall trend is the stronger-than-average retail sales growth in Gisborne and Otago, driven by increased spending on rebuilding, replacing, and refurbishing after Cyclone Gabrielle in the former, and the return of international tourists to the latter supporting retail and hospitality sales growth.

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