15 March 2017

Wooden spoon for Southland in regional economic scorecard

Southland’s economy is struggling to keep pace with the rest of New Zealand, a new economic report released this week says.

In the ASB Regional Economic Scoreboard for the December 2016 quarter, Southland finished last out of 16 regions in the country.

The ratings were based on regional economic growth, utilising measures such as employment, construction, retail trade, and house prices.

The result was a drop by one placing from 15th in the September quarter, with Southland swapping places with Canterbury.

In particular, the retail and construction sectors in the region have shown to be lagging behind the national average.

Annual growth in retail sales was at 4 per cent, just below the national average of 5 per cent.

Construction had actually experienced negative annual growth.

While the national average was at about 6 per cent growth, figures for the end of the December quarter had Southland at -7 per cent growth compared to the previous 12 months.

House prices rose by 7 per cent throughout the period as well, but again this figure fell behind most of the other regions – ahead of only the West Coast and Canterbury.

ASB rural economist Nathan Penny said Southland was still feeling the effects of a “double whammy” of tough growing seasons and low milk prices during the past few years.

“At this stage, Southland’s growth has mainly been through the agri sector, and as that has slowed the general economy has slowed as well.

“Obviously there are a number of other sectors that play a part, but because of the sheer size of the dairy sector in Southland it has a big impact.”

Penny said with an improved outlook for both milk prices and a strong growing season, he was expecting to see signs of improvement in the next quarter or else throughout the rest of 2017.

Federated Farmers Southland provincial president Allan Baird said while the dairy payout was looking good to hit $6, the flow-on effect to the rest of the economy would not be immediate.

“There’s certainly more revenue coming in for the dairy sector, but most dairy farmers are already at a fairly high point in their overdrafts.”

Baird said while confidence was up and the outlook for the next few months was good, most of that money would be tied up with paying back debt catching up on farm maintenance.

“As a sector dairy is still very cautious, so any non-essential spending is still going to be a bit low.

“Southland will rise, but it’ll take another 12 months or so to come back from what were two pretty tough years.”

Baird said across the farming sector confidence was growing, not only in dairy but amongst sheep, beef and arable farmers.

Otago Southland Employers Association chief executive Virginia Nicholls said while Southland had not been achieving as highly as other regions in the country, there was cause for optimism.

Although growth in some areas was slow, tourism in the region was performing above expectations.

“Southland is experiencing good growth within the tourist sector which is increasing strongly.

“There are several reasons for this; the increased tourist attractions that are now available in Invercargill, along with more events happening in the region.

“The Queenstown and Wanaka hotels are also hitting full capacity and as a result of this there has been an increasing number of tourist groups staying overnight in Invercargill and Gore.”

Southland Chamber of Commerce chief executive Sheree Carey said while work needed to be done, the figures did not necessarily paint a full picture of the economic situation in the region.

“These surveys only represent a particular point in time [short term window] and don’t necessarily provide accurate commentary on economic trends in a region.

“Our tourism sector is showing steady growth, retail sales were up 4 per cent and house prices are on the rise – up 7 per cent in the December 2016 quarter, so it’s not all doom and gloom.

“What needs to be done to lift economic performance has been documented as part of SoRDS and the Chamber and other regional organisations current priority is to support the work streams identified in the SoRDs action plan.”