The summer of 2020/21 provided a boost to a number of regional economies even as traditional tourism hotspots remained hard hit by the loss of international tourism. The latest Infometrics Quarterly Economic Monitor points to a faltering in the overall economic recovery, with a further divergence across New Zealand. Some parts of the country have continued to recover further but other areas show patches of softer economic activity.

“Domestic travel, strong construction activity, and a more robust labour market have helped support regional economies in recent months, as businesses press ahead with work and look to hire more workers, which in turn is assisting Kiwi households to keep spending” says Infometrics Senior Economist and Director Brad Olsen. “However, supply chain disruptions and the lingering effects of COVID-19 are weighing on our economic recovery.”

Bay of Plenty region was the top performing regional economy over the March 2021 quarter according to provisional estimates from Infometrics, rising 3.0%pa even as the national economy slipped back 0.3%pa. “Higher commodity prices have supported economic activity in Bay of Plenty, with good returns for dairy, meats, horticulture, and wood exports” says Mr Olsen.

“Taranaki and Waikato regions were also strong performers in the March 2021 quarter, with solid domestic tourism spending, a higher dairy payout, and sustained higher building levels keeping economic activity rising” says Mr Olsen. “Firm primary sector activity has bolstered business investment, and New Zealand’s still strong trading position is supporting many provincial economies.”

Summer was always set to be a tougher time for regional economies with substantial tourism sectors, with the loss of international tourists over the peak months being felt hardest in the March 2021 quarter. “Tourism spending losses expanded over the three months to March 2021, with a 10% drop compared to the start of 2020” says Mr Olsen. “The West Coast, Otago, Auckland, Canterbury, and Southland all saw large falls in spending, with domestic travel simply not enough to fill in the spending hole.”

The drop in unemployment in the March 2021 quarter, and slowly falling Jobseeker Support numbers, reinforces improvements in the labour market. “Filled jobs across New Zealand are showing strong employment trends in healthcare, construction, and public administration industries. Other industries, concentrated around tourism activities, are slowly looking to turn a corner” says Mr Olsen.

The opening of the trans-Tasman bubble is unlikely to be the panacea hoped for, although it will provide a much-needed boost to our hardest hit tourism regions. Coupled with continued supply chain disruptions, growth is set to be patchy, but the path forward for the economy is still more upbeat.

“New Zealand’s economic recovery lost some momentum at the start of 2021, and the economy could remain sluggish throughout the rest of the year as the lingering effects of COVID-19 limit New Zealand’s economic potential, with some areas set to remain harder hit for longer. However, New Zealand’s economic outlook is expected to turn brighter as vaccines start rolling out and New Zealand charts a path towards reopening to the world eventually.”

ENDS