Drought saps regional economic confidence
Drought is evaporating economic confidence in rural New Zealand, with Northland, Waikato, Gisborne and Hawke's Bay, the gloomiest they have been for years, according to a Westpac Bank survey.
Regional economic confidence is also falling sharply in Taranaki, Manawatu and Whanganui, although Taranaki's expanding energy sector is helping offset that.
Confidence in Wellington has improved for the third survey in a row to almost neutral at a net-negative 1 per cent. Confidence in Wellington was the highest since late 2011.
There may be a growing sense that the Wellington economy was adjusting to years of public-sector cutbacks, and a slowly improving housing market, Westpac says in a report released today.
Canterbury remains the most optimistic region, with a net 35 per cent positive, though that is down five percentage points since December.
Auckland is also upbeat at a net 16 per cent positive, buoyed by a surge in house prices.
But dry weather is taking a heavy toll outside the big cities.
"Drought has caused economic confidence to evaporate in the rural parts of the North Island," Westpac says.
The biggest dive in confidence came in Waikato, where again people were almost neutral in December, but a net 29 per cent negative this month, the second-worst in the country after Northland.
The drought has hit dairy farmers hard in Waikato, with rising global prices for dairy products providing little immediate comfort.
But the most depressed region is Northland, which was a net 28 per cent negative in December, but is now a net 49 per cent negative.
Northlanders' economic confidence has plunged from already low levels, as the drought hit an economy only just emerging from the after-effects of a previous drought in 2010 and a lingering house price bust, Westpac says.
Economic confidence was at a similar level in the 2010 drought, but is around a 20-year low dating back to the recession of the early 1990s.
In Gisborne and Hawke's Bay confidence was neutral at zero in December, with an even balance between pessimists and optimists.
But in just three months that has plunged to a net 19 per cent negative, with many more pessimistic than optimistic, in March.
Confidence plunged back into pessimism as dry weather hit farmers in the region, though the drought wasn't officially declared until after the survey was carried out before March 10.
Economic confidence in the region is now the lowest since 2008, when the country was last hit by a widespread drought.
The region is also facing high unemployment, a Gisborne property market "in the doldrums" and the high New Zealand dollar, Westpac says.
Taranaki, Manawatu and Whanganui were the among the most-confident regions in the country just three months ago, at a net 25 per cent positive.
But drought has knocked that back sharply to almost neutral at a net 5 per cent positive. The region remained marginally optimistic because of the growing energy sector in Taranaki, the lowest unemployment rate in the North Island and modestly rising house prices.