Rates, dairy prices hurt confidence

Last updated 12:29 25/06/2014

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Rising interest rates and falling dairy prices are denting confidence, especially in rural centres, with the Westpac survey of regional economic confidence showing a 5-point drop in nationwide confidence to a net 32 per cent positive in June.

So while economic confidence remains optimistic overall, in most regions consumers are not as upbeat about the prospects for their local economies as they were in the March survey.

One of the few exceptions was Wellington, where a net 33 per cent expected better times ahead for the region in the coming year, up a whopping 22 points on the March survey. The big lift in confidence in Wellington took regional confidence to its best levels since the middle of 2010. The rise bucked the broad trend elsewhere. Wellington has lagged behind the national average for more than a year, but has now returned to just above average. That reflected rising job numbers in the region in the March quarter, car and truck registrations up strongly in the past year and more homes are being built, Westpac said.

But most other regions showed confidence was fading, with falls in Canterbury, Otago and Southland especially.

While the economy was growing strongly, up 1 per cent in the March quarter, a number of key drivers of recent growth were starting to "lose their lustre" Westpac said.

International dairy prices have fallen sharply, down about 25 per cent since earlier this year, which meant that this season's payout for dairy farmers would be well down on last season's record breaking level. Despite that confidence in the dairy heartland of the Waikato was resilient, down just 3 points to a net 38 per cent positive.

The resilience was put down to a sizeable lift in commercial consents being issued, and strong farm sales and prices.

The report pointed out that the mood at the recent Fieldays was "upbeat" as well.

Waikato was among six regions in which consumer confidence dropped, down 6.7 per cent, and among four regions where people were less optimistic about their financial situation.

As well, housing markets in many parts of the country have slowed after the Reserve Bank brought in speed limits on low-deposit home loans, followed by rising interest rates since March. And the Reserve Bank has told consumers to expect rates to rise much further.

Even so, Auckland confidence remained undented, up 1 point to a net 38 per cent positive, despite clear signs of a slowing housing market.

While confidence fell in Canterbury by 19 points, it still remained the most optimistic region in the country at a net 43 per cent positive, just ahead of Auckland and Waikato. Fairfax NZ

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- Waikato Times

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