Editorial - A knife-edge economy
Good economic news has flowed from Wellington in recent days. The latest Westpac McDermott Miller Regional Economic Confidence survey showed economic confidence rising in most households and Statistics NZ reported building consents for new houses increased 10 per cent in November. But big divergences are evident among the regions and Waikato's confidence is sagging.
Rebuilding helped lift economic household confidence in earthquake-devastated Canterbury to its highest level since late 2009 in the December quarter. Auckland's return to optimism is reckoned to have been boosted by an increasingly exuberant housing market.
A sharp fall in residential building consents in November is worrying at first blush. But when apartment consents are taken out of consideration, we find the construction of new dwellings posted a heartening 4.6 per cent increase. Non-residential building work is on a roll, too, helped by the Canterbury rebuilding. The construction sector hence seems set to continue to boost economic growth over the coming year, just as the Treasury was forecasting before Christmas.
But householders in more export-oriented regions are not so ebullient. Confidence has lifted in some but fallen in others, including Waikato and Bay of Plenty, notwithstanding signs of improvement in global economic conditions. The forecast dairy payout - still lower than last season despite a recent rise in prices - doubtless has dampened Waikato's spirits, while difficult conditions for the tourism industry and the effects of PSA on the kiwifruit industry are among factors eroding optimism in the neighbouring Bay of Plenty.
This flows through into the building sector. The number of new dwellings consented in Waikato fell from 200 in October to 170 in November and from 135 to 111 in Bay of Plenty (although the numbers in both cases were higher than in November 2011).
Confidence will have been further bruised by Norske Skog's decision to close one of two newsprint machines at its Kawerau mill. As the demand for newsprint flags, it intends diversifying into renewable energy and biofuels.
That will bring no comfort to the 110 or so people earmarked for redundancy over the next few months. But the whole region should brace for its confidence-sapping impact.