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28/3/2018 — General
Otago brickbat for Shane Jones
By Dene Mackenzie

Otago Chamber of Commerce chief executive Dougal McGowan has hit out at Regional Development Minister Shane Jones, saying he could easily help lift Otago's economic confidence.

The Westpac-McDermott Miller Regional Economic Confidence Index showed a sharp drop in regional confidence in the March quarter.

McGowan has written to the two Dunedin-based Cabinet Ministers David Clark and Clare Curran urging them to stop removal of five Tertiary Education Commission jobs from the city.

“Shane Jones says Northland needs jobs, regions need airlines and new jobs need to be provided in the region.

“What about the five jobs in Dunedin that will disappear? This is a very easy decision for the Government to make. Just say no.”

A net 25% of Otago households expected the region's economy to improve in the coming year, a sharp drop on the 53% recorded in the December quarter, according to the economic confidence index.

Westpac chief economist Dominick Stephens said most of the drop between December and March was likely to be a technical correction following a large increase in the previous quarter. However, there could be other factors at play, including worries about whether the region's infrastructure was able to cater for tourist arrivals in the future.

There might also be concerns about the impact of dry and hot weather conditions on the horticulture and viticulture sectors. A notable fall in manufacturing output might also have come into consideration following decommissioning of the Cadbury plant in Dunedin being front of mind, he said.

Disappointment over the Cadbury plant closure might be offset by news an independent chocolate maker was well on the way to opening a new factory later in the year.

It was also true that despite a sharp drop, confidence levels in the quarter were not much different to those posted in previous quarters. They were likely supported by a strong tourism season, raised construction activity in Dunedin, employment gains in the hospitality and related sectors as well as increased retail spending, Stephens said.

The survey also examined consumers' views of their own economic situation, producing an index summarising responses to questions including how they viewed their own financial situation, and their current willingness to buy a major household item. Consumer confidence in Otago was the highest in the country.

“Most households in the region expect the NZ economy to improve over the coming year and they are also becoming more optimistic about the outlook for their own finances.

“As a result, households in the region are far more willing to make large a large household purchase than they were before,” Stephens said.

The Otago Chamber would start its own regional survey next week and McGowan expected results to show a similar fall in economic confidence, although it was still thought to be strong.

People had the perception of being better off because of increased equity in their homes from rising house prices. The increased equity gave homeowners the ability to borrow to fund their large ticket purchases, he said.

There was a strong signal from overseas of inflationary pressures starting to rise, meaning it would cost NZ banks more to borrow funds offshore.

“Rising interest costs could start to hurt households with large borrowings.”

Overall, economic confidence rose in nine of the 11 regions surveyed by Westpac-McDermott Miller. Households in Auckland remained the most negative about their region's economic prospects and those in Wellington were the most optimistic.

Confidence in some rural regions was affected by severe weather events which had an impact on agricultural production and other aspects of the economy, Stephens said.

The Nelson-Marlborough-West Coast region reported a 20-point fall in confidence in March, which was enough to place it among the most pessimistic regions in the country. The result was thought to reflect the impact of ex-cyclones Fehi and Gita and the widespread disruption and damage caused.

Confidence in Southland recovered in March and 33% of households were now expecting better times ahead for the region, Stephens said.

Southland had returned to being one of the most optimistic in the country. Southland households were most likely buoyed by an increase in employment and a fall in the rate of unemployment, higher house prices, increased tourist arrivals and growth in retail sales.

*Dene Mackenzie is political editor of the Otago Daily Times.

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