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11/1/2019 — General
Strong economic vibes in the south
By Simon Hartley

The economies of Otago and Southland chalked up stellar growth in the past calendar year, including some export records set by Port Otago and South Port at respectively Port Chalmers and Bluff.

Time and again during the year, the southern provinces notched up pole positions in national rankings with economists, while separate measures of the manufacturing and service sectors also often headed the four regions covered across the country.

For differing reasons, both economies have seen surges in population growth, bringing with it the need for new housing and infrastructure construction, which is at least initially self-perpetuating, with new jobs, increasing home building and sales and increased retail spending.

Dunedin's population bounded ahead by 1,900 people to hit 130,700 - which averages out at more than five people theoretically arriving every day. Arguably some of the southern success can be put down to cooling in northern provinces and cities, such as Christchurch's rebuild wind-down and Auckland's easing house prices and economy.

While the cooling effect makes the southern provinces look better on paper, Otago and Southland's gains have real merit - be it record tourism numbers and guest nights around Queenstown and Central Otago, record log exports or strong, or steady, lamb and dairy prices during much of the year.

Otago booked stellar pre-Christmas spending gains, up 7.1%, the second highest in the country, while Boxing Day retail spending hit 11.1%, matching the national increase for the day.

Cadburys' closure and loss of 360 jobs was the bitterest pill of the year for Dunedin. Its demise was a slap in the face to have to watch a highly profitable, innovative and long-standing employer dismantled and shipped overseas; all for the greater good of Mondelez' bulging multi-billion dollar balance sheet.

Another unwelcome business closure was revealed in mid-December, with 40 staff to be laid off from Dunedin engineering company Milmeq. Not only was its order book empty, because of increasing global competition, but other divisions of the company were sold to new Australian and NZ owners, prompting the split up.

However, if there is any silver lining, at least the Cadbury site doesn't become a run-down eyesore awaiting redevelopment, the site at least provides the cornerstone foundation for Dunedin hospital's $1.2 billion rebuild.

Keep an eye out for hospital budget top-ups in the years ahead. The rebuild is already being predicted to encompass up to 1,200 jobs at times, including estimates of 600-800 on-site workers, who will also be needing accommodation.

Mataura Valley Milk's $240 million investment in Southland has come to fruition, opening mid-year with 70 jobs already in place and more being advertised.

Otago Chamber of Commerce chief executive Dougal McGowan said Otago and Southland's primary sector had in 2018 been strong, it was also at times assisted by the fluctuating New Zealand dollar.

While highlighting the on-going strength of the primary sector, McGowan said diversification had also been important, in technology, tourism and business start-ups.

Port Otago chief executive Kevin Winders believed Otago's economy was tracking at a 7-8 out of 10.

“The new season’s exports are starting to gear up,” he said. Last year was record for logs across Port Chalmers' wharves, and if demand continued in the second half trading, Winders said that record may be matched, or possibly beaten. However, he cautioned that export of processed timber was under a cloud, because of China's tariff wars with US President Donald Trump, but also because China had reinvested in its own sawmilling sector, so was processing more New Zealand logs itself.

A milestone for Port Otago is the scheduled arrival of a record 117 cruise ships, of which there had only been one cancellation so far.

At South Port in Bluff, it booked record cargo handling and growth in bulk cargo which underpinned a 14% boost to its after-tax profit of $9 M for the June year. There was a 13% increase in cargo flows through Bluff in the period, total volumes rose to a record 3,445,000 tonnes.

Cargoes of logs and woodchips reached one million tonnes for the first time.

Winders confirmed there had been increased interest from would-be land purchasers of freehold properties, which was being dealt with on a case-by-case basis. Growth and performance in the coming year for the southern provinces is predicted to continue, but come 2020 a nation-wide cooling of the economy is expected, largely from slowing population growth.

*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.

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