Kiwibank: Things are getting better – you just might not feel it yet

As the economic clouds over New Zealand begin to lift, the future will be brighter for many people, according to a new report from the Bank of New Zealand.
photo: Pablo Heimplatz/Unsplash

The Bank of New Zealand says the economy is starting to recover in most parts of the country, even though it may not feel like it.

It has been released The latest annual regional report, The report expressed “tentative optimism” about the outlook for the country’s economy.

Every region except Wellington had an improved economic score compared to last year, although the highest score was still only 5 out of 10 in Southland.

“We’re not going to be in trouble by any means,” Kiwibank chief economist Jarrod Kerr said.

“What we do feel is that things are slightly better than they were last year, but they’re still at recession levels. There are places where people are in pain, they’re hurting …

“Our message is ‘Look to next year. Next year is going to be better than this year.'”

He said the message was welcomed by many.

“You can see them hunkering down and putting out fires now. But you can see their eyes light up at the thought that interest rates are going to be lower and things are going to get better next year. We are going into a deeper recession and I think we’re going to get out of this again in the next six months.”

Most of New Zealand, including Auckland, scored 3 out of 10. Gisborne, Taranaki, Canterbury and Otago scored 4. Southland scored 5 and Wellington just 2.

Kerr said Wellington’s score was the same as last year.

“It was bad last year and it’s still bad now. It’s a mess in Wellington, especially with public services and unemployment. Even if people are not directly affected, they are feeling the impact.”

Kerr said the tax cuts were unlikely to have an impact on struggling retailers and the hospitality industry.

But he said income growth should outpace inflation from now on, which would gradually help improve household cash flow, and when interest rates do fall, that would help encourage consumption.

“Retailers are having a tough time. They tell us they have to offer deep discounts to attract customers. Customers who come into the store are buying less, maybe one item, compared to three a year ago.”

More people are worried about job security, he said.

“A year ago, the labour market was so tight that you could find another job if you wanted to, and you heard about people leaving their jobs to do similar jobs for 20 per cent more money… Now, we have a huge influx of migrants, and we’re hearing about 40, 50, 60 applicants for every job.”

He said it was notable that construction activity in Southland increased by 46 per cent, in stark contrast to the rest of the country.

“It’s great that they’re addressing the shortage there. We wish the whole country would do the same.”