New Zealand’s regions are showing signs of recovery, but there is a growing economic performance divide between the North and South Islands, a new report from Kiwibank says.
The Annual Regional Note, released on Saturday, showed that the South Island was continuing to outperform the North and that while most regions recorded gains, progress remained uneven.
The national average score has lifted from 3 to 4 out of 10.
Kiwibank chief economist Jarrod Kerr said the economic tide was turning.
“Most regions have seen at least some improvements, but the recovery is far from even.”
Southland and Otago lead with scores of 5, driven by a building boom and tourism rebound respectively.
Northland, Taranaki, and Gisborne scores declined. Wellington and Auckland lifted slightly, with New Zealand’s biggest city supported by population growth.
“The further south you go, the more optimistic people are,” Kerr said.
“So you think about Northland and Taranaki and Gisborne, they’ve gone backwards over the last year. And you think further south, you know, going to Otago and Canterbury, they’re actually doing a lot better.”
He said the divide could become a “self-fulfilling prophecy” with people leaving places such as Auckland and moving to Christchurch.
“It is more affordable and, these days, you don’t necessarily have to be in the largest cities — a lot of people are working from home.”
Kerr said the housing market had remained largely “locked in lateral moves”.
“Since stabilising in early 2023, national house prices are up just 1.8%. Since the Reserve Bank began cutting rates in August, house prices have only lifted by half a percent — and, in many regions, they’re still flat or falling.”
Labour market conditions were also mixed. Otago had the strongest employment growth in the country, up 8%, while Taranaki recorded the steepest employment drop at -8%.
Retail sales remained subdued and below their average levels in most regions, with Wellington recording the steepest at -3.3%, while regions such as Waikato, Northland and the Bay of Plenty improved slightly on last year.
Consumers were still being cautious, Kerr said,
“They’re rebuilding balance sheets, not rushing to the shops just yet.”
‘Time for the Reserve Bank to step on it’
Kerr told 1News he would like to see the Reserve Bank “go from having their foot firmly on the brake, to putting it in neutral, to actually putting their foot on the accelerator”.
He believed the Official Cash Rate should fall from its current position at 3.25% to 2.5% to provide meaningful stimulus to the economy.
“We think the risk, if anything, is that inflation falls too far and falls below 2% because the economy is so weak. So, job done on the inflation front, it’s time to stimulate growth.”
