Measures of farmer confidence were also at record lows during the quarter and that might have spilled over into lower household confidence. In general, farmer uncertainty about the future of the industry remained high as sector regulations continued to tighten, the report said.
Like the rest of the country, rising interest rates and cost of living increases would have added to the downward pressure on households’ view of their regional economy.
Looking forward, the bank expected the relative strength of Southland’s agriculture sector would mean Southlanders’ confidence in their local economy might track higher than equivalents in other regions across the country.
Otago’s prospects "picked up a touch" over the December quarter, rising four points. The influx of international tourists boosted activity in tourist hot spots such as Queenstown and Wanaka and, while worker shortages continued, the open border was allowing more migrant workers, including backpackers, to arrive in the region.
On balance, the bank maintained "a glass half-full" view of the region’s economy as it expected the ongoing rebound in the tourism industry would continue to dominate the economic landscape over this year and into 2024.
The report said households’ confidence in all the regional economies of the country took a dive over the December quarter.
Northland and Auckland remained the most negative regions as the rising interest rates and cost of living increases were hardest.
The household confidence level was lowest in the Auckland region, while Waikato posted the largest fall.
Cost of living and interest rate increases were hitting Aucklanders’ wallets hard and, if anything, the squeeze on household budgets was about to accelerate as more homeowners and investors rolled on to higher fixed mortgage rates over the coming months.
The Auckland housing market was also at the forefront of the nationwide house price declines, dropping 20% since November 2021. As a result, Aucklanders’ view of their local economy might get worse before it got better.
Ongoing rises in the interest rates and the cost of living as well as falling house prices had weighed on confidence across the regions.
"We expect that confidence will remain under pressure as rising interest rates and costs of living plus falling house prices combine to put the squeeze on households," the report said.
