Otago and Southland has been punching above their weights in several economic sectors during the past year, with quarter on quarter gains being notched up from the booming tourism cycle, all of which has been further underpinned by solid agricultural commodity prices.
Forecasts for dairy farmers are well above break-even, lamb and beef prices have been at high levels, forestry had touched record prices and even lacklustre wool prices have started to move off record lows.
Commercial building activity in Dunedin is attracting people and businesses to the city, and the hospital rebuild is yet to make an impact, while proposed CBD development in Invercargill has ratcheted up increasing confidence in several arenas. There have been fluctuations and some softening in Otago’s monthly BNZ-Business NZ manufacturing and service sector data, but they had been easing off earlier highs, several of which topped the country during the past year.
During the past 10 days, two consecutive surveys, by banks ASB and Westpac, elevated Otago and Southland to first place rankings in regional rankings, followed by the economic optimism from the household outlooks.
They were followed by a Westpac McDermott Miller employment confidence survey, which had Otago’s confidence the highest of 11 regions. Lacklustre business confidence surveys during the past three months have plagued the coalition Government.
Wednesday’s ANZ business outlook at least improved from 50% expecting weaker trading conditions in August to 38.3% now expecting a deterioration. Westpac senior economist Satish Ranchhod said that nationally, while overall confidence in the labour market eased slightly in September, it was otherwise fairly buoyant compared with the other measures of confidence.
"Employment confidence has firmed in Otago and the central North Island, but has fallen sharply in the upper North Island, especially in the Waikato," he said.
The standout issue raised by the 1556 respondents was workers’ concerns about their incomes, given the number of those workers who reported getting a pay increase had fallen to a three-year low.
"Workers have also become very pessimistic about their chances of a pay increase over the coming year," Mr Ranchhod.
Also noted by workers, and declining in confidence, were their expectations of job opportunities, growth in expected earnings and their personal job security; albeit only in single figure point range.
However, Mr Ranchhod said overall labour market confidence was "particularly strong" in the Otago, Gisborne-Hawke’s Bay, and Bay of Plenty regions.
"Economic conditions in these regions have been boosted by improved returns for horticulture exports and solid growth in house prices," he said.
Otago was also continuing to see the benefits of strong growth from international tourism, he said.
Southland respondents had continued to highlight solid levels of job availability.
"The region is expected to continue to benefit from growth in meat and dairy exports, while elevated construction activity should ensure the region is better able to meet an expected increase in tourists to the area," Mr Ranchhod said.
Federated Farmers’ Otago president Simon Davies said that on the whole, Southern farmers should be feeling good about financial returns in the season ahead.
The dairy forecast payout price was "positive", although dairy farmers have rising concerns with Fonterra booking its first loss in 17 years and how that will affect the co-operative and themselves.
He said beef and lamb had been hitting "unbelievable prices" but there is mounting concern of a "bubble popping" as it did five years ago, but farmers hope the meat companies can steer away from that scenario.
"I’ve never seen the quality and quantity in [spring grass] growth before. Silage is even being made in September, on the Taieri and Clydevale — that’s almost unprecedented," he said.
The presence of M bovis remained a constant concern, he said. Mr Davies has farmed on the coast at Toko Mouth, raising 6500 sheep and beef on about 600ha, for the past eight years.
There appears was no shortage of clouds on the horizon, both literally and figuratively, for Southern farmers.
Mr Davies said if this weekend’s weather turned bad as forecast, Southern farmers could see a sudden increase in lamb death rates, potentially pushing up numbers to 10%-15% losses.
Some North Island farms were particularly hard hit a fortnight ago, he said.
Around Central Otago, water flows and allocation rights are of rising concern.
The implications for that part of Otago [around the Manuherikia River] are pretty serious . . . whatever the decision. Either way, farming will change up there," he said.
He said there was a "raft" of potential legislative and compliance changes "barrelling down" on farmers, covering biodiversity, the revamping of tenancy agreements, the emissions trading scheme and forestry planting programmes, to name just a few.
"Almost every piece of legislation written in this country will in some way affect farmers," he said.
On the question of the potential for a drought come summer, Mr Davies was pragmatic, given the situation could not be controlled.
"We just have to deal with it, but farmers should make decisions early," he said.
Otago Southland Employers’ Association chief executive Virginia Nicholls said while confidence in the labour market in Otago and Southland was strong, businesses are reporting continuing concerns about accessing both skilled and unskilled staff.
"Recruiters remain busy across a significant number of sectors and businesses are actively hiring," she said.
In Otago, construction is looking for qualified tradespeople for residential and commercial projects.
"As a result, project managers, surveyors, architectural designers, draughtsmen and women are also needed.
"There’s active recruitment for some of these roles from overseas," she said.
Trades staff are also in short supply in Southland. There had been recent recruitment drives by manufacturers in Southland across a variety of export sectors, including aluminium, wood processing, meat and milk processing.
"Meat processors are also investigating bringing in meat process workers from overseas," she said.
Manufacturers are also looking into using automation and robotics.
"More tourists are visiting the region, and there’s a number of unskilled roles that the hospitality industry is finding challenging to fill," Mrs Nicholls said.
In response to the earlier surveys during the week, Mrs Nicholls said the results lined up with feedback the associations had got from businesses around the region for some time.
There was evidence of increased business investment, particularly in construction and tourism, and in Southland manufacturing had been very busy, she said.
She added Central Otago’s horticulture and viticulture sectors were looking to grow, including planned new cherry plantings in the next few years.
"As a result there will be an increased need of workers and extra accommodation," Mrs Nicholls said.
Otago Chamber of Commerce chief executive Dougal McGowan, commenting on the surveys, said the positive data for the South was largely underpinned by rising house prices and values, but also boosted by the positive sentiment in the wider rural sector.
