Otago tells a tale of two economies

Nick Tuffley.
Nick Tuffley.
Otago has a two-speed economy, Queenstown racing along while Dunedin struggles to keep up, according to the latest ASB Main Report.

And the claim has some validity, according to the Otago Chamber of Commerce and the Otago-Southland Employers Association.

ASB chief economist Nick Tuffley said economic activity in Otago remained healthy.

In particular, the tourism sector continued to charge ahead.

Feeding off the tourism activity, construction - both residential and commercial - continued at a rate of knots.

No doubt the sector was driving much of the solid 14% annual increase in commercial construction.

House prices also moved up in the quarter.

''However, we cannot help but wonder if the region is travelling at two speeds,'' Mr Tuffley said.

Association chief executive John Scandrett told the Otago Daily Times he believed there were ''selected elements'' that could be seen as evidence of a two-speed regional performance.

''But I don't think the gap is Lamborghini-against-Lada wide. For example, our service sector has delivered strong tourism activity outcomes in Central Otago and also here in Dunedin. Recent city hotel occupancy data supports that fact.''

In both regional areas there were areas of strength in retail and construction but, in both areas, not all operators were seeing targets reached, he said.

There were probably gaps across the overall employment situation where Central Otago is experiencing ongoing robust full employment while in Dunedin the unemployment landscape, especially in the 18-to-24-year-old grouping, was not so well balanced.

Chamber chief executive Dougal McGowan was in no doubt the region had a two-speed economy, with an air of vibrancy around Queenstown.

Recently, overseas visitor numbers through Queenstown Airport had twice exceeded records and those high visitor numbers were based on tourism.

Commercial and residential construction activity in Central Otago was strong, while in Dunedin it was about to take off, particularly around the University of Otago and the Emerson's Brewery project.

So far, much of Dunedin's residential construction had been based on restoration, rather than new builds, he said. In Queenstown, unemployment was close to zero but Dunedin had a problem with youth unemployment.

''It's not all bad news. Dunedin has good growth but it is not at the same speed we see in Queenstown.''

Asked what needed to happen to get Dunedin's economic growth heading to that seen in Queenstown, Mr McGowan said the red carpet needed to be rolled out for businesses contemplating moving to the city.

The city needed to become attractive for companies and their staff but often, they ran into needless red tape and obstacles.

''Sometimes, in some areas, people go in with great ideas and opportunities and they are taken up straight away. Sometimes in Dunedin we are a bit slower at taking those opportunities.''

Talking to members, Mr McGowan found a large number of scenarios affecting growth. Retailers were particularly concerned about coping with online competition.

One member reported customers coming in, trying on shoes and taking a photo of them before buying them from an online retailer.

The chamber was supporting local retailers by helping them have a digital presence as well as a shop front, he said.

The Main Report gave Otago four stars, which translated to ''be there or be square''.

Canterbury and Auckland were both on five stars, or ''the place to be''. Waikato and Bay of Plenty were the other four-star economies.

In contrast, Southland had only two stars, which meant it needed an energy injection.

Mr Tuffley said Southland had experienced a tough run of late and its star rating had dropped as a result.

Dairy incomes had fallen on both dairy prices and a poor production season.

The wider population appeared to feeling the pinch and Southland consumer confidence in the June quarter was the lowest in the country.

Construction in Southland was also soft. Both residential and commercial building consents were weak over the quarter.

But there were some bright spots. Southland posted 4% annual jobs growth and house sales were up 17%.

The big recent news was the Tiwai Aluminium smelter contract extension, he said.

''We won't see any bounce from that positive announcement until the September quarter scoreboard.''

 

 


State of the Nation

Employment   5/5

Annual employment growth is robust but risks slowing. Migration and a high participation rate continue to boost the size of the workforce.

Wages  3/5

Wage increases continue to be modest by historical standards.

House prices and sales   5/5           

In Auckland, low housing listings, high migration and low mortgage rates are supporting house prices. Activity is now picking up elsewhere.

Retail sales   4/5

Annual retail growth has steadied from recent highs as consumer confidence eases.

Car registrations   5/5

Car sales and new car registrations remain high but the growth rate is clearly slowing.

Construction   4/5

The Canterbury rebuild appears to have peaked and construction in Auckland needs to increase in order to meet demand for housing.


 

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