What is the broader outlook for the New Zealand economy?
Regional economies across New Zealand are feeling the pinch as economic activity slows and employment levels fall, according to the latest data from Infometrics. The June 2024 Infometrics Quarterly Economic Monitor has revealed a continued weakening of the economy, with provisional estimates showing a 0.2% year-on-year decline in economic activity for the June quarter, turning annual growth negative for the first time in recent years at -0.2%.
“The economy is clearly weaker, with households tightening their belts as unemployment rises and job security deteriorates,” said Infometrics chief executive and principal economist Brad Olsen. “Businesses are reporting lower sales and limiting further hiring.”
Olsen noted that while sectors driven by population growth, such as health and education, have provided some stability, economic sentiment remains poor, particularly in the private sector.
Olsen said the data also showed that employment declines have been widespread across several regions. Seven of New Zealand’s 16 regions saw job losses in the June 2024 quarter. Tairāwhiti Gisborne experienced the largest decline, with a 1.2% drop in filled jobs, followed by Taranaki at 0.6%, and Nelson and Wellington both at 0.4%. In contrast, parts of the South Island showed resilience, with Canterbury and Otago both recording job growth above 1% despite broader economic challenges.
Economic slowdown continues
The downturn is being felt across a range of industries, including retail trade, manufacturing, and the primary sector, as well as construction and professional services. National spending growth has slowed, with Marketview card spending data indicating a mere 0.3% increase in the June 2024 quarter. Although inflation has eased to 3.3%, it still outpaces spending growth, leading to an overall reduction in per-person spending, Infometrics noted.
“This trend, coupled with continued population growth, further highlights the downturn in per-person spending, as Kiwis keep a tighter hold of their wallets,” Olsen said.
The primary sector’s performance has been mixed. While dairy prices have shown improvement, boosting the sector’s contribution to regional economies by an estimated $15.1 billion, other areas have struggled. Meat prices have seen some recovery, with beef prices up 2.1% from June 2023, but sheep meat prices remain significantly lower, despite recent improvements. Horticulture exports are performing well, but forestry export values have declined by 5.8% nationally and remain near 10-year lows.
Outlook
Looking ahead, Olsen warned that the economic challenges are far from over. “It’s tough out there, with fewer vacancies, and unemployment set to rise over the coming months,” he said. However, he expressed cautious optimism that lower interest rates, as signalled by the Reserve Bank in response to easing inflation, could help reignite economic sentiment by mid-2025.
Infometrics also unveiled new regional groupings in its latest report, providing further insights into how different parts of the country are faring economically. These groupings—Metro, Provincial, and Rural—highlight the varied economic trends across the nation.
“These three groupings make it easier to compare a city or district to a similar collection of areas,” Olsen said.
Metro areas saw the strongest employment growth, averaging 2.4% in the year to June 2024, followed by Provincial areas at 1.8% and Rural areas at 0.7%.
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