Media Release: Regional economies show resilience ahead of Alert Level 4 economic hit
New Zealand’s economy continued to strengthen and grow in the second quarter of 2021, with regional economies driving economic activity. The June 2021 quarter Infometrics Quarterly Economic Monitor shows a further improvement in economic conditions, driven by rising employment, upbeat households, and rocketing building activity. The stronger economic results for the regions position the New Zealand economy well to tackle the latest setback as the country moves to Alert Level 4.
“New Zealand’s economy remains resilient, and we are confident in the ability for economic activity and spending to bounce back after Alert Level 4” says Infometrics Principal Economist and Director Brad Olsen. “The economy will suffer a short-term knock from Alert Level 4, which is tough on a number of sectors. But as our economic performance to date has shown, New Zealand is expected to recover swiftly.”
Provisional Infometrics estimates point to the economy growing 17%pa in the June 2021 quarter, taking year-end growth to 4.2%pa. However, these strong growth results are exaggerated, with economic activity compared to the lockdown-constrained June 2020 period. “Underlying activity looks to be sitting around 2.7% higher than in the June 2019 year, with strong construction and healthcare employment and activity contributing to the recovery” says Mr Olsen.
The North Island is driving the continued rise in economic activity, with Infometrics estimates pointing to a 2.8% rise in underlying activity, compared to 2.1% growth for the South Island. “Strong primary sector and domestic tourism results have bolstered activity, with regions such as Taranaki, Hawke’s Bay, Bay of Plenty, and Northland leading present growth” says Mr Olsen.
Employment is rising, with both construction and healthcare jobs up 6%pa, record levels of job ads, higher wage pressures, falling Jobseeker Support numbers, and the unemployment rate falling to 4.0%. “Current indicators show a tight labour market, with additional jobs across the country helping support strong spending activity by households” says Mr Olsen. “Primary sector activity is holding firm too, which is bolstering activity.”
House prices remain at insane levels, but construction activity continues to rise further to address supply concerns. “Residential consent figures are pointing to a strong pipeline of work for builders, with 18%pa growth in consents a positive sign. But house price growth remains incredibly high, and available properties are low, meaning there’s considerable work still to be done to improve housing outcomes” says Mr Olsen.
“The Level 4 lockdown will hinder economic activity in the immediate term, and short-term supply and skills shortage headwinds may restrict growth going forward. Risks to longer-term growth also persist as the economy overheats and drags future growth into the here and now. However, the economy remains resilient position to counter these challenges.”