Media Release: Jobs support regional economic momentum, but primary sector headwinds developing
Economic momentum continues to hold up better than expected across New Zealand, with rapid jobs growth and population growth counterbalancing inflation and interest rate challenges faced by households. Some parts of the country continue to experience solid growth, but others remain hampered by the ongoing effects of wild weather over the first half of 2023.
Infometrics’ June 2023 Quarterly Economic Monitor shows a 1.4%pa rise in provisional economic activity in the June 2023 quarter. “Another strong increase in employment, the rise in the working age population, and the 0.3% quarterly increase in hours worked in the economy have combined to suggest a rise in underlying economic momentum picked up slightly after falling back earlier in the year as weather disruptions dominated,” says Infometrics Chief Executive and Principal Economist Brad Olsen.
“This increase would see economic growth on average over the 12 months to June 2023 come in at 3.1%pa.”
Employment activity has remained strong in recent months, with filled jobs now up 3.5%pa in the June 2023 quarter compared to a year before. “Otago, Auckland, Marlborough, and Waikato regions all saw jobs growth of more than the national average in the June quarter, which has supported stronger economic activity trends,” says Mr Olsen. “Tourism-focused employment has supported stronger jobs growth, with more than 10,000 additional roles in the accommodation and food services industry supporting the still-robust level of domestic travelling going on, plus the continued revival of the international tourism sector.”
“However, other headwinds are developing, with currently high levels of building work continuing but a weaker outlook emerging,” says Mr Olsen. “Residential building consents are down 20%pa in the June quarter, as lower house prices, higher building costs, and difficulty obtaining loans limit further construction”.
“Primary sector output is being hampered too, restricting future growth prospects across regional New Zealand,” says Mr Olsen. The ANZ Commodity Price Index shows that dairy prices are down 20%pa, meat prices are down 14%pa, and forestry prices are down 12%pa. “Accounting for inflation, forestry prices are the lowest since at least 1986, and the cut to the dairy pay-out is expected to cost in the order of $2.2b in the 2024 season. On-farm costs are up 12%pa, which together with the price cut will see spending and investment activity across the primary sector heavily curtailed”.
“Expectations remain for a challenging period across the economy over the next 12 months as higher interest rates continue to subdue spending and investment, with the labour market set to become less tight as more people become available for work exactly as fewer jobs are offered up.”
The Infometrics Quarterly Economic Monitor is a series of reports about local economies, rather than one comprehensive report. This media release provides a high-level overview of trends and changes to regional economies.
More details about the Quarterly Economic Monitor can be found here: https://www.infometrics.co.nz/product/quarterly-economic-monitor