Westpac Regional Roundup, December 2021

The emergence of the Delta variant has created a performance gap between regions that were forced into lockdown and those that were able to operate with fewer restrictions. That though is set to close with the introduction of the traffic light system and the opening of the borders. This is according to Westpac’s latest Regional Roundup, which summarises the economic outlook by region across New Zealand.

Westpac Industry Economist Paul Clark commented that “as most restrictions on economic activity are lifted, we are picking Auckland, the Waikato and Northland to quickly catch up with other regions that have been able to operate with fewer limitations. Otago should soon follow once internal borders are lifted, and foreign visitors are allowed back in the country.”

“That said, regions that have a large rural backbone are well set and we expect them to continue to lead their metropolitan counterparts over the coming year. Indeed, most growers and farmers can expect to benefit from healthy price levels and a positive tailwind provided by a weaker NZ dollar.”

“Construction is also likely to be a big positive, with elevated levels of consent issuance expected to drive activity in most regions. Ditto the housing market, although impacts here are likely to weaken as price growth slows, turning negative in the second half of 2022. The potential for sharper price corrections is higher in relatively small markets like Southland and the West Coast. Conversely, smaller falls are possible in places like Canterbury and Otago, where gains to date have not been as strong.”

“The positive outlook for regional economies does not come without risk. The most obvious of these relates to the new Omicron variant, and the potential for restrictions on economic activity and border closures once it reaches our shores. Other factors, such as persistent inflation, ongoing supply chain disruptions and labour shortages also pose downside risk,” said Mr Clark.

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