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NZ regional confidence rises in December quarter as dairy farmers upbeat, cities optimistic

Monday 11th January 2016

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New Zealand regional economic confidence rose in the December quarter, with an upswing in sentiment among dairy farmers and positivity in urban centres.

The Westpac McDermott Miller Regional Economic Confidence Survey showed increased optimism across all regions expect Northland in the final three months of 2015. Westpac industry economist David Norman said they had expected a bounce in sentiment after it floundered in September when dairy farmers faced low milk prices from Fonterra Cooperative Group, but in some cases the rise in optimism was "surprisingly large."

The survey balances households expecting good or bad economic times in their region over the coming year as a percentage of households in that region, with a positive number indicating more households have a good economic outlook. It was conduced from Dec. 1 to Dec. 11, and sampled 1,565 households.

Dairy-exposed regions reported increased optimism after Fonterra's payout was revised up to $4.60 per kilogram of milk solids, from $3.85/kgMS in September. Southland's mood improved 52 percentage points to a net 16 percent of respondents positive about the region's economic outlook. Taranaki/Manawatu-Whanganui rose 24 percentage points to net 9 percent positive, Nelson/Marlborough/West Coast was up 10 points to net 26 percent positive, and Waikato moved up 5 points to net 4 percent positive.

Urban centres also became increasingly upbeat, with Canterbury up 1.6 percentage points to 25 percent, Auckland rising 8 points to 21 percent, and Wellington gaining 12 points to 28 percent net optimism. 

Norman said Wellingtonians' views were helped by "signs of life" in house price growth and high incomes compared to the cost of living, while Auckland was positive despite house price growth slowing as residential construction booms and the size of the city keeps consumers insulated from commodity price weakness.

The most optimistic region was Bay of Plenty, with a net 41 percent of respondents upbeat in December. Bay of Plenty has been the most positive region for the last three quarters, which Westpac's Norman ascribed to the resurgent kiwifruit industry, strong house price growth, particularly in Tauranga, and falling unemployment.

The west of the region "is looking a lot more rosy" than the east, which may suffer from a tepid forestry sector, Norman said. 

Otago saw the biggest upswing in confidence, with a net 37 percent of respondents optimistic compared with a net 4 percent who were pessimistic when the survey was last conducted in September. This was down to increasing property values and more tourism in the Queenstown-Lakes area, Norman said, with guest nights and house prices up.

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