Attendees at Business Wairarapa’s annual summit on Thursday were treated to a relatively upbeat analysis of the region’s recent economic performance, although it came with the warning that “more challenging economic times are coming”.
The analysis was provided by Brad Olsen, chief executive and principal economist of Wellington-based economics consultancy Infometrics and one of the event’s three keynote speakers, along with entrepreneurial fashionista Karen Walker, and Wellington Live founder Lilia Alexander.
Despite the challenges of the pandemic, Wairarapa’s economy has performed well during the past few years, Olsen said, and was about 12 per cent larger at the start of 2023 than it was in 2019.
“That’s ahead of the national average of around eight per cent and puts Wairarapa in the top third of all local areas across New Zealand.”
Olsen identified domestic tourism as “a key part of the area’s recent economic success, with a 24 per cent increase in domestic tourism spending compared to pre-pandemic [2019] levels, and over $10m a month spent in Wairarapa by domestic travellers”.
Although he noted that international visitors have begun to return in recent times, Olsen emphasised that domestic tourism remains “by far the most important driver” of the region’s tourism economy.
Wairarapa’s spending growth has been strong, he noted, indicating a larger population, appetite to spend, and those strong domestic tourism flows.
Infometrics’ analysis of Marketview card spending data for the region shows a seven per cent average annual increase in spending since 2019 – considerably ahead of the 4.3 per cent average for New Zealand as a whole.
“Employment growth has remained strong too, with preliminary data to March 2023 showing a 2.1 per cent per annum rise in filled jobs for Wairarapa residents,” Olsen said.
Last year, the primary sector, health, construction, retail trade, and manufacturing were Wairarapa’s five largest employing industries, “with employment in all of these bar manufacturing being a larger proportion of the overall workforce than the national average”.
Construction levels also remain solid, although “falling housing prices and high costs are starting to see construction intentions retreat from high levels”.
However, gathering economic headwinds do cloud this relatively rosy picture, Olsen warned, and businesses will need to work harder to make sales, and focus on attracting new business while retaining existing customers.
“Household budgets are being squeezed by inflation and rising interest rates, and businesses will need to convince customers why they should spend some of their more limited spending budgets on a purchase,” he said.
Meanwhile, the primary sector – the region’s largest employing industry – “is facing more challenging conditions”.
“Meat and forestry prices are lower, with global demand weakening even as on-farm costs rise – up around 12 per cent per annum over the past year,” Olsen said.
“Lower revenue but higher costs will see profit margins, spending, and investment by primary sector businesses all shrink in the times ahead.”
Although parts of the wider horticulture sector, including wine, are performing better, they’re still facing higher costs.
While Olsen iterated the need for businesses to “look to adjust their approach to suit tougher economic times”, he finished on an optimistic note.
“Solid economic momentum in Wairarapa is expected to help the area get through.”
