Will the Provincial Growth Fund provide a pot of gold? PHOTO/ANNE–MARIE BOSCH
Wairarapa’s economy is growing at a faster pace than that of either Wellington or Auckland, and growth is not expected to slow any time soon.
The Infometrics Quarterly Economic Monitor for the 12 months to the end of September showed the Wairarapa economy expanded by 3.7 per cent in the 12 months to September 2018 compared with a year earlier.
This was faster than the New Zealand average of 2.9 per cent per annum and the 2.6 per cent notched up by both the wider Wellington region and Auckland.
Wairarapa is not alone – it’s part of a wider story of the regions outpacing the cities in the growth stakes.
GDP in Hawke’s Bay increased 3.1 per cent, while in Manawatu-Wanganui it was 3.8 per cent and in Nelson-Tasman it was 3.2 per cent.
Infometrics economist Brad Olsen said three core themes look to be driving regional growth: exports, consumer spending, and a strong labour market.
“Our export prices remain near record levels, and New Zealand continues to diversify our export offerings overseas, while ensuring we maintain our high-quality standards.”
Although consumer confidence fell during the past year, households were still feeling positive about the economic outlook, which continued to translate into increased spending, he said.
Finally, the labour market across New Zealand is strong, with national unemployment falling to 4.3 per cent per annum on average during the 12 months to September 2018.
Infometrics expects the national economy will continue to grow, albeit at a slower pace than previously, over the next four years, on the back of a bright outlook for exports.
“Our forecasts are for national economic growth to remain above 2.5 per cent until 2021, with the regional economy a key driver of this growth as they are our export powerhouses, particularly for primary sector exports,” Olsen said.
The picture of a strong economy in Wairarapa comes even without the stimulus from the Provincial Growth Fund, the $3 billion pot of money Regional Development Minister Shane Jones is dishing out to regional projects.
Olsen said with some of the early funding going towards feasibility studies and business case development first, the impact of any PGF funding might not be felt for a year or two.
The Wairarapa area has no PGF projects funded yet, so the impacts of the PGF on Wairarapa appear to be further away than in other regions, he said.
“More broadly, we do expect the PGF to provide a significant boost to the regions over the next few years, with the funding expected to improve productivity and transport connectedness among other things.”
The Wairarapa Economic Development Strategy, launched in mid-November 2018, shows the Wairarapa area is geared for growth, he said.
The strategy’s focus on providing key infrastructure and targeting growth industries with development funding sets a strong foundation from which the area can grow over the next five to 10 years.
The primary issue for the regions in 2019 is one which is completely out of their control. Overseas growth issues, particularly in Asia, could see demand for our exports from our larger trading partners fall, reducing our export receipts.
“We’ve seen Chinese and other Southeast Asian growth slow over the last year, and the risk is that this will continue and accelerate,” he said.
Another danger is if households start feeling more pessimistic, they’ll start to cut back on their spending, which will see less money coming through retailers’ tills.
And a final concern is business investment.
“Over the past year, both business confidence and actual business investment have fallen, meaning firms aren’t spending as much on maintaining and upgrading – another possible drag on the economy,” Olsen said.