Dunedin City Quarterly economic monitor - March 2018

Overview

Indicator Dunedin City Otago Region New Zealand
Annual average % change
Gross domestic product
2.3%
3.9%
2.7%
Traffic flow
2.5%
5.6%
2.0%
Residential consents
-13%
11%
2.5%
Non-residential consents
-67%
-37%
2.6%
House prices*
9.3%
9.8%
6.6%
House sales
-9.0%
-13%
-14%
Guest nights
4.0%
4.6%
3.9%
Retail trade
4.7%
7.6%
4.5%
Car registrations
4.4%
8.6%
4.4%
Commercial vehicle registrations
38%
26%
13%
Jobseeker Support recipients
-4.5%
-4.1%
-0.5%
Tourism expenditure
6.2%
12%
9.3%
Level
Unemployment rate
7.1%
4.5%
4.6%
International net migration
1,027
2,255
67,986
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Dunedin City

Economic activity in Dunedin expanded by 2.3% over the March 2018 year, according to Infometrics’ provisional estimate of GDP. Increasing levels of economic activity are also evident in traffic flows, which rose 2.5%. Over the past five years, Dunedin has experienced its most sustained economic expansion in more than a decade.

Dunedin’s education sector, which accounts for 13% of employment, has received a boost this year as student numbers at Otago University increased by 300. This lift bucks a trend of flat to falling student numbers since 2010.

Increasing numbers of students, coupled with elevated international net migration, and higher levels of tourism activity have pushed up spending in Dunedin. Electronic card spending data from Marketview shows that retail spending in Dunedin climbed 4.7% over the March 2018 year. Car and commercial vehicle registrations also picked up, rising 4.4% and 38% respectively.

Visitor spending in Dunedin increased by 6.2% over the March 2018 year, while a record month of March pulled commercial guest nights over the past twelve months to 4.0% above their March 2017 year level. Commercial guest nights in Dunedin City during March month totalled 108,500, compared to 102,500 a year ago. Infometrics estimates show that Airbnb guest nights during the summer months were up about three quarters on a year earlier. Dunedin’s tourism sector has received a lot of exposure over recent months, following Ed Sheeran’s three concerts at Forsyth Barr Stadium at Easter and visits by several large cruise ships, including Ovation of the Seas - the largest cruise ship to ever visit New Zealand. Tourism supports about 11% of jobs in Dunedin, compared to 9.6% nationally.

Building consents have been a detractor over recent months. Consents rose strongly in 2016 and into 2017, but have recently come off the boil. We are not worried about the long-term prospects for construction, as the looming $1.4bn hospital rebuild project will be spread over the better part of a decade. Nevertheless, in the short-run the sector may face trouble retaining workers as there is currently huge demand for construction workers in neighbouring areas.

Overview of national economy

The prediction by Winston Peters of an economic correction or slowdown, made at the time of last October’s coalition announcement, appears to be coming true. Infometrics’ latest forecasts see New Zealand’s economic growth slowing to 2.4%pa by the end of this year and slipping below 2.0%pa during 2019. A range of factors have combined to drive the slowdown, many of which can be sheeted back to government policy. Weaker population growth will also mitigate some of the demand pressures in the Auckland housing market, but the region’s housing undersupply and affordability issues are likely to remain critical.