Queenstown-Lakes District Quarterly economic monitor - December 2019

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Overview

Indicator Queenstown-Lakes District Otago Region New Zealand
Annual average % change
Gross domestic product
3.0%
2.6%
2.3%
Traffic flow
2.0%
1.5%
1.7%
Health Enrolments
6.3%
5.4%
2.3%
Consumer spending
4.8%
3.7%
3.3%
Residential consents
27.9%
14.2%
13.8%
Non-residential consents
39.9%
32.9%
5.2%
House prices*
0.6%
15.2%
3.6%
House sales
5.3%
-2.1%
-1.0%
Tourism expenditure
2.9%
2.3%
3.5%
Car registrations
-5.1%
-1.7%
-8.6%
Commercial vehicle registrations
-10.9%
-8.8%
-6.9%
Jobseeker Support recipients
29.3%
2.7%
10.6%
Level
Unemployment rate
1.1%
3.3%
4.1%
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Queenstown-Lakes District

The Queenstown-Lakes economy grew by a solid 3.1% in the year to December 2019 according to Infometrics provisional GDP estimates. This was slightly ahead of the national rate of 2.3%, but represents an easing in the district’s rate of growth and a potential convergence with the New Zealand average.

Average house values in the district grew by a modest 0.6% in the year to December 2019, compared to 3.6% nationally, reaching an average value of $1,199,916. At this level, the unaffordability of housing is clearly acting as a handbrake on further price growth. House sales have grown strongly though, with volumes up by 5.3%, showing that the market remains busy, albeit below the previous peak in 2016-17. High demand and prices continue to spur the construction sector into action, with residential consents up by 27.9% for the year, with a total of 329 dwellings consented in the December 2019 quarter. The non-residential sector will be even busier in years to come, with consents jumping 39.9%, including a number of hotel and retail developments.

Tourist spending in the district continues to grow, but the rate of growth is tapering off. In the year to December 2019, spending in Queenstown-Lakes grew 2.9%, compared to 3.5% nationally, with easing Chinese visitor arrivals in 2019 leading to more subdued growth than in the past. While these figures don’t as yet include the anticipated reduction in Chinese visitor arrivals following the discovery of COVID-19, the impact of the disease brings significant uncertainty into the future outlook. Chinese visitors accounted for 13% of international tourist spending in the district in the year to March 2019.

Car registrations in the district fell by only 5%, compared a national fall of 8.6%. This differential may simply be a function of Queenstown-Lakes strong population growth rather than higher household confidence. Similarly, consumer spending growth of 4.8% in the district compared to 3.3% nationally may also be a function of population growth.

Queenstown-Lakes unemployment rate remains incredibly low, at 1.1%, reflecting the strong labour market and unaffordability of housing for those outside of employment. Jobseeker Support recipients did spike by nearly a third, but this spike represents a relatively small number of people so may not be a sign of a bigger issue.

Overview of national economy

The economy looks to have turned a corner, at least temporarily, at the end of 2019. Although growth has slowed, some near-term indicators have shown an improvement. Traffic flows, tourism spending, and house prices have all shown renewed growth, and are set to provide a foundation for further growth in 2020. Government spending activity over the medium term also looks to support economic growth, but there remains little in the way of fundamental growth drivers over the next five years. With economic growth shifting down a gear in recent years, headline growth is likely to settle at a softer level. However, a significant risk to growth in 2020 is presented by the COVID-19 outbreak, which will restrain tourism and export activity, and could threaten consumer and business activity if the outbreak continues or spreads to New Zealand.