Rotorua District Quarterly economic monitor - June 2019

Overview

Indicator Rotorua District Bay of Plenty Region New Zealand
Annual average % change
Gross domestic product
2.3%
2.8%
2.5%
Traffic flow
2.6%
3.4%
1.5%
Health Enrolments
-0.1%
1.6%
1.8%
Consumer spending
4.3%
5.7%
4.0%
Residential consents
10.0%
-12.1%
5.8%
Non-residential consents
40.7%
-12.4%
7.9%
House prices*
11.6%
9.2%
1.4%
House sales
0.3%
-0.6%
-0.9%
Guest nights
-3.3%
-1.7%
1.3%
Tourism expenditure
0.8%
3.4%
3.2%
Car registrations
-11.9%
-7.5%
-8.6%
Commercial vehicle registrations
5.1%
3.0%
0.3%
Jobseeker Support recipients
6.8%
9.6%
9.6%
Level
Unemployment rate
4.6%
4.2%
4.1%
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Rotorua District

The Rotorua District economy put in a solid performance this quarter with Infometrics’ provisional GDP estimate for the district growing 2.3% in the June 2019 year. Rotorua District’s GDP growth was slightly below the national average of 2.5% and 2.8% across the Bay of Plenty as a whole. The Bay of Plenty’s higher growth was largely due to continued strength in Tauranga City economy.

Rotorua district’s unemployment rate fell to 4.6% for the June 2019 year, the lowest in a decade. In contrast, the average number of Jobseeker Support recipients in the district rose 6.8% in the June 2019 year. With central government funding additional WINZ front-line staff, and reports of a greater focus being put on supporting benefit recipients into work, we are hoping to see the number of Jobseeker Support recipients start to fall in the coming year.

The fall in forestry prices is a concern for the district. The fall has been attributed to an over-supply of logs to China. Prices should correct themselves as New Zealand’s log exports to China adjust downwards over time. But with growth in the Chinese economy weakening, and with many of the larger New Zealand logging companies locked into supply contracts, it is hard to say how long it will take for the current over-supply of logs to China to run down.

Also of concern is Fonterra’s recently announced a $590-$675m loss for the 2018/19 financial year and decision to pay no dividend due to the poor outlook for some investments. However, the farmgate milk price is currently expected to be closer to the top end of the $6.25-$7.25/kgms forecast pay-out for the 19/20 season, and national milk volumes are expected to remain steady.

Rotorua District’s tourism sector looks to have plateaued, albeit at historically high levels. Guest nights fell 3.3% in the June 2019 year, while tourism expenditure has been more or less flat since early 2018.

House prices in the district grew 11.6% in the June 2019 year despite the annual number of sales having remained at around 1,150 since late 2017. Non-residential consents continue to grow while residential consents remain strong, both of which should keep local builders busy well into next year.

Overview of national economy

The New Zealand economy continues to perform well, but concerns are growing about the future, with a long, slow, slowdown expected over the next few years. The Reserve Bank’s aggressive cut to the official cash rate (OCR) to 1.00% reflects a deteriorating economic outlook as both business and government investment remains poor, inflation remains low, and the employment outlook softens. With slowing population growth expected to eventuate before the end of the year, the focus turns to consumer spending and whether it can prop up economic growth, or if it too succumbs to global and domestic uncertainty.