Regional economies threatened by coronavirus disrupting Chinese exports, tourism - Infometrics

Infometrics says New Zealand's regional economies were expected to see a boost this year, before the coronavirus came along.

The data analysis company's latest Quarterly Economic Monitor suggests there were several indicators in the 12 months to December 2019 that the regions were about to see greater economic growth.

"Faster growth in traffic volumes, house prices, and tourism spending all point towards a bit more heat coming into regional economies towards the end of 2019," said senior economist Brad Olsen.

But the emergence of the deadly coronavirus in China - New Zealand's largest trading partner - has thrown a spanner in the works, with exports expected to soften in the first half of 2020. Travel restrictions imposed by the Government - barring people coming from or through China who aren't New Zealand citizens or permanent residents - will also likely affect tourism across the nation.

"Tourism activity is likely to drop lower, and New Zealand's larger trading footprint with China means our primary sector exports are at greater risk, with dairy, meat, forestry, and horticultural exports all experiencing issues," Olsen said.

"Supply chain disruptions are also becoming apparent, and there is a risk that, if the outbreak persists, consumer and business confidence may take a hit as a contagion effect takes hold and reduces economic activity."

The importance of the Chinese market was highlighted earlier this month with figures from the Meat Industry Association showing a large increase in the export of sheep meat and beef to China. Sheep meat exports to China grew by 40 percent to $1.6 billion for the year, and beef by 113 percent to $1.7 billion. The trade of seafood has also been impacted.

Economist Cameron Bagrie warned Kiwis businesses may face issues importing goods from China. 

"We import about $13 billion of goods from China - they are the global supply chain, they're not just part of it."

Considering the uncertainty, Infometrics says it means it is likely overall economic growth will be lower in the first half of the year. 

Prior to the threat of COVID-19, which has killed more than 2000 and infected 75,000 people worldwide, the east coast of the North Island and Waikato led regional economic growth in the year to December. Tasman saw the fastest growth, Infometrics said. 

The trend of rising house prices in the regions is also expected to continue into 2020 as interest rates remain low. High construction activity is supporting regional economics and will begin to address undersupply in key markets.

The latest Real Estate Institute of New Zealand figures out this week showed seven regions, including Hawke's Bay, Manawatu/Whanganui, and Otago, experiencing large annual house price growth in the year to January. Four regions now command average prices of more than $600,000.