Regional New Zealand is helping to boost 'sluggish' economic growth following COVID-19, a new report shows.
The Infometrics Quarterly Economic Monitor released on Tuesday shows during the March 2021 quarter, domestic travel and strong construction boosted several regions. Businesses hiring more workers spurred households to keep spending.
Compared to the start of 2020, tourism spending was down 10 percent. This affected growth in areas more reliant on international tourists, including Auckland, West Coast, Canterbury, Otago and Southland, where spending from domestic travellers wasn't enough to fill the gap.
Senior economist Brad Olsen said several primary producing regions enjoyed greater economic fortune. But other areas remained hard hit by border closures preventing international travel, creating further "divergence across New Zealand".
"What we're seeing is in some areas [are] recovering at a much faster pace and recovery rolling forward, and other parts of the country where that momentum has faltered," Olsen explained.
Bay of Plenty was the top-performing region over the quarter. Infometrics' provisional estimates show activity for the region is rising at a rate of 3 percent per annum, as the national economy slipped back to 0.3 percent.
"Higher commodity prices have supported economic activity in Bay of Plenty, with good returns for dairy, meats, horticulture, and wood exports," Olsen said.
Rising economic activity was also seen in the Taranaki and Waikato regions, which benefited from domestic tourism, increased construction activity and a higher dairy payout.
Overall economic growth was "sluggish" over summer, as supply chain disruptions and the lack of international tourists continued to impact economic recovery.
But looking ahead, the outlook is more positive. Over the same quarter, the unemployment rate dropped to 4.7 percent. The number of Kiwis on job-seeker support is slowly falling and solid primary sector activity is encouraging businesses to invest.
"Sluggish growth and sluggish economic activity is still a lot better than we thought we'd be seeing and there's certainly more optimistic signs of better things to come," Olsen said.
"Particularly once we start to get the vaccine rollout across the general population from July, that will hopefully add more heat into economic recovery," he added.
Without international travel, economic recovery in metropolitan areas including Auckland remains sluggish. This was compounded by more people working from home following COVID-19, with use of public transport in the Wellington region down around 10 percent year-on-year.
Olsen said while there is still economic activity - and a more upbeat view of the national economy - there's currently a separation in where the activity is coming from.
"On the whole, provincial economies on the whole seem to stand stronger at the moment... those areas with a strong tourism focus, plus our metro centres, are suffering a more sluggish outcome and are hoping to build more momentum," Olsen added.
The Infometrics Quarterly Economic Monitor captures quarterly activity to provide a picture of economic growth. It collects and analyses data from a range of sources, including construction, employment, primary sector production, commodity prices and spending activity.