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Dairy fall hits regional confidence

NZN 29/03/2016 Sophie Boot

New Zealand regional economic confidence plunged in the March quarter, with pessimism driven by the economic impact of weak dairy prices, partly offset by stronger tourism.

The Westpac McDermott Miller Regional Economic Confidence Survey showed decreased optimism across all regions except Gisborne/Hawke's Bay in the first three months of 2016.

Westpac industry economist David Norman said the downturn had been expected but was a little larger than expected in non-dairy centred regions like Otago, Northland and the Bay of Plenty.

The survey balances households expecting good or bad economic times in their region over the coming year as a percentage of households in that region, with a positive number indicating more households have a good economic outlook. It was conducted from March 1 to March 11, and sampled 1,554 households.

Dairy-exposed regions were increasingly negative, with Fonterra cutting its forecast payout to dairy farmers by 25 cents to $3.90 per kilogram of milk solids on March 8.

Southland's mood dropped 38 percentage points to a net 22 per cent of respondents negative about the region's economic outlook. Taranaki/Manawatu-Whanganui fell 31 points to net 22 per cent negative, and Waikato lost 18 percentage points to net 14 per cent negative.

Sentiment also soured in non-dairy exposed regions, with Otago dropping 25 points to a net 11 per cent positive, and Northland shedding 6.9 points to net 16 per cent negative.

"Some of the variation may be explained by wider margins of error, especially for smaller regions, but there is little doubt that people's views of their region's performance are mostly weaker," Norman said.

Gisborne/Hawkes Bay improved 19 percentage points to net 33 per cent positive, rising for the sixth quarter in a row. Norman said tourism and horticulture growth had begun to flow through the region.

Urban centres remained upbeat, with Canterbury down 3.9 percentage points to net 21 per cent positive, Auckland dropping 6.5 points to net 15 per cent positive, and Wellington falling 7.8 points to 20 per cent net optimism.

The most optimistic region remains Bay of Plenty, with a net 35 per cent of respondents upbeat in March, although confidence fell 6.3 points from December.

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