28 Aug 2015

Taranaki takes hit from dairy, oil industry fall-out

5:34 am on 28 August 2015

The wider Taranaki economy is taking a hit from reduced dairy payouts and declining oil and gas activity, according to the latest reports from two of the major banks.

The ASB Regional Economic Scorecard and the ANZ's Regional Trends report both show jobs are being lost and economic activity in the region is contracting.

Once considered a jewel in the crown of the New Zealand economy, Taranaki has found itself exposed to the deteriorating fortunes of the dairy and oil and gas sectors.

ASB rural economist Nathan Penny said confidence had been rocked in the province which was reflected in the bank's quarterly regional economic scorecard rankings.

"We've got Taranaki ranked at 11 out of 16 regions so towards the bottom third or so, and based on the current state of play, particularly on the back of dairy and also the oil outlook, Taranaki's been in a little bit of a soft spot for a little while now."

Mr Penny said Taranaki had performed poorly in several of the key indicators the bank monitored.

"The household sector in terms of their spending, that was weak in the June quarter as was employment compared to a year ago. So those two are probably the ones that stand out along with construction so we're seeing negative growth on those fronts."

In the ASB report, Taranaki performed worst nationally in terms of jobs growth, recording a 1.9 percent decline when compared to June last year, while the retail and construction sectors contracted by 9 and 24 percent respectively.

The ANZ says employment fell by 3.7 percent in the June quarter, the largest percentage decline of the regions, and the unemployment rate rose to 7.5 percent from 5.7 percent in March.

It found overall economic growth in the region declined for the second quarter in a row and at 0.6 percent was at its lowest since December 2011, and the lowest nationwide for the quarter.

According to the ANZ, overall economic activity was down 1.6 percent for the quarter, equal worst with Southland.

Clelands Construction director Martin Stephens said his New Plymouth-based company had yet to feel the bite of the downturn, but he expected that to change.

"I am expecting a bit of a time-lapse when that sort of thing will kick in, but I think other companies may be feeling that it is starting to occur now.

"I think say towards the end of the year, then it will begin kicking in a bit harder, especially in regards to residential work."

Mr Stephens said dairy farmers and oil and gas workers were not going to have a lot of extra money to spend on their homes and it was possible builders would lose work.

In its commentary, ASB warned that Taranaki risked losing its three-star rating and joining the likes of two-star regions such as Gisborne, Southland and the West Coast.

On the bank's five-star scale, two-star regions were deemed in a "serious need of an injection of energy".

But Mr Stephens was confident the province would bounce back.

"I'm also hoping that downturn won't happen, of course. I like to remain optimistic and I think Taranaki has punched above its weight for a long time and will continue to do so."

Taranaki Chamber of Commerce chairman Arun Chaudhari said his members were well aware consumers were tightening their belts and they were making the necessary adjustments.

"It's not like they were not hurting before, but I haven't picked up that this has been a particularly bad quarter or bad year.

"They are resilient and they'll have to be cautious, avoid all expenditure that they can hold back, hold onto their reserves and just have a policy of being quite judicious with their spending."

Mr Chaudhari warned against reading too much into quarterly figures.

"I believe it is only cyclical. Over a long period, these things are always cyclical. The oil price is down to $US38 a barrel and we know the dairy price has been down for a while.

"So while it seems like a cause for concern I wouldn't worry to much about it."

The top three ranked regions in the ASB quarterly scorecard were Auckland, Bay of Plenty and Waikato, while Gisborne, the West Coast and Southland propped up the table.

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