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Summary
- Westpac report says that large gains are likely to come from the big urban centres amid soaring house prices.
- Regions like Auckland would have a larger share in recovery than the tourism-dependent Otago, which is expected to see a weak performance in 2021.
- NZ economy has ended 2020 on a positive note and is in a stronger position than anticipated.
A report by Westpac Banking Corporation (NZX:WBC, ASX:WBC) has revealed that large urban centres would be major drivers of NZ economy in 2021 with house prices playing a huge part. However, rural regions would persist to perform well, with farmers as well as growers gaining from the increased demand in key export markets.
The Westpac Regional Roundup report indicated that the speed of recovery and gravity of recession after lockdown varied in different regions of NZ. The report projected that investment activity would essentially close the performance divide with already gliding rural areas, on the basis of rapidly rising house prices in locations like Auckland, Christchurch, and Wellington.
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The Bank has forecasted that the outlook of Auckland was bright after the region witnessed a community outbreak of COVID-19 and more prolonged restrictions. However, Otago was likely to lag behind due to an impact on tourism business. Queenstown and Wanaka were the major regions that saw loss of foreign tourists as COVID-19 wreaked havoc for the travel and tourism sector.
Paul Clark, Westpac Economist, stated that a possible travel bubble with Australia in early 2021 would be a positive news for areas like Otago, Southland, and Auckland in particular.
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The regions are also likely to gain more from a steady easing of restrictions on international travellers later in the year. However, the comeback to a vibrant tourism sector before the end of coronavirus pandemic still remains a distant possibility.
NZ economy on a strong footing
NZ imposed strict lockdown to eliminate COVID-19 from the community, which pushed the economy into one of the deepest recessions in history. However, the harsh measures after the easing of restrictions allowed NZ economy to quickly bounce back.
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As per Stats NZ GDP figures, NZ witnessed a GDP contraction of 12.2% in the June quarter of 2020, but rebounded by 14% in the September quarter.
The recovery is expected to continue in 2021, as the NZ government believes that the economic and fiscal impact of coronavirus would be less serious than it was feared earlier. However, rising government debt and locked borders remain as concerning elements of the economy.
