South Canterbury’s economy will outperform a tightening national economy over the next two years as New Zealand “reins things in” to tackle inflation – but it must make the most of its unique assets, a leading economist says.
“Timaru, I think, is going to be better than a whole lot of others. I could say (it is)wearing one of the cleanest of the all dirty shirts,” Cameron Bagrie said.
Bagrie visited the town this week, hosted by legal firm Gresson Dorman, to speak to its business partners. While in town he sat down with The Timaru Herald to discuss the economic outlook of the region.
He said over the next two years New Zealand will face an inflation problem, and in order to get that down the economy needs to go through a squeeze where “we rein things in”.
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“The party’s over … that’s sort of the message here.”
“The economy is going through a belt-tightening phase. I think, strategically, Timaru is better-placed compared to a lot of other regions to handle that.
“I think South Canterbury will be in that out-performer section of New Zealand, within the context that New Zealand is going through a slower growth phase.”
He said those in South Canterbury, like most of New Zealand, are looking over their shoulders with a “degree of nervousness” about what the next 24 months is going to bring.
“The nervousness comes from two major things that are on the radar.
“One is just inflation and the derivatives of that are higher interest rates but also the impact that’s having on families’ budgets but also business costs and as business costs move up, we’re starting to see profitability take a hit.
“The second big thing that people are looking at is what’s going on in New Zealand in regard to where we are going in the next four to five years politically.”
Looking at the long term economic forecast, Bagrie said New Zealand faces a reset.
“Resets offer opportunities and one thing that New Zealand has got a problem with is that we’re living beyond our means.”
Bagrie said our current deficit of 8.9% of GDP, which has the country $34 billion in the red, is unsustainable.
“We’re going to need to learn, as an economy, to earn our way to growth as opposed to spending it.
“That’s going to take pretty major changes.”
He said we are starting to see the New Zealand dollar move into a friendlier export zone.
“The New Zealand dollar being a bit low is helping with that rotation away of spending a dollar and more towards earning a dollar.”
He said Timaru and South Canterbury have some “pretty unique” natural resources such as water, which was “absolutely critical” and would help the region economically.
“You’ve got to be able to exploit those natural resources.
“Timaru and South Canterbury has got a pretty good combination of … natural endowments which you can pull together and get a growth plan around.
“Climate change on some levels, I think, is going to play into South Canterbury’s hands if you think about the opportunities in the likes of horticulture.”
But, he said there would be a lot to navigate including the environmental restrictions which constrain traditional pastoral growth.
He said there were also other opportunities to explore, including research and development innovation, and “natural and strategic assets” than can be leveraged for tourism – but Timaru would have to combat being off the beaten track.
“People go from Christchurch, Geraldine, all the way through the Mackenzie to Queenstown and back the same way.
“Getting people off that traditional track, there’s potential in that. Tourism is a part of the growth trajectory for South Canterbury, but there are a lot of other sectors you want to pursue.”
In recent months a number of nationwide retailers have announced plans to open in Timaru. Bagrie believes the town’s attributes had been a “little bit of a secret” but that was changing.
“The lifestyle down here is pretty good, but it was off people’s radar.
“It’s now starting to get on people’s radar. You can see the number of Aucklanders skiing on Mt Dobson. People have started to wake up to what Timaru offers.”
Timaru was named the best place to live in a recent Stuff survey of the regions.
Bagrie said the notion of working from home had also changed the landscape, as people could now work from a smaller centre and still be paid a city salary.
“Firms are increasingly looking at basing themselves in area where they can get a cost advantage at the moment.”
But, he said, the region must tackle the main aspect holding it back in terms of being able to attract more people.
“If you look at a place like Selwyn versus Timaru, it’s pretty obvious where the better housing stock is.
“So enticing people into Timaru faces a barrier that’s not about of the job, but the quality of the housing stock.”
Bagrie’s advice for South Cantabrians was to go back to basics and focus on the small things over the next 12 months.
“A lot of little things, done well, will make a big difference to any business or any household.
He says one of his biggest worries is people are getting caught up in the hype of recession.
“I’m intentionally calling it a reset because resets offers opportunities both economically but also across New Zealand we have got … social problems.”
“Probably the most important thing is let’s get the conversations and communication right about what we are going through.
“We’re going back to normality and that’s not something that should be feared … that’s something that should be embraced.”