Kapiti’s economy is humming along, the local business community was informed by a senior economist this week.
Speaking at an Electra Business Breakfast Kapiti, ANZ Chief Economist Sharon Zollner says although 40 percent of the financial market is based in Auckland, the other centres are performing differently to the main cities.
She says Auckland and Christchurch is currently on a slow down, whereas Wellington and Kapiti are humming along just fine.
She says in Wellington and Kapiti, population growth is driving business growth and increasing confidence as a result.
While housing prices are cooling nationally due to credit restrictions by lenders, in Wellington and Kapiti housing prices were continuing to rise.
However, New Zealand is not faring well in terms of housing affordability compared to other free market countries.
She says Kiwis have a high personal debt situation, which reduces other spending.
New Zealand is consuming less but people generally feel comfortable with their current level of borrowings.
However, she warns that consumers will get ‘spooked out’ at some point.
Zollner says the NZ dollar is strong, and ANZ is predicting the US dollar at 62 by the end of the year.
Interest rates will continue to be low and is still favourable for investing.
Although she warned that there is not a lot of confidence about the direction of the where the economy in terms of investing.
In the ANZ survey, NZ businesses are asked what their main concerns and constraints are.
Zollner says it certainly isn’t interest rates but rather finding skilled labour.
She says the labour market is tight.
“Nominal wage growth hasn’t been fabulous but CPI inflation has been even lower so if you look at real wage growth, it’s tracked growth well.
“However, there is a productivity issue, if you are not able to be more productive it’s pretty hard to pay higher wages”, she said.
Her forecast is for nominal wage growth in the next little while because of the public sector settlements plus the rise in the minimum wage.
She says firms are very reluctant to let good staff go.
Consumers in New Zealand aren’t worried about spending however some people are saying they are cautious as business confidence is down.
There is however a disparity in consumer confidence and retail confidence, says Zolner.
Normally these two things track closely but recently retail confidence has taken a bit of a dive.
Zollner believes the higher costs of staff has had an impact for retailers, as margins are being squeezed.
Photos supplied by Captured by Friday.