Strong rural showing lifts confidence

Press, 23 October 1989, Page 3

Strong rural showing lifts confidence

Another strong rural showing, especially in the South Island, helped lift consumer confidence across New Zealand last month, according to a new economic survey.

This suggests a consumer-led economic recovery is just around the corner in all regions. But there is an if — and it is a big if. The long-awaited recovery depends on better economic conditions detected in the Dominion-United economic review in September continuing for another three months. Events of the last three weeks, including the collapse of DFC New Zealand, a shaky sharemarket and rising interest rates, threaten at least to stall that improved confidence. The latest Dominion-United economic review, which surveyed 1860 consumers throughout New Zealand, detected the strongest jump in confidence since the surveys began in June last year. Optimism was spread across all 15 regions, but was strongest in the farm-ing-dominated south of the South Island. This suggests all provinces are poised to enjoy a consumer-led recovery, providing the economy is not constrained by a tightening monetary policy and accompanying rising interest rates. For the first time some New Zealanders expected their personal finances to improve over the year ahead and they were much more confident that the economy would be in better shape a year from now. The consumer confidence index for all of New Zealand jumped 11.5 points to 113, well ahead of the 100 point breakeven mark between optimism and pessimism. Consumers had been only slightly optimistic over the previous six months. The index stood at less than 98 points a year earlier, showing consumers were then pessimistic about the economy. The six surveys taken by a consulting firm, McDermott Miller, since June last year have detected a step-by-step improvement in consumer confidence. The latest survey was taken during the last two weeks of September, at the end of the Government’s honeymoon after a well-received Budget and change in Prime Minister. The honeymoon appears to be over. It remains to be seen whether the Reserve Bank, in its drive to get inflation below 2 per cent by the end of 1992, will allow such a recovery to happen. But the across-the-board rise in confidence in September — the 13-point improvement on the index was the largest in the history of the review — is encouraging. The latest index score of 113 continues a step-by-step improvement from a pessimistic 91 points scored in the first survey in June last year.

Last month’s survey showed that for the first time all 15 regions were optimistic. The gap between rural and urban consumers continues to narrow as farming communities enjoy the benefits of higher world meat and dairy prices. Rural consumers remain less confident than city-dwellers, but they exceeded the 100-point mark on the confidence index for the first time. This was good news for the South Island, which is now clearly more confident than the North Island. Optimism in the southern South Island is now stronger than Auckland. Only Nelson-Marlborough of the five South Island regions surveyed scored less than 110 points on the index. The South Island’s combined score was almost 116 points, four points ahead of the North Island. > Better farm prices and a recent improvement in tourism appear to be behind the southern optimism. A more favourable exchange rate and the lower interest rates prevailing in September were also welcomed by the predominantly rural communities and service centres of Otago, Southland and the West Coast. Unlike Aucklanders, most South Island consumers consider they are better off financially than they were a year ago and they are looking forward to better economic times and improving personal finances in the next year and beyond. The September survey showed a sharp recovery in confidence in the metropolitan regions of Auckland, Wellington and Christchurch. The change of Prime Minister, an end to Government infighting, and a host of seemingly good economic indicators seemed to help big-city optimism. Christchurch enjoyed benefits of both higher retail spending and improved confidence in the farming hinterland it serves. Increased consumer spending in the area was caused by relatively lower house prices and higher household disposable income. The Christchurch area is slightly more optimistic than Auckland for the first time. Perhaps the most remarkable result frbm the latest survey was the confidence jump in peripheral regions — those on the geographic and economic fringe of New Zealand — such as East Cape, the West Coast, and Wanganui. These communities, which are remote from the decision-making centres, were the first to feel the effects of economic reforms and the last to see the benefits. ’ —“Dominion Sunday Times’’