REGIONAL ECONOMIC ACTIVITY

Economic growth is usually measured by changes in real Gross Domestic Product (GDP). However, the latest official statistics on real GDP by region are only available for the year ending March 2003 [1]. Other indicators of economic activity are therefore often used to examine how regions are performing. The National Bank, for example, produces composite indices of regional economic activity on a quarterly basis. The National Bank economic activity indicator is based on a combination of 23 different data series [2].

Whilst the National Bank data are not official statistics, they provide an up to date measure of economic performance. Furthermore, it has been shown that the National Bank activity data for New Zealand as a whole broadly matches trends in the real GDP series [3].

In the five years to September 2009, growth in economic activity has averaged 1.1% per annum according to the National Bank's composite index of economic activity. Growth has been the strongest in the West Coast (1.9% per annum) as the region has benefited from strong growth in tourism, mining and dairy-related industries. Taranaki and Gisborne (both 1.8% per annum) have also experienced strong growth in economic activity over the past five years. Growth in Taranaki has largely been on the back of robust contributions in the oil & gas and dairy sectors, while Gisborne's large agriculture sector and its associated downstream processing industries have driven growth. Southland has also grown relatively strongly at an average of 1.6% per annum as their large dairy sector has benefited from high milk prices in the past. The strong growth in Gisborne, West Coast and Southland is especially remarkable given they have experienced subdued population growth over the past five years.

Economic activity growth has been the lowest in Northland (0.5% per annum) followed by the Auckland region (0.6% per annum) and Hawke's Bay (0.8% per annum). It is interesting to note that New Zealand's largest region, Auckland, which represents about one-third of total GDP, has experienced the second lowest growth over the past five years. It is slightly surprising growth has been so weak, given that the economies of scale and high level of the human capital stock in Auckland gives it significant advantages over other regions.

The New Zealand economy entered recession at the beginning of 2008 and recorded a fall in economic activity over all five quarters to March 2009. From its peak in the December 2007 quarter, the National Bank's composite index of economic activity fell 3.2% in the 15 months to March 2009, closely matching the 2.9% fall reported in official GDP statistics. In the June 2009 quarter however, both measures reported that New Zealand had exited recession. The National Bank's measure of economic activity rose by 0.3% over the quarter while official GDP data showed the economy grew by 0.1%. In the September 2009 quarter, the National Bank's measure of economic activity increased 0.7%.

Table 3: Regional Economic indicators, years to September 2004-2009

	National Bank Economic Activity
	Annual average % change 2004-09	Annual % change 2008-09
Northland	0.5%	-2.5%
Auckland	0.6%	0.5%
Waikato	1.3%	-1.6%
Bay of Plenty	1.0%	-1.5%
Gisborne	1.8%	1.3%
Hawke's Bay	0.8%	-0.4%
Taranaki	1.8%	-0.8%
Manawatu-Wanganui	1.3%	0.6%
Wellington	1.4%	-3.2%
Nelson-Marlborough	1.2%	-0.1%
West Coast	1.9%	-0.1%
Canterbury	1.5%	-0.5%
Otago	1.2%	-0.6%
Southland	1.6%	-1.5%
New Zealand	1.1%	-0.7%

Source: National Bank.

The largest falls in activity over the past year were all in regions in the North Island. Wellington contracted by 3.2%, followed by Northland (-2.5%) and Waikato (-1.6%). Construction and retail activity has been particularly weak in all three regions, while the slowdown in tourism has also led to a large decline in guest nights in Northland. Drought conditions in early 2008 and the fall in commodity prices will have also affected Northland's and Waikato's large agricultural sectors. Only three regions experienced a rise in economic activity over the past year, with Gisborne recording the largest rise at 1.3%.

---