Why the economic downturn keeps dragging on - and the regions doing the worst
The latest Regional Score update shows Otago and Canterbury are the best performing regions, while Wellington and Gisborne were at the bottom of the rankings.
New Zealand has been grappling with a prolonged economic downturn for the past three years, according to Kiwibank's latest Regional Score update. The South Island's Otago and Canterbury regions are leading the recovery, while the North Island continues to struggle. Tourism and agriculture are driving strong economic performance in the South Island, while higher unemployment and weak business conditions weigh on many parts of the North Island.
Chief economist Jarrod Kerr attributes the slow nationwide recovery to weak demand, higher costs, and economic uncertainty in the North Island. He expressed disappointment that this is a very long downturn, starting in 2023, with multiple recessions in 2024, 2025, and likely 2026 as well. House prices in Auckland and Wellington have plateaued, impacting household and business confidence, especially small businesses that rely on home equity for loans.
Unemployment in the North Island stands at about 6%, compared to 3.7% in the South Island, and underutilisation is at 13.8%. Northland has one of the highest underutilisation rates. The labor market paints a clear picture of the challenges faced by many households in securing work and income, particularly in parts of the North Island.
Kerr expects improvement in 2027, citing lower interest rates, improving agricultural incomes, and another strong tourism season. However, he highlights the need for less uncertainty, such as the opening of the Strait of Hormuz, lower oil prices, and clear tax policies for investors to further boost economic momentum.
Written by urgent.news from RNZ Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
