An even lower kiwifruit crop than 2022 was predicted for 2023.
“It may difficult year ahead for many” but staff shortages mean employees still have “bargaining power to ask for more money”.
These comments from Tauranga business leaders follow a new survey showing household economic confidence in the Bay of Plenty has plummeted, as one of the region’s major economic drivers - the kiwifruit industry - rides “roller-coaster” seasons.
New Zealand Kiwifruit Growers Inc chief executive Colin Bond said growers had been “under the pump” for some time due to rising costs, a lack of labour and Covid.
An even lower crop than 2022 was predicted for 2023 as well as ongoing adverse climatic conditions and continuing short-term challenges, he said.
“News like this dents grower confidence.”
Last year, kiwifruit growers contributed $1.992 billion to the Bay of Plenty economy. Nationally it was about $2.2b.
A reduction in grower earnings in 2023 would have a flow-on effect for the local economy, Bond said.
“The lower crop volumes and quality issues over the 2022 season indicate that there will be a drop in earnings for growers. While many growers will feel the financial effects of this drop, green and green organic kiwifruit growers will be particularly hard hit as they are experiencing significant, ongoing issues that are out of their control.
“These issues are related to weather, labour problems, and supply chain.”
Bond said it encouraged growers to talk with their banks and technical advisers to ascertain if any cost-saving measures were possible.
“While some growers will be able to make efficiencies, others are already experiencing financial pressures. NZKGI constantly advises growers that the kiwifruit industry, as with other primary industries, can be a roller coaster, and businesses should be prepared to weather bad seasons.”
His comments followed the Westpac McDermott Miller Regional Economic Confidence report for the last quarter of 2022, which showed household confidence in the Bay of Plenty had dropped to -26 compared to -6 in September.
Confidence was down and in the negatives in all regions of New Zealand.
Westpac senior agri economist Nathan Penny said, in the Bay of Plenty, falling kiwifruit returns, a softening forestry sector, house prices that had nosedived by more than 13 per cent since the November peak, high-interest rates and ongoing cost-of-living increases were starting to bite.
However, he noted regions that were benefitting from agriculture and the return of tourists may fare better than others.
Nigel Tutt, chief executive of economic development agency Priority One, said it was no surprise consumer confidence was down with high inflation levels, rising interest rates and a looming recession.
“It will be a difficult year ahead for many. The Western Bay has quite a diversified economy with strong export sectors, I’d expect we will continue to perform better than the NZ average on most economic measures.
“We are still seeing people and businesses keen to move here, although housing availability is a constraint.”
Tauranga Business Chamber chief executive Matt Cowley said each sector had different drivers and circumstances.
“It’s not unusual to see low business confidence during an election year, especially when it’s combined with global uncertainty. The cost of doing business is the most common issue impacting all sectors.
“Staff shortages are also common across all sectors, which means employees still have the bargaining power to ask for more money as they have a lot of options.”
Cowley said the construction sector had experienced the most noticeable slowdown.
“Despite there being demand for housing across the Western Bay, it’s just too difficult for buyers to get financing.”
Tremains Bay of Plenty managing director Anton Jones said the market had been particularly quiet but was starting to gather some momentum.
“There has been a bit more activity in the last week. From my point of view - and I’ve said it to my kids - there is probably no better time to buy a house if you can service the debt even with higher interest rates as you probably won’t see it any cheaper for a while.”
In his opinion, if the Government changed later this year it could also provide more optimism for investors especially if incentives like tax deductibility were put back on the table.
Tourism Bay of Plenty general manager Oscar Nathan said this summer had not been as fabulous as people had hoped thanks to the run of rainy weather.
He said the organisation was pleased with the higher number of visitors but aware of the increasingly negative economic indicators.
“There’s no doubt that this will, in turn, have an impact on consumers’ ability and willingness to partake in holidays and tourism activities. It will be interesting to see how this plays out in real-time.
“The ‘you only live once’ sentiment seems to have increased over the past few years, meaning that many people have been recently prioritising their lifestyle and leisure choices more than ever.”
Nathan said 32 cruise ships docked at the Port of Tauranga between December 20 and January 20 with capacity for about 46,000 passengers and 21,000 crew between them, in total.
The daily number of international visitors in the region during the peak Christmas and New Year period reached 80 per cent of those seen in the same period just before Covid-19 broke out.
“We’ll have to wait until April to get the data on how much these visitors have been spending, but it’s this international cashflow that’s been missing from our local visitor sector for the past two summers, so it’s been highly anticipated and gratefully received.”
Another 45 cruise ships were due to dock in Tauranga Harbour over the next two-and-a-half months, bringing a total of nearly 84,000 passengers.
Scott Downs from PF Olsen said infrastructure spend and policy changes by China’s Government to try and encourage more economic activity could sway in the forestry industry’s favour.
“So that’s a good sign for us. Talking to people in China, the malls are busy, the shops are busy, the markets are busy, the tourist places are busy so it’s turning on.”
There was less supply of timber worldwide with fewer logs coming out of Europe and South America, which put New Zealand in a good position.
Downs said the at-wharf-gate price for A-grade logs was $131 per cubic metre which was about $5 less than the two-year average but he estimated prices would climb.
However, he was remaining cautious.
“I think we will comfortably reach $5 above the two-year average in February or March. But we don’t want to see the prices increase too much and then crash in May, for instance. And that’s still a possibility.
“We just want it ticking along nicely and some stability if we can but sometimes the market does overreact both ways.”
What happens when you come face to face with a heavy truck on a single-lane gravel track?