KEY POINTS:
Rural New Zealand grew faster than the cities last year and will probably continue to outpace urban areas if the Reserve Bank raises rates next month, says the latest National Bank survey.
The economic activity survey said 10 regions showed growth in the December quarter and four declined.
Nationally economic activity rose 0.8 per cent, with rural areas leading with 1.1 per cent, compared with a combined urban result of 0.6 per cent.
The quarterly growth for rural areas reflected a trend across the year, with an annual 2.3 per cent rise in 2006, compared with 1.4 per cent for urban areas.
Commodity prices had grown, supported by a rise in global dairy prices, said National Bank economist Steve Edwards.
Rural areas could yet enjoy further economic benefit, he said.
"Certainly commodity prices are at high levels although they've yet to really filter through the farm gate to the farmer's pocket. But they certainly may have brought forward some of their expenditure in anticipation or they're feeling good about things."
A rate hike next month - which is widely expected by financial markets - would hurt more in urban areas, Edwards said.
That was because rural New Zealand would continue to reap the benefits of high commodity prices, regardless of the direction of interest rates.
Given the current business cycle, the growth rate was probably a little stronger than expected, reflecting inputs such as rising business confidence, better-than-expected retail sales and a housing market that "keeps chugging along".
"For the trough in the business cycle for New Zealand it's historically high."
The national unemployment rate improved in the quarter, commercial motor vehicle registrations increased and house sales were up throughout most of the country, while the exchange rate strengthened against all major trading partners and approvals for dwellings in December were generally weaker.
The bank said Auckland, which grew 1 per cent for the quarter, led the most recent consumer confidence survey with a rise in the residential real estate market supporting household optimism.
REGIONAL GROWTH
December quarter
* Northland up 2.4%
* Taranaki up 2.1%
* Waikato up 1.7%
* Auckland up 1%
* Wellington down 0.3%
* Otago down 0.3%
* West Coast down 1.1%
