New Zealand’s economic outlook is still patchy despite some greener shoots showing for 2025.
Crystal Beavis
So says Infometrics chief executive and principal economist Brad Olsen, who addressed a Waikato District Council workshop last week as the council embarked on developing its next Long Term Plan 2025-34.
In summary, overall economic growth in Waikato District is tracking at about 3 per cent. While the latest dairy payout, estimated at $692 million, is down about $33 million on the prior season, on-farm costs have stabilised in the last six months and the outlook for primary export prices is improving. Primary production represents about 17 per cent of the District’s GDP and is a good economic indicator.
The growth in the number of businesses dropped to about 2 per cent in 2024 following a short post-Covid surge of about 7 per cent. Despite a rise in business confidence, unemployment is also expected to rise, especially among youth, while consumer spending – represented by total regional retail sales – is down 5.3 per cent. Mortgage affordability is still a challenge and house prices are essentially flat.
The upshot is that rates affordability remains a major concern, and councils will be challenged to maintain services in the face of a sharp rise in infrastructure costs experienced over the past three years. This is an unprecedented time for all councils which face huge changes demanded by legislation and extreme economic conditions.
Infrastructure costs are soaring. Photo: Josh Sorenson, Pexels.
Since Waikato District Council prepared its last Long Term Plan (LTP) for 2021-31, road construction and water supply system costs, for example, have escalated by 27 per cent, far outstripping the CPI.
On top of this, the council had to repair more than $18 million of infrastructure damage caused by Cyclone Gabrielle last year and has now been knocked back $35 million by NZTA removing support for nearly all new roading infrastructure projects for the next three years.
To help contain costs, Waikato District is reviewing and changing its roading contracts which are responsible for 33 per cent of the general rate. It is also working to develop the best possible solution for a shared council-controlled organisation for ‘three waters’ (wastewater, stormwater and drinking water) either with Hamilton City or with a consortium of district councils including Waipā. These are major projects taking an enormous amount of staff time and focus.
With only 33,000 rateable properties in the district, the council had to work hard to peg this year’s general rates rise to 11.9 per cent – below the average for New Zealand councils – and must work equally hard to establish a new LTP and set rates for the next two years.
Residents and ratepayers are taking interest in record numbers. A survey last month asking for community feedback on how to prioritise council services and activities, from roading and waste management to community halls and library services, attracted nearly 2000 responses from more than 800 people. Presented at the workshop, this feedback will help determine which key areas require focus with regards rates, debt, and levels of service. Options will be developed for further consultation in March-April next year before the final shape of the LTP is agreed.
