Thought piece from CEDA Board Members Paul Bayly and Dave Norman.

Last month, StatsNZ reported that annual inflation had risen to 7.3% since the June 2021 quarter, the largest jump in 32 years.  

This increase has been largely driven by essential goods and services – food, housing and transport. The government responded with extending cuts to the fuel excise duty, road user charges and transport fares to 31 January 2023.  

New Zealand isn’t alone in this issue, as countries across the world deal with the double whammy of recovering from increased central government spend and associated borrowing to cope with the COVID-19 pandemic, while also dealing with global supply chain issues and the effects of the war in Ukraine.  

So, what does this mean for us locally? And what can we do to ease some of the issues?

Dave and Paul | CEDA Board

Dave Norman and Paul Bayly

Inflation increases are hitting hard 

Paul Bayly joined the CEDA board in December of last year and he is aware of the effect increased costs are having on our community.

“There is a very direct and immediate impact on incomes, with higher costs associated with rent and mortgages, power bills and transport to and from work,” he says.

“Some people are really struggling with this, and they are having to make difficult, stressful choices, whether it’s turning off the heating, or keeping the car in the garage, which in turn can limit their work options.” 

Fellow CEDA board member and economist Dave Norman agrees.  

“There are families in our community who are doing it tough. They have been hit hard by the cost of everyday items such as fuel and groceries and they are feeling the pressure.” 

“Those on higher incomes are also making decisions as their discretionary spend is constrained,” he notes. 

“During COVID-19 they may have invested in house renovations or bought new cars, which supports jobs around the region. As interest rates have shot up, people are limited in their discretional spending, whether its declining to purchase their daily coffee, holding off on house renos, or eating out less. That has a negative effect on our local businesses.”  

Effects on regional development 

At a regional level, what does this mean for our development aspirations? 

“Large capital projects will still go ahead,” says Bayly. 

“However, with tighter budgets they will need to prioritise, and that means discretionary spend may suffer. 

“For example, maintenance may have to be put off, or lower priority projects may be deferred. This can only go on for so long, as it can create a tidal wave as businesses and organisations will have to catch up on their schedules eventually.” 

“As a result, a clear case will have to be made for prioritising say project A over project B.” 

Norman believes that while we are currently seeing weak confidence, high inflation and even higher interest rates, it will be transitory.  

“It’s a balancing act,” he says. 

“Inflation and interest rates are high, the labour market is tight, and we are still experiencing ongoing supply chain disruptions. 

“On the other hand, the border is reopening, and businesses are rebounding from the effects of Omicron.” 

“That said, by next year we should see inflation coming down, while fuel prices are pulling back.”  

“However, there is a knock-on effect. With lower house prices and higher construction costs, developers are nervous, resulting in a slowdown in construction activity overall.” 

“There are also a huge number of jobs on offer, with no one to fill them.” 

Infometrics recently reported on the tight labour market, with Brad Olsen mentioning the pressure short-term sickness and a continued brain drain of young talent making it hard to resource current levels of business in the provinces.   

Addressing the skills gap 

Norman believes one of the main issues in the job market is a mismatch of skills.  

“While there are job opportunities in all manner of roles available right now, there is a particular gap in roles that are highly skilled. This is something we must overcome to remain competitive and to continue to grow.” 

CEDA works with businesses to liaise with training providers both locally and across the wider region, identifying skills gaps and sourcing the appropriate opportunities.  

“Our business growth advisors are absolutely key in this role as they establish partnership models to support people and business,” says Norman. 

CEDA’s Business Attraction, Retention and Expansion Strategy is a key focus area for CEDA, providing targeted business support, tailored programmes and support of key projects and inward investment opportunities.  

“Our business growth advisors can’t do it alone though, with local and central government integral to this support,” he acknowledges. 

Maximising wellbeing 

“CEDA is only one part of the Manawatū economy. However, along with central and local government, we are the ones who can enable the private sector to operate well,” says Norman. 

“Collectively, we are the ones who have the power to make Manawatū the place people want to do business, whether it’s making connections, or providing support. 

“At a local government level, the role is to make sure every dollar is focused on improving outcomes for our community. They are the ones who can enable private investment to thrive by providing essential services and infrastructure such as roads, clean water and smooth consenting processes.” 

Bayly agrees. 

“Councils ensure the provision of essential services which will have a direct impact on our communities,” he says. 

“For example, if it’s too expensive to run a car, then people can catch a bus to work but only if that bus service is affordable, timely and reliable.” 

Bayly also believes that high inflation may attract more people to the region. 

“The cost of living in the likes of Auckland is skyrocketing, so this aids in our attractiveness to skilled workers to our region,” he says. 

CEDA’s role continues to focus on profiling the region working with our various sectors to attract talent, support our rangitahi and collaborate closely with educational providers such as Massey University and UCOL | Te Pūkenga. This is some of the foundational work that adds on building up the region as a great place to live and experience. 

Silver linings… 

While the headlines talk of doom and gloom, there are some silver linings, particularly if we as a region focus on our strengths and support each other.  

“We are fortunate thanks to the diversity of our economy,” says Bayly. 

“Our strengths in manufacturing and technology in particular – we are the home to over 100 tech companies, and our strong agriculture sector means we are not too bad off in comparison to other regions. We don’t experience the peaks and troughs that they do. 

“As Dave mentioned, this is transitory, we just have to get through it and do what we can. That means support local and buy local and if in business, take advantage of the programmes CEDA has on offer.” 

To find out more about the type of support CEDA can offer, contact our team today

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