As we settle back into our work after hopefully a little bit of time off over the holidays it is useful to consider a broad brush assessment of external and internal economic factors as they will affect business in the coming year.
On balance the businesses of
Christchurch and Canterbury are well placed, to operate in a positive business
environment involving increasing certainty and hopefully prosperity. It is
however a mixed bag. Dealing with the macro picture first, we can expect
exchange rates to be more conducive to supporting exporters. That is important
for a region like Canterbury being so dependent on export income. The offset of
that is potential for increasing price pressures on imports. However, even that
is mixed given the downward pressures on fuel prices and how important the cost
of imported fuel is to our ongoing economic activity.
Interest rates can be expected to
remain low throughout 2016. We are into a new era of a locked in low interest
rate regime, which is good for borrowers and not so good for savers. Linked to
low interest rates is inflation, currently continuing at record low levels with
no significant signs of any upward pressure.
We can expect continuing pressure
on dairy prices which does have a significant impact on our overall economy. On
the other hand other exported products, particularly some meat products, are
holding up well. We should be wary however of continuing volatile climatic
conditions and the potential impact that will have on farm earnings and export
volumes. Once again current climatic conditions are clearly demonstrating the
importance of certainty of water supply which underpins investment in
irrigation. Tourism, another significant export earner is showing significant upside,
particularly with increased visitations by free independent Chinese travelers.
This will continue to increase over 2016, despite some concerns about the
Chinese economy. It will put pressure on South Island infrastructure generally
and we need to be aware of that and prepare for it.
From a Christchurch city perspective
the rebuild in now tracking with more certainty than ever. By the end of this
year SCIRT will have finished its horizontal infrastructural commitments, the
central city retail precinct will be up and running and residential rebuild
will be continuing at a pace. I predicate that 2016 will be the year that we
complete 50% of the required construction in our city. That is a significant
milestone, but of course, it also means we still have 50% to go and a lot of
spending and investment yet, in the regeneration of our city.
Underpinning the $100 million a
week being spent specifically on the rebuild we continue to have a strong local
economy driven by increasing service industry activity, a robust manufacturing
sector, strong retail and the indirect benefits coming from the rebuild of Christchurch
city. Aside from the private sector commercial activity we have increasing confidence
in education at all levels in our community with some good signs with respect
to overseas students returning to secondary and tertiary level education in Christchurch
and bringing valuable foreign exchange with them.
Our health sector is a very
important contributor to our economy with Canterbury District Health Boards
budget well in excess of $1 billion and the demand on the whole sector being
higher than ever. We must always remember as participants in the business
sector the psycho social consequences of the earthquake are still playing out
and will continue to impact our people as they go about their business. That
issue will require additional resourcing.
To a greater or lesser extent will are all
dependant on business activity whether it’s through its ability to generate
employment, to pay taxes to service our public sector needs or to generate
ongoing wealth. The interdependancy between a healthy community and a healthy
business sector is compelling. We are in a good space in Christchurch and
Canterbury and we can be confident as we go into 2016.