Why the South is Hot

International tourist numbers in Canterbury were up by over 12 percent from last year. This is partly due to the weak dollar and the efforts of offshore marketing to promote tourism. The prevailing mood in the region is one of quiet optimism, and the most frequently used word to describe the current state of its economy is “buoyant”. After last year’s difficulties it remains to be seen whether Canterbury’s growth and confidence will continue to improve, especially in the light of weakening economy in the US and the spill over in Japan and Australia.
Canterbury recorded its strongest quarterly rise in economic activity since March 1999, according to the National Bank’s latest survey. Growth in retail trade and employment was the second highest across the nation. New car registrations, consumer confidence and the value of commercial building permits were the third fastest increases. The picture isn’t entirely rosy, however. Weaker growth was noted in house sales, dwelling approvals and job ads, all of which were the lowest in the country.
John Phipps, Christchurch branch manager for staff recruiter Kelly Services, backs up the growth in employment figures. “The market has been very busy recently. In the past couple of years we saw decline in the availability of candidates but now we can fill our orders. We cater for three sectors: commercial, call centres, and industrial. We have seen big increase in call centres as it is cheaper to set one up here than in Auckland and Wellington, wage rates and establishment costs are also less. While it is still hard to get good people, we are getting enough to meet the demand.”
One of the main points of entry for visitors is through Christchurch Airport, which employs over 4500 staff.
Vic Allen, market development manager at the Airport, believes activity there acts as barometer of the economic growth of the region. Both international and domestic passengers arriving are up by 10 percent.
“We have about 50 businesses at the airport. We are seeing an increasing number of new businesses interested in setting up here, or relocating from elsewhere in the country. An obvious attraction for those organisations receiving and despatching packages is proximity to the planes, which makes the whole business more efficient. Also, if organisations have staff that travel lot, it saves time.”
A new joint venture was recently set up between Air New Zealand and Pratt & Whitney. As Pratt & Whitney is one of the biggest engine maintenance facilities in the world, this venture will bring significant boost to the region’s economy.
The growth of domestic passengers was up by 10 percent last year and since this occurred during an average business confidence period and slowdown this seems surprising. Allen says this is partly due to overseas passengers taking domestic flights. “Above and beyond this there does seem to be an upsurge of Kiwis travelling, which is surprising. But there has been rapid drop off since Qantas NZ folded. This has affected significant loss of capacity.” Air NZ has introduced new flights and Freedom Air is coming into Christchurch to help take up flights, but the airport has yet to make up the loss. If Origin Pacific introduces provincial services over the next few months, it is predicted that domestic services will be back to what they were.
Preliminary plans for upgrading the domestic terminal building are under way, with work to be carried out over the next three years. Clearly there are opportunities for more businesses to open up subdivisions here. The technology is already in place to take advantage of further developments with fibre optic cables for the CBD. The airport’s convenient position offers other advantages. It has ground transport linkage being right on State Highway 1 heading north and south, and is only 20 minutes from Lyttleton Port so it is in hub position for multi-modal transport.
Looking forward, Allen is confident that the number of overseas passengers will continue to grow because the fundamental factors are in place. “The only negotiable factor is that we are going through weakening global economy which reduces the number of visitors, especially from North America.”
With its diverse economic base Canterbury acts as microcosm of the New Zealand economy, leading the rest of the country through cycle of ups and downs.
The next low will be due to the drought which has not yet impacted on the economy but is predicted to bring downturn within the next six months (the rural community accounts for 60 percent of the region’s economy). Irrigation and water enhancement projects are currently under way in order to deal with the next major drought. “Once the impact of droughts can be taken out of the equation, then the region will be saved hundreds of millions of dollars,” reckons Chris Pickrill, CEO at Canterbury Development Corporation.
Pickrill’s predictions for the future are positive. The steady growth seen in Canterbury reflects the initiatives taken in the rest of the South Island, which are now being recognised by commentators. “Canterbury’s economy should be the fastest growing region over the next five years. It has good broad base with balanced range of opportunities. It is not just dairy phenomenon here. The opportunities here include affordability of housing, education and health, lifestyle and the environment. The knowledge economy is driving the region forward and will have huge impact in the future.”
In the short-term the slowdown in the US will have an impact and bring drop of confidence to the region. “I regard this as check, not marked decline, without major retrenchment,” says Employers’ Chamber of Commerce CEO Peter Townsend.
He believes passionately that the key to Canterbury’s future rests on two planks. Firstly, to put leverage on its natural capital through technology. He points out that agriculture currently brings in $250 million and by the year 2017 it is expected to deliver $1000 million – this assumes many factors but relies on huge investment in technology. Secondly, it is not enough to just say the country is “clean and green”; we need to justify our products and services.
With Canterbury’s reputation as the Silicon Valley of New Zealand, it is appropriate to put Townsend’s belief in technology into practice. Many companies were modernised in order to deal with Y2K so the technology is already in place to improve efficiency and reach the next dimension. This revolves around three key areas, according to Paul Morrison at Computerland: knowledge management, intranet growth and, corporate data. “It is all about converging systems now. Any individual can get information to clients through financial, jobbing or client contact with all systems combined into one interface.”
Speed and accessibility are crucial to savvy businesses these days. Most companies have taken control of their IT environment and want to exploit smarter business. The new trend is to use more mobile devices, says Morrison. “We see this right through from small businesses to large corporates. People want to access computers from home to update contact information.” Devices like the handheld Compaq ipaq are gaining popularity, as it is wireless and internet enabled.
Building on Canterbury’s reputation as high-tech centre, Deloitte Touche Tohmatsu is keen to identify companies that have particular focus in the new economy industries. There has been change over the past few years with many dotcom companies folding and investors becoming more cautious, looking for products to be scaleable. Deloitte’s New Ventures Group looks at how it can assist businesses that have great ideas and have possibly already gone to market but are looking for growth.
The Canterbury Innovation Incubator (Cii) is an apt initiative developed in the region. Deloitte runs raft of workshops including cash flow, raising capital and staff issues for Cii. Cii has now been running for 18 months with the aim of becoming