The fight for Wellington businesses continues

Sarah Chambers, owner of Little Makos swimming school in Wellington, probably wouldn’t normally think of her business as having anything to do with government, but she has felt the effects of public sector job cuts.

This year, she had 100 fewer kids enrolled than last winter, and people were emailing her to say they were holding off on going to school because of job insecurity.

There were also more subtle signs that people might be affected by the disease.

“A lot of people use work email addresses to sort things for their kids. It’s noticeable even if they don’t tell me they’ve switched from a .govt email address to a gmail. People who’ve been sending emails for four or five years from a .govt address… you can read between the lines even if they don’t say it.”

Some families moved to Australia because employment opportunities there were limited, she said.

Chambers said that gave her pause, and she couldn’t decide what to do with the staff. If she cut their hours, it would be hard to get them back — but staying fully staffed with fewer students would have a financial impact.

Wellington Chamber of Commerce and Business Central chief executive Simon Arcus said many Wellington businesses were waiting for the “survival to 25” plan to come to fruition.

“Hospitality and retail are talking about a 30 percent drop in revenue. There’s definitely a sense of stagnation.”

He said the impact of government spending cuts – which RNZ calculated had led to the loss of more than 6000 jobs, as well as a reduction in government spending on other businesses, including professional services firms in Wellington – had been widespread.

It should be noted that some of the eliminated jobs were vacancies and were therefore not directly related to employment reductions.

Arcus said that while the government’s presence in the capital had at times supported Wellington’s economy in times of crisis, this time the cuts were being introduced in the context of a wider crisis.

The latest Westpac consumer confidence survey showed that Wellington’s confidence index fell from 90.1 in March to 79.3 in June, compared with an average of 111.4. A reading above 100 indicates that there are more optimists than pessimists.

“It’s much worse than places like Auckland,” said independent economist Shamubeel Eaqub. “In Auckland, we have a private-sector recession. In Wellington, we have a private-sector and public-sector recession.”

Restaurant Association chief executive Marisa Bidois said Wellington businesses were facing a very difficult situation at the moment.

“It’s becoming increasingly difficult, from what we’ve heard. The hospitality industry is saying that because of the many cuts that have taken place, there are fewer people in Wellington.”

The association’s latest survey showed Wellington sales fell 5.5 per cent in the first quarter of this year compared with the same period a year earlier, after falling 3.3 per cent in the previous quarter. Southland was the only other region to see a fall of that measure, down 2.2 per cent.

MBIE data shows Wellington job adverts are down 50 per cent year-on-year, compared with a 42 per cent drop in Auckland and a 36 per cent drop in Canterbury. Between June 2023 and June 2024, the proportion of the population receiving jobseeker support increased in all regions, but the biggest increases were in the central Auckland and Wellington areas. The ASB’s latest economic report noted that Wellington was the only region in the country to see a drop in employment compared to the previous year – down 1.9 per cent.

The data also shows that Wellingtonians are taking fewer holidays than people in other parts of the country. Their spending on tourism in other parts of the country fell 6.4 per cent year-on-year in the latest figures, compared with a drop of just over 2 per cent in Auckland and about 3 per cent for New Zealand as a whole.

Arcus said the housing data did not yet clearly indicate that people were abandoning Wellington altogether. The number of listings was up 50.3 per cent in June compared with the same period a year earlier. The number of sales was down 21.5 per cent, but the median days to sale was down two days. Inventory was up almost 50 per cent.

He added that he expected this to be a last resort.

“I think ultimately people will hold on to their homes if they can. If we saw an impact on the housing market, that would be a sign of seriousness… selling a ranch is a big deal.”

Kelvin Davidson, chief real estate economist at Corelogic, said it was hard to believe the cuts would have no impact on the housing market.

He added that some households would be directly affected and uncertainty would increase.

“It may be that, in the broader scheme of things, the impact of sentiment is greater than the impact of actual job cuts… It is difficult to determine exactly how large that impact might be, and of course to distinguish it from other impacts.

“Look at Auckland, for example, where the central government job cuts have been less significant, but we’ve also seen a decline in house prices. In short, it’s certainly a real problem in Wellington, but it doesn’t necessarily make the market look dramatically different to elsewhere.”

Eaqub said the market will eventually adjust. “Everyone thinks in linear terms – ‘if these conditions continue, everything will fall apart’. But will that be the case? Will we always have a lot of redundancies and vacancies in commercial offices? Wouldn’t we expect commercial rents to fall, wouldn’t that help clear the market? It may take time, but Wellington will always bounce back.”

Arcus said there was already a sense that things might be improving a bit. He said some activities had picked up again, such as spending on health and safety training that could not be avoided.

“We all feel like this is temporary in the sense that it can’t go on like this forever.”

He said the government would have to “do what governments of its ilk do” and allocate resources to the private sector.

“It will be a great renaissance for Wellington if they start asking ‘why can’t the private sector do this job?’ That’s what we’re hoping for.”