How the economic recovery post-Gabrielle presents both a challenge and an opportunity

by Nick Stewart

Public concern right now is on immediate cashflow for those impacted, including employees of businesses severely impacted by the event (like many of our agribusiness giants have been).

It’s been a well-published fact in recent years that many Kiwis live payday to payday, and either don’t have savings. Consumer NZ’s latest sentiment tracking puts the majority of New Zealanders having less than 10% of their income saved, with a large proportion if that having less than 5% set aside. This is due to a variety of factors, but we can all acknowledge that it’s unlikely the cost of living crisis helped.[i]

Add to that, Hawke’s Bay and Gisborne rank low on the scale of economic resilience according to ASB’s latest economic scoreboard (September 2022); here in the Bay, we’re number 13 out of 16 regions. Gisborne sits just above us in the rankings as in geographic location, at number 12. Despite being crucial food-growing regions, the high input costs were making it difficult for local producers to thrive.[ii]

The Government has promised a $300M Cyclone Gabrielle emergency package, $250M of which will be spent on roading. The remaining $50M has been earmarked for business support. The exact breakdown of this is still unclear at the time of publishing.

The issue is: When a certain sector slumps or fails, the support businesses around it also falter. The 2015 post-boom issues in Perth’s mining industry, for example, had a large impact on their entire business ecosystem. As the price of iron ore fell, the state’s unemployment rose to 5.8% (up from 3.5% in 2012). Equipment suppliers had no one to sell to. Office vacancy rates soared. Even the lunch bars, which had previously supplied engineers and support staff, were empty.[iii]

Gabrielle being a natural disaster, one singular industry wasn’t targeted by the destruction – but it is clear that our primary sector (agriculture, horticulture, viticulture) has taken a massive hit. In regional New Zealand, these businesses are only one degree of separation away from everyone else. If you’re not employed by them, you know someone who is. Or maybe you contract services to that company, or maybe they come into your cafe every morning and order for their crew.

Some businesses will be struggling to make payroll. If they make it this month, will they make it next month?

And if they can’t pay their workers, how will they pay their suppliers?

There will be a flow-on effect. Communities and regions built around these big businesses have their own ecosystem. If one part goes down, it’s felt everywhere else. Adjustment, recovery, or at the very least support, is needed.

And it needs to be local-led; as in, those on the ground here need to have input into how the recovery package will be best utilised.

In the Christchurch earthquakes, the Government recovery package was promising. But surveys of residents post this event showed a significant gap between the Government’s perception of success, and the perception of the locals impacted by the event (and the rebuild, for many years after). The vast majority of residents surveyed were unsatisfied with the recovery. Comments accompanying the survey indicated that people had been left in limbo, with damaged homes and no clear way forward, for years.[iv]

Post-quakes, there was also a significant shift in business. A report by Resilient Organisations indicates that 9 out of 10 organisations made at least one change to cope with the new environment they found themselves in. Some pivoted to new products and services, or targeted a change in customers. The same report also indicated a slow recovery, with 37% of organisations operating comfortably several months later and only 60% comfortably stable or thriving two years later.[v]

We will see this happen here too. As businesses shift and adapt to our new reality, to meet new challenges and demands, we will see an upheaval in the trends of employment. The rebuild will provide a lot of employment opportunities – but it’s likely many people will need to pivot into new sectors or careers to ride the wave.

I’ve seen the word “resilience” being thrown around a lot at the moment as a call to arms. Yes, the regions are resilient – Hawke’s Bay and Gisborne locals have been through a lot over the years in terms of environmental events. The next few years will be tough. But if the Government does it right, and nurtures a local led approach, this is an opportunity for us to come back stronger (and more resilient) than ever.

Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.
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