Kiwibank data shows widening North-South divide in economic conditions
New Zealand's economic recovery is inching forward, but Kiwibank's latest Regional Score shows the improvement is landing very unevenly across the country.
Queenstown topped the rankings with a "feels-like" score of 9 out of 10, followed by Southland and Otago on 7, while Taranaki (3) and Wellington (3.4) sat near the bottom of the table. The South Island's average regional score of 5.1 continues to outpace the North Island's 4.
Kiwibank chief economist Jarrod Kerr (pictured) said the divide reflects a recovery moving at different speeds depending on where you are.
"The economy is improving, but it's doing so at different speeds across the country. Tourism-heavy and agricultural regions in the South Island are leading the way, while many households and businesses in the North are still feeling the pressure of weak demand, higher costs, and economic uncertainty," Kerr said.
Kiwibank's companion regional note put it more bluntly, describing the lack of a meaningful national rebound as "disappointing" — noting that even the strongest South Island regions are being weighed against a national backdrop where "most score below 5, cold or too-cool and definitely not 'just right.'"
Labour market and property split tell the same story
The North-South gap shows up starkly in employment data. North Island unemployment averages around 6%, compared with 3.7% in the South, while national underutilisation — which captures both unemployed and underemployed workers — sits at an elevated 13.8%, with Northland recording one of the weakest results.
"The labour market tells the story clearly. Many households are finding it difficult not just to secure work, but to secure enough hours and income. That's especially true in parts of the North Island," Kerr said.
Property markets reflect the same divide. National house prices have largely moved sideways over the past three years, but Otago and Southland have outperformed, while Auckland and Wellington remain well below their post-pandemic peaks.
Kiwibank's regional note put numbers on that gap: house prices in Auckland and Wellington sit 22% and 25% below their post-COVID peaks respectively, while Queenstown prices are up 20% in the past year alone and Southland has climbed 6% over the year to sit 8% above its 2021 peak.
RBNZ lifts OCR to 2.75% as mortgage refixing trend grows
That regional picture sits alongside a rate decision made just a day earlier: the RBNZ lifted the OCR by 25 basis points to 2.75% on 2 September, citing inflation of 4.1% driven largely by fuel prices linked to the Middle East conflict. The central bank's own assessment echoed Kiwibank's regional findings almost word for word, stating that "after lacklustre growth in the June quarter, New Zealand's economic recovery has most likely resumed but remains uneven."
Some analysts argue the hike is unlikely to derail the housing recovery on its own, since underlying inflation excluding fuel sat at a more moderate 2.9% — within the RBNZ's target band.
On mortgage rates specifically, the regional note flagged a shift already under way: "households have been refixing their mortgage rates for longer periods," a trend Kiwibank says should help "insulate many from the interest rate hikes" as borrowers lock in current pricing.
Kiwibank expects the recovery to broaden through 2027, supported by lower interest rates, improving agricultural incomes and another strong tourism season.
"The good news is that the foundations for stronger growth are in place and the direction of travel is positive... While the recovery remains uneven, we expect economic momentum to strengthen and become more widely felt across New Zealand through 2027," Kerr said.
For property investors, the regional split points to where confidence — and borrowing appetite — is likely to recover fastest.
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