Rural regions are leading the way in economic growth but New Zealand's urban areas are expected to catch up in the second half of the year.
Residential construction activity is expected to continue to run hot over the year. Photo: 123RF
Westpac's Regional Roundup report, which covers the year to June, forecasts regions that rely on international visitors will continue to lag, while residential construction activity will continue to run hot over the year.
The outlook was generally weaker for the southern part of the South Island and stronger for the middle and top of the North Island.
"Some of the biggest gains, however, are likely to be seen in the large urban centres of Auckland and Canterbury," the report says.
Westpac's acting chief economist Michael Gordon said there was a pipeline of construction activity across the country, but warned house-price growth was set to cool given the range of measures that had been introduced aimed at stifling investment.
"A hot construction sector is likely to spell better times ahead for manufacturers in Auckland, the Waikato and Canterbury, who are also likely to be buoyed by stronger economic growth in key export markets."
Gordon said that would likely give the services sector a boost and support employment in major centres.
He said strong commodity prices would continue to benefit regions, but those that rely on foreign tourists would continue to lag.
"Indeed, we expect that they will only start recovering properly once the borders are opened to visitors from countries other than Australia," he said.
"Given the pace of Covid-19 vaccinations, both at home and abroad, that is likely to be some time off."
Westpac industry economist Paul Clark said the bank was forecasting a piecemeal reopening of the border in April, but was not expecting a full reopening to key markets over the next 12 months.