Economically the Wellington region is holding its own, but it's a struggle.

Wellington's economy declined by 1.2% in the last year, slightly under the national average of minus 1.3%.  A growth rate that hovers about or below the national average has dogged the region for years.

Manufacturing has declined as a source of employment, but the region has successfully pumped up its tourist efforts and Wellington has sold itself as the cultural capital of New Zealand.

Looking forward, Westpac says the Wellington region stands to suffer disproportionately from the public sector cost-saving directives.

"Employment in the capital over the past year has outperformed the national average," Markets Economist Sharon Zöllner says.

"Wellington has a relatively low exposure to manufacturing and construction, the two sectors which have suffered the heaviest job losses in the past 12 months."

"Wellington consumers are slightly chirpier than the rest of the country on average, and better employment prospects are also likely to go a long way to explaining why.

In housing the Wellington is lagging a little behind the national average. House prices are down 2% on a year ago, versus minus 1.4% for NZ as a whole. Sales are up on a year ago, but not as much as the national average, Zöllner  says.

Dwelling consents in Wellington are down around 43% on a year ago, reflecting that the abrupt end to the apartment boom and much tighter credit conditions for developers.

Retail sales growth in the March quarter in the Wellington area was the weakest of all the regions - five per cent down against a national average for the quarter of minus 4.1%. The Retailers Association thinks that the "flat trading environment' will continue in 2010.

Association spokesman Barry Hellberg says retailers that concentrate on their core strengths, emphasise their niche differences, and maintain high standards of customer service should continue to trade reasonably well.

Westpac notes that a year ago Wellington was showing the strongest annual growth in retail sales in the country, but it has deteriorated quite sharply over the past 12 months. "It is likely Wellington will underperform over the next year as public sector employment growth grinds to a halt."

Last year the region's seven councils with the support of the business community developed the Wellington Regional Strategy, revamped the economic development agency (now known as Grow Wellington) and agreed to levy a special rate to fund it.

Fran Wilde, the chair of the Wellington Regional Council says, "(Grow Wellington) had a slow start but is now performing. I am now satisfied that it is doing better and it understands its role as a regional agency."

And it has the backing of the regional chamber of commerce. Chief executive Charles Finny says "we have not seen a huge number of runs on the board, but it has the right focus.

On inward investment Finny agrees there have been no actual successes, but there is "a lot of potential" with on going discussions with Hong Kong entities about investment in film and digital activities.

"It has taken a long time, but they are now focusing on the right areas. We work with them and we are comfortable with what they are doing."

Published in the National Business Review of 22 May 2009