Most regional economies in New Zealand remain in a cold snap, with urban areas experiencing an economic chill, according to Westpac Bank’s latest report.

On a scale ranging frosty to hot, only four regions, mainly in the South Island, were rated as cool. Five others, including Wellington and Auckland, were rated as cold, while Waikato and Northland are still frosty.

“Regions with strong rural backbones or links to the international tourism sector are starting to warm up, especially those in the south including Canterbury, Otago and Southland,” Westpac senior economist Satish Ranchhod told RNZ. 

Ranchhod said it was an uneven recovery, with urban areas feeling a real economic chill, while overall conditions remained tough and the benefit of falling interest rates had yet to be felt.

“Many businesses also told us that while conditions remain challenging, they aren’t going backwards like they did in recent years.

“More businesses are also starting to feel optimistic about where the economy was headed over the coming year, thanks mainly to the easing in borrowing costs,” he continued.

According to the expert, cost of living pressures remained the biggest challenge, with households still feeling the squeeze and businesses reporting higher operating costs.

The tariff war also added uncertainty to the outlook and caused businesses to watch and see what might eventuate, he added.