WAIKAPU — In a talk to the Maui Chamber of Commerce on Friday, Bank of Hawaii Chief Economist Paul Brewbaker repeatedly used the words "compression" and "loss of lift" to characterize the near future for Maui's economy.

The principal cause locally is that the two biggest segments of Maui's economy, residential real estate and tourism, are both entering the low part of their up and down cycles at the same time.

He never used the word "recession."

"We (at Bank of Hawaii) think in the 20-teens it gets interesting again." He advised the 220 business people at a luncheon at King Kamehameha Golf Club to be akamai and control expenses in order to win through to the "sweet spot" in a few years.

Reminding the audience that to an economist, tourism is an export, he said, "Take away our investment lift (from real estate) and take away our export lift" and the economy has to flatten out.

The fastest-growing sector of the state's economy centers on knowledge-based service industries. These include professional and technical services, computer systems, management of enterprises, administration and waste management, health and safety and information businesses. (He said he didn't know why administration is combined with waste management.)

However, even if this sector is growing, offset by flat real estate and visitor sectors, "it doesn't get us overall high growth rates," Brewbaker said.

In addition, he said, "we don't actually know how long the technology thing will go."

His talk was billed as "Six Things You Don't Know about the Economy." He didn't offer six, but two he did throw out were the fact that seed corn is now a bigger business in Hawaii than sugar, and that, with inflation taken into account, tourism receipts haven't grown since 1987.

Brewbaker said the reports on Maui County building permits don't provide him any clear signal, except that it looks as if residential spending will go down, while commercial investment will continue to rise.

Another thing he said most people don't know is that Maui condominium prices (on average) are as high as single-family house prices. He said he could not explain that. House prices have always been considerably higher.

"Somebody thought this would be a good time to do a clampdown on housing," Brewbaker said.

Maui has enjoyed very strong job growth over the past several years. That's over, he said, with investment in the two biggest sectors losing their lift.

There remains, however, a serious skill imbalance in the county. That is, there are jobs open but no qualified people to take them.

In the question period, he was asked whether the weakening dollar would boost tourism by making Hawaii vacations cheaper to foreigners.

The short answer is no. Although Hawaii vacations are a bargain to Europeans, whose euros are worth $1.50, and to Canadians, whose loonies are near all-time peaks relative to the dollar, the Europeans are not showing up, he said.

The Canadians are, with visits up about 25 percent according to the Department of Business, Economic Development & Tourism, but their overall numbers are not high enough to offset other downward pressures.

In the question period, Brewbaker was asked about the economic effect of the crackdown on transient vacation rentals.

"I live in Kailua," said Brewbaker, where the agitation against TVRs has been, if anything, stronger than on Maui.

Economically, he said, TVRs are "outliers," not enough to drive the economy significantly.

"Vacation rentals are way out on the margins. It's not a threat (economically) to anybody.

"There are issues with the way it fits into a community."

He mentioned that in Kailua, where he grew up, operators are claiming that the public cannot use beach accesses.

"It comes down to defining what's acceptable in the community."

He was skeptical that having transients in a neighborhood, by itself, is harmful. "C'mon, half the guys are from California anyway."

Another question concerned the growth of government and whether that could be sustained in a flat economy.

Brewbaker said government actually hasn't grown as fast as the rest of the economy.

The elected officials won't have to worry about carving up a surplus, which was a concern a year ago, but he said he did not expect revenues to diminish to the point where "teachers have to be laid off."

Returning to the theme of tourism, he briefly alluded to Gov. Linda Lingle's State of the State message, which said Hawaii had to move away from land development.

The move to a knowledge-based economy has worked, he said, but one reason tourism is stalled is that it's maxed out.

"There is a very high degree of utilization," he said, since the state has not added guest rooms for 20 years.

So, even if euro-wealthy Europeans wanted to fly here, there would be no place for them to spend the night.

Furthermore, he said, there is no established method in current policies to even discuss where "the next 5,000 or 10,000 hotel rooms" would be built.

Bottom line, he said to the businessmen and -women: Run your businesses leaner.

Harry Eagar can be reached at heagar@mauinews.com.

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