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HSBC economist Paul Bloxham suggests the New Zealand economy is heading for a 'V-shaped bounce back' while Australia faces a 'U-shaped economic recovery'

HSBC economist Paul Bloxham suggests the New Zealand economy is heading for a 'V-shaped bounce back' while Australia faces a 'U-shaped economic recovery'

HSBC Australia and New Zealand chief economist Paul Bloxham is suggesting the New Zealand economy could be in for a  V-shaped bounce back from its COVID-19 induced recession, while Australia faces a U-shaped economic recovery.

"The difference between elimination and suppression of the virus is on vivid display in Australia and New Zealand at present," Bloxham says in a research note. "The state of Victoria has had a spike in new case numbers in the past week, which has seen authorities slow the state's reopening and ramp up testing. By contrast, in New Zealand, improved confidence as a result of elimination was once again apparent, with a third weekend of sold out rugby matches." 

In Australia Bloxham says he expects a "U-shaped" economic recovery, with second quarter Gross Domestic Product (GDP) down 7.5% quarter-on-quarter, followed by a modest 0.4% rise in the third quarter and stronger bounce back from the fourth quarter onwards.

"This forecast seeks to account for an expectation that the reopening in Australia will be gradual. Suppressing rather than eliminating the virus means that cluster outbreaks are possible, as Victoria shows, restraining the pace of reopening," says Bloxham.

"For New Zealand, a higher economic cost was borne upfront, with the full lockdown."

He expects a much bigger economic contraction in in the second quarter of 14.7% quarter-on-quarter.

"However, local elimination has put the economy on track for a 'V-shaped' bounce back. We are pencilling in a 12.6% quarter-on-quarter rise in GDP in the third quarter," Bloxham says.

 "Sold out toilet paper in some parts of Australia; sold out rugby matches in New Zealand -- the signals from these differing phenomena support our contrasting 'U-shaped' versus 'V-shaped' recovery profiles for the antipodeans."

Bloxham previously made headlines in New Zealand in 2014 when he labelled New Zealand's economy a rock star.

Despite COVID-19's resurgence in Victoria, which reported 75 new cases on Monday, Bloxham suggests a broader nation-wide Australian case resurgence seems unlikely, given most state borders are closed and there are low active case numbers in six of Australia's eight states and territories. (Victoria and New South Wales, the two most populous states, are the exceptions).

"Australia's six smaller states and territories are all continuing to reopen their economies. For example, South Australia hosted an Australian Rules football match with 25,000 fans in attendance, and Western Australia reopened its night clubs on the weekend, albeit with, somewhat antithetic, social distancing rules," says Bloxham.

In New South Wales, where the border to Victoria remains open, he says there are "some signs of household caution."

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?? no international tourism and education, and no impact on NZ's economy ??

I am baffled.

At some level, locals not travelling overseas and spending their dollars outside the country will be replacing the spending that would have happened with internationals coming and spending outside dollars here. Maybe not as much high end tourism spending internally, but then again, maybe balanced out a bit by not so much budget van packers either.


We normally have 3.8m tourists per year spending and average of $4600 each, so additional internal tourism can only supply a small fraction of that.

3.1 million NZ resident arrivals for year ended up to Jan 2020. 2.4 million of those had not travelled for business or education. So assume leisure/tourism. Do those people still have the economic ability and desire to travel? Will they holiday domestically instead?

If I read correctly from stats NZ, 1.75M NZ resident trips offshore last year.
But like I say, it'll be interesting to see where the balance falls.

Seriously doubt that. In NZ most people travel to see friends and family, and they won't spend anywhere near as much as a tourist who spends money on accommodation, food, transport and tourist activities. For example, if I plan on taking a holiday it will be to Auckland, Napier or Dunedin where I have friends to stay with. I certainly won't be bungy jumping, whale watching, or paying to look at silly little hobbit movie sets. Plus I want a holiday where there is sunshine and beaches - something NZ can't deliver. So I'll be saving my money until Queensland lets us in.

Wow!!! 1st time Ive agreed with you!

how can we have a Vshape revovery when approx $20B has evaporated from our economy???? Unless government fills the void????

It's taking some people longer than others to realise that "WE ARE DIFFRUNT" !!!

Apart from tourism and overseas students, one of our biggest wealth producers is buying houses and sell them for a profit. It's still going so she'll be right..

Yeah Rock Star Economy is intact for now.

Apart from tourism and overseas students, one of our biggest wealth producers is buying houses and sell them for a profit. It's still going so she'll be right

I've seen forecasts that house prices in NZ and Australia might even go up (I guess that means a nuclear holocaust could also be positive for house prices in the Antipodes). Some woman even popped up in my Linkedin feed with an Ashley Church article that suggested that causes of house prices are different over time, but one thing remains constant: the housing cycle (whatever that is supposed to mean).

May be below link :

Wow now unemployment, population growth and consumer confidence does not matter in housing market best advise from one of the Spruiker agency :

May be correct as now economy is not running on fundamentals but on printing of money. So message is do not worry as government reputation is more at stake and to get vote/power will do anything and everything to ensure that ponzi continues and mint is open for printing as long as it takes.

There's always an interesting vibe in the comments section of Ashley Church's LinkedIn posts. He's got a few cheerleaders.


V = Very slow. ha ha. I think NZ has a better chance of recovering faster than many other economies but I doubt it will be a V shaped with this Virus still hanging around restricting things. Wait until the Global economic impacts hit us, mortgage holidays run out, unemployment goes higher etc. The worst is yet to come.

Every time I go out somewhere it is absolutely packed. Restaurants, bars, cafes, etc. Roads seem very busy even though there will be a lot more work from home.
I doubt the economy will recover to pre-covid due to loss of tourism etc, but anecdotally it seems much better to me than I ever expected.

what illicit substances have the HSBC folks been abusing ?

have a look at the benefits numbers. we have 60% more people ready to work but Ue than this time last year. we have 1.7mm on the wage subsidy scheme.

And yet a V shaped recovery ? Dream on.


Whatever the illicit substance is, you can guarantee the profits were laundered through them.

Today is turn of positive news ........

Tomorrow will be some negative and than must continue.

Even though the US isn't a major trading partner they are bound to have an impact on our exports now that they have just over 50% of the adult population currently working. I'm not sure how well any economy can function with so few workers.

V recovery is more appropriate for Australia.
For NZ I would see a LP recovery

Does V shaped recession last for few years, if not Mr HSBC Economist is right or below analyst :

Yes the veracity of the V is all dependent on timescale.

I am/was hoping for the house prices to go down. But unfortunately I think that prices are going to go up again.
All those “kiwis” returning home (or one of their homes) because things are deteriorating overseas, is going to put pressure on housing again.

I heard of a couple and kids returning to Dunedin from overseas. They can't find a house to rent in Dunedin so they are commuting from Alexandara. 2.5 hours each way.

There are still more people leaving New Zealand than arriving. In June 8345 people arrived, but 14,217 people have left. In the last three months, a net 36,000 people have left NZ.

That assumes they've come back to a paying job and can get a mortgage, or that they bought enough cash back to buy. It's more likely to be those that went overseas on the big OE, or didn't have time to get established anywhere and are moving back in with the parentals.

70,000 immigrants replaced by 25,000 returning beneficiaries. That = more reason for house crash.

The one thing that all these projections don't take into account is a massive increase of infections arround the world stalling the global economy even further.
The old saying of 'if the US sneezes, the rest of the world catches a cold'. The US sneezed before the Wuflu was even heard of, now it is in the early stages of a debilitating flu getting worse by the week and no real end in sight.

Given that its off-shore events that have triggered virtually every recession in New Zealand history, it seems fairly unlikely we can avoid a significant hit to our economy just because our domestic economy will be able to remain open.

New Zealand has managed to duck the worst of the health consequences, and our economy should do better than many as a result, but I don't believe we will be able to avoid the longer term impacts to the world economy.

Another economist, I think Cameron Bagrie, described NZ as the tallest dwarf after the GFC when our economy looked better than many other countries. It may be a similar scenario again.

Lol, I like that one

This time is a bit different though!
If NZ can stay Covid free and if other countries remain in and out of lockdown, I suspect we will see a lot of money entering the country. There is plenty of money in the world looking for somewhere to call home, I think we will be as good a place as any.
Also in other recessions a lot of people leave the country, in this one we are likely to get a big surge in people, many of which will have money to spend. An inverse brain drain.

I think the big surge in people will be unemployed Kiwis forced to return home so they can go on the dole. They will be an additional drain on the economy.

Agreed, all the kiwis I know overseas who have stable jobs and settled roots (often because their partner is native to that country) have no intention of returning at this stage. They may later for lifestyle reasons but not because of the covid recession

Agreed, all the kiwis I know overseas who have stable jobs and settled roots (often because their partner is native to that country) have no intention of returning at this stage. They may later for lifestyle reasons but not because of the covid recession

I can really see the confidence he speaks of in this post’s comments /sarcasm shooting in the US surge.
Meanwhile on TV1 we heard about a comedian saying she was cut from a Green's entertainment line up due to her dating a comedian that a Green MP used to date or the other way arround, the kind of stuff that no one gives a toss about.

This would more accurately align with what he is saying for NZ:


Cool. Everything is going to be OK. Stop printing more "stimulus" then.

think the writer got excited about the headline - nz vs Au

I will throw it out there .. It will be a L shape recovery