sign uplog in
Want to go ad-free? Find out how, here.

Westpac economists say the weekly hit to the economy with Auckland on Level 3 and the rest of NZ at Level 2 is about $300 million

Westpac economists say the weekly hit to the economy with Auckland on Level 3 and the rest of NZ at Level 2 is about $300 million

Westpac economists say if the latest Covid community outbreak in Auckland proves to be "a temporary scare" then the economic implications are likely to be very limited.

And ASB economists share the same sentiment, with ASB chief economist Nick Tuffley saying if the latest lockdown is merely a matter of days, the economic impact will be minimal. 

"Spending that would have happened (particularly in the services sectors) over this Monday – Wednesday period will likely be caught up on in following days or weeks.  If restrictions continue over the weekend, the potential for foregone revenue in hospitality, for example, starts to step up," he says in ASB's Economic Weekly

In their Weekly Economic Commentary the Westpac economists estimate about a $300 million hit to the economy for every week of Auckland being in Level 3 and the rest of the country Level 2.

"However, in the case of a short lockdown, much of the activity would be delayed rather than cancelled, so the final economic cost would be lower.

"That was certainly the experience from August [last year], when there was also a dialling up of restrictions for several weeks in response to an outbreak in Auckland. And while that did cause some temporary disruptions to economic activity, there turned out to be no discernible impact on GDP over the quarter as a whole."

The Westpac economists say they had already assumed that "temporary periods at a higher alert level would occur" so see no reason to alter their GDP or unemployment forecasts at this stage.

"Of course, the longer restrictions remain in place – or if they’re dialled up – the greater the economic impact could be," they say.

"For now, we’ll keep our fingers crossed – and keep scanning our Covid tracers – as we wait to see how the situation evolves."

The economists not that while the overall impact of this latest outbreak "will hopefully be limited", it will be particularly worrying news for those in New Zealand’s hospitality sector, which is still reeling from the exclusion of international tourists from the country.

"That loss has been reflected in retail spending levels, which fell by 0.4% in January and have now fallen by 1.7% since September."

They say that over the Christmas/New Year period, the loss of international tourist dollars was partially offset by New Zealanders taking holidays onshore.

"But now, with New Zealand families heading back to work and school, we are hearing that the absence of international tourists is being felt much more acutely.

"And the seasonal nature of tourist flows means that their absence will be much more evident in economic data also, with negative GDP growth expected in the summer months."

ASB's Tuffley says it is "really important" that we reflect on what we have learned about the economy since the August lockdown. 

"NZ businesses proved surprisingly adaptable to operating under restrictions.  Many retailers, for example, have stepped up their online or contactless sales methods, enabling a fair degree of commerce to continue.  It is largely those activities that require face-to-face contact that bear the brunt. Even then, however, the longer-term impact will depend on the extent to which people catch up on what they originally wanted to do vs. outright cancellation."

And then a final word from Tuffley: "...What is it about toilet paper?  Unlike money it actually grows on trees (sort of) in NZ.  It’s coffee supplies we need to be worrying about, plus whether or not it is now socially acceptable to watch Bridgerton during lockdown! 

"Take care out there and we hope you have to hand everything you need to get through this latest – and hopefully – brief lockdown."

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

15 Comments

The Economists see little impact, on the coal face business owners will see it differently. I have lost $2'800 in revenue so far, not that much but it hasn't been 24 hours yet, losses will continue to rise.

On the other hand employees who are still getting paid think there's no problem at all with lockdowns, maybe just a little inconvenience

Am I right in seeing that there's no wage subsidy until we hit seven days of L3?

These economists are salaried employees who have no idea of the real implications to small business.

Yeah, I'm going to go right ahead and take economist predictions with a big fat grain of salt. Fortune tellers have a better track record.

ThIs is not a temporary scare as we have already seen and these incidents will keep popping up regularly over the next xx number of years.
On a global basis the days of almost ignoring swine flu or bird flu or whatever flu is over. Lockdowns shutdowns restrictions whenever one pops up will be the new norm.

Yup & what a hell hole of a world that will be

3 Days and Economist are nervously expecting little financial fallout. Could be right. But...
What happens if:
(1) COVID mutates into an uncontrollable Global killer like Ebola?
(2) Another earthquake hits our country?
(3) The USA devolves into civil war as traditional political parties fracture and lawlessness breaks out across the country?
(4) Bitcoin is universally outlawed and the stock market plunge as cryptocurrencies become unconvertible back into fiat currency?
(5) China invades Taiwan?
(6) (List unexpected risks of your own)

In all likelihood none of those will happen, but they could, and how prepared are we for any unexpected occurrence, if "3 Days" has experts debating the impact outcome of that tiny timeframe?

Answer: We aren't. We should be - we've had at least a decade and multiple warnings to 'get ready', but we didn't.

(NB: COVID-19 was never supposed to happen like this. We were told that modern technology and controls would nip any outbreak in the bud. In other words, The Health Experts had it sorted; they knew what they were doing; what might happen and what to do in advance. Just like the Financial Experts tell us they know what they are doing with their 'unconventional' policies. COVID-19 and "Whatever we Call" the next financial meltdown are going to have a lot in common.)

COVID mutates into an uncontrollable Global killer like Ebola?

It's shown no signs of doing that so far. It mutates very slowly. Ebola is also so deadly that it burns itself out.

One of the reasons COVID has spread so much is that it has this period of being very infectious but without showing symptoms. Ebola is only particularly infectious once it's obvious you are sick, and by that point you're likely already in hospital, not walking out and about in public.

Your questions 2-6 aren't related to COVID and could happen at any time, so not sure why're they're relevant to economists projections about COVID lockdown.

You are right re ebola, but we have also been very lucky it hasn't got onto a flight, or hit a large international airport. It generally burns out before getting out of the local villages. But hey one missionary, backpacker, scientist studying something who is due to fly home and bingo... It may not be two weeks, but it is still a few days until symptoms show, and in the modern connected world I would say that is enough.

We have had a year of covid now, and govt are still showing an inability to understand how virus spreads, and that a point in time swab test is not in itself a barrier.

I think we also need to look at some personal freedoms. If you are in a role that required weekly/fortnightly testing then perhaps it is fair to say that you should not be travelling. Unfair I know, but we have just had a nationwide holiday for something just that simple.

If you are in a role that required weekly/fortnightly testing then perhaps it is fair to say that you should not be travelling.

If you're talking about the current community case with the woman who works at an airport service company - she actually isn't required to have any regular testing. Her employer has voluntarily chosen to subject people in her role to 2-weekly testing.

If you make it really restrictive, such that if you get regular testing, you aren't allowed to live a life, then her company would likely not have volunteered for the testing at all. How does that make us safer?

Also if you're going to enforce draconian restrictions on these people doing critical necessary work, then I think the government should be topping up these people's salaries in compensation.

Re your idea of a top up, I had that same thought.
If draconian measures mean people don't do the job, then that stops the flights and the problem is solved either way.

I see it as quite black and white, either we are trying to stop it at the border or not. If not, then stop wasting everyones time. If we are then do everything we can.

You would think that if the price of a weeks lockdown is $300 million then the government would do more to prevent it. We have had a year of this already, is it not about time they built a dedicated quarantine facility ? Surely $300 million is enough to build one that can be also used for state housing or housing for the homeless after this event ? How many billions is this going to cost us while basically nothing changes ?

You must be joking. Labour learnt their lesson saying they'd build 10k more homes, and realising they're woefully unequipped to deliver anything concrete. There's no more solid promises coming from them before the next election. Just sympathetic nods, slight tilting of the head whilst looking concerned, and a lot of "smiley talking".

100k more homes

Good catch yvil. It was in fact 10k per year for 10 years! Reading this article now the whole thing is absolutely laughable!

Stating that Labour is "the party of home ownership", Mr Little said: "When you don't have enough houses, you bloody well build more! That's how you fix this crisis."

https://www.rnz.co.nz/news/political/308361/labour-pledges-10,000-houses...