Guy Trafford sees that just as our primary product markets have turned to focus on Asia, our travel and tourism markets are going to have to have the same focus, at least until a COVID-19 vaccine is effective in the US and Europe

Guy Trafford sees that just as our primary product markets have turned to focus on Asia, our travel and tourism markets are going to have to have the same focus, at least until a COVID-19 vaccine is effective in the US and Europe

With winter officially upon us and the likelihood of moving in alert level 1 next week, it is perhaps a good time to take stock of where we are and what are the possible outcomes ahead.

With a combination of good luck, good management and the buying into the isolation policies necessary to beat the virus by everybody, New Zealand, health wise, has come through the first stage of the pandemic in very good shape - especially when we compare ourselves to other countries. The only nation which we have major trade links with to come close to our status is Australia.

This is another very fortunate event given they are both our nearest neighbour, our second largest trading partner and the largest provider of tourists (around 45%). There are some other Asian countries such as Vietnam with only 328 infections and no deaths supposedly, as well as Japan (fourth largest trading partner) and the likes of Taiwan and South Korea and of course China. They are all countries that appear to be handling the virus effects reasonably well, closer to New Zealand than most and, at least pre-covid-19, having large middle classes with the ability to buy New Zealand products.

Only Australia is likely to be able to provide the Government and general New Zealand population with the degree of confidence in their systems and reported numbers to consider letting them in as tourists or indeed to visit in return, at least until a viable global vaccination program is introduced. (But there may be some degree of Asian paranoia may be at play here as Taiwan is considerably ahead of Australia and arguably even New Zealand with only 7 reported deaths from 428 cases of infection. However, Australia sends over 1.6 million tourists a year and Taiwan barely rates a mention in the visitor stakes.)

But even (new) visitors from Australia will not grace our shores for some months to come, with September now being mentioned as the earliest date. With luck there may still be some snow on the slopes for snow bunnies, but for places like Queenstown it may be a case of too little too late.

Despite the negative effects of the widespread drought, agriculture in most regions has managed to come through the lockdown period in reasonable shape. For the drought affected areas it is going to be a long haul for them, and this winter is going to feel like it is dragging on forever until Spring, hopefully then to bring surplus feed.

The fact that markets for sheep meat, beef and dairy have remained relatively positive is another plus given the impact they have on our export returns.

New Zealand exports - almost bizarrely - a hit record levels in February and March but Covid-19 caught with us in April with exports dropping by -4% on 2019. However, still a good return given the global environment.

The biggest loser in economic terms from Covid-19 has been international  tourism which makes up around 20% of total exports. This equates to around $47 million per day. However, domestic tourism spends around $65 million so there is still a considerable amount flowing into the sector, but the cream has certainly gone.

What has been hard to ascertain is what the outflow of money from New Zealand by kiwis holidaying etc abroad. It appears that about 2.3 million trips leaving New Zealand are taken each year, with Australia being far and away the most popular destination. To try and get an idea of just how much is remaining in New Zealand and potentially being spent here (we can only hope) I did a rough-and-ready calculation based upon my conservative view of what a Kiwi may spend.

Average trip : Flights $1,200.

Length of visit: 10 days

Daily spend: $100

This comes to around $5.1 billion or $14 million per day (suspect you could add quite a bit on to this). So not quite replacing the $47 million per day from international visitors but a worthwhile contribution if it is spent back in New Zealand.

However, nothing quite beats export monies flowing into the coffers and with New Zealand’s government debt going from 19% up to 36% this year and peaking at 54%, some serious money has flowed out. A lot of how the average kiwi copes through the next couple of years is going to come down to how future spending is targeted and when or if a vaccine is developed. To date the pharmaceutical companies are still in the early stages of development, generally in phase one of a three phase program and still with the manufacturing and distribution hurdles to cross.

Moderna and Johnson&Johnson have stated their capacity would be around 1 billion vaccines per year once tested and approved. It may be that then the hard part begins; that is, getting the world populations vaccinated. This may be New Zealand’s Achilles heel when it comes to physically re-joining the rest of the world. With most countries having to accept that a latent presence of the virus will exist in their populations until all are vaccinated they, as has already been shown by many, accept the losses and get on with life (or death). New Zealand and hopefully Australia and some of the previously mentioned Asian countries may chose to align themselves with trade and travel protocols which as this ‘group’ is likely to include Australia, China, Japan, South Korea, Taiwan, Hong Kong among others, but not South America, Indian sub-continent Africa, the Middle East, Russia, USA or the EU and UK,(etc etc) at least for some time. New Zealand and Australian may become firmly part of Asia as a consequence. So while to date Australia is the only country the obvious conversations have been about lowering the border barriers to, it may be that we need to start thinking beyond them and looking into selected Asian countries if we want to get back to the economy pre-Covid-19.

The current trend is that these countries are where the most growth has been coming from for primary products as well as tourists. Given any comprehensive vaccine program is likely to be at least two years away and maybe longer, Asia is likely to shape our exporting future where travel is involved. In the meantime the primary sectors are still going to be the main drivers of any export dollars.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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19 Comments

The fatality rate and transmission rate are both much lower than initially feared. Give it 2 months and a dip in government polling will quickly translate to a reopening of all international travel.

The fatality and transmission rate are lower than feared, because of the actions of the government. You left out that bit.

I think the point being made is you can be too over cautious.

Government rely on business to continue to operate, and every business operates with some degree of risk. We need government to accept some of that risk themselves, because if they don't there will be reduced or no business for everyone.

I expect Aussie to have sorted itself out with covid by the end of this month latest, which suggests overseas travel between these countries could commence as early as mid July. This would help out Christchurch, Queenstown and our ski field operators in a big way. While I'd rather have the slopes to myself, it would result in more employment and less public and private debt. Maybe the solution is for travellers from Aussie to self isolate for two weeks prior, which is possible working from home to get this show on the road.

I do think the government narrative is driven by the pending election, as its better to under promise and over deliver. Does nothing for business short term planning in the meantime however.

Go tell that to Sweden, who are experiencing a bit of buyer regret over the whole herd immunity thing.

I was referring to worldwide fatality and transmission rates. Which are largely unaffected by the actions of our government. In countries with high incidence of testing the fatality rate ranges from 0.55-2.3%. In Sweden that did not shut down effectively the rate of new infections has been steady and not resulted in an overwhelming of their health sector.

https://ourworldindata.org/coronavirus-testing

Yup - just a pity about Sweden's 4500 or so deaths. It seems their economy is on the same track as others with more stringent measures, too.

And as a result they have about 250-300,000 people recovering, giving immunity which will slow the progression of the virus through their population over the coming years.

Ah no, as they themselves have reluctantly accepted now

We were told 60-80% of the population would get infected, and tens of thousands would die in NZ, so naturally tried to protect our health system. Even where little action was taken until it was too late, that prediction was untrue (e.g. UK, Italy), despite the terrible media images.

Yes our government acted, having the advantage of seeing the impacts in other countries, and using the benefits of our multi-thousand kilometre moat. Australia's government acted too, but differently, and has less cases per capita with lower economic impact. We would have been even better off if the government had insisted on isolation of all arrivals 2 weeks earlier than they did, that slow reaction lead to most of the big clusters.

The key issue, governments action aside, is that the projections of infections and deaths were wildly false. Luckily.

The projections were made on the assumption of either limited or no action. How can you then say they were false - action was taken.

By the population, with little prompting by Gubmint, as many of us went Isolating weeks before...and so did some of the rest-homes......

Yeah let's have China flights, what could go wrong?

As at Mar 2020, NZ exported 23% of goods and services to China and imported 16% of goods and services from China.

Yet, not a single political leader in NZ understands Chinese history and culture.

So the biggest risk is not NZ's 'reliance' on China but NZ's ignorance towards China.

Sadly because of censorship the Chinese people have a poor appreciation of their own history too. A long interesting history with remarkable innovation in art and technology but how many Chinese get a chance to read a spectrum of historians - obviously there are many European and American historians but how many Tibetan, Taiwanese, Uighur historians are available for an average citizen?
Of course all countries have their myths and usually they can change. My own lifetime has seen a change of emphasis from the British Empire installing the Christianity, rule of law and build railways and hospitals to more emphasis on the impossible to defend Opium war or Amritsaar massacre. The French had forgotten Joan of Arc until she was useful for national pride in the mid 19th century. American history is still battling with slavery. All these historical facts and myths are ever changing with in all countries an ever wider search for 'women who changed history'.
NZ is remarkably ignorant of their own history and that is only 800 years with 200 years of written records; it is hard to expect them to be knowledgeable of 5000 years of Chinese history and culture.
Fortunately I don't need to know the history and culture of my butcher, baker or candlestick maker - if China is an honest country we can trade while staying politely ignorant of one another.

"As at Mar 2020, NZ exported 23% of goods and services to China and imported 16% of goods and services from China." Is Chinese migration a plus or a negative?

Chinese students in NZ are recorded as NZ exports.
Chinese tourists in NZ are recorded as export earnings.

According to the AsiaNZ Foundation report 2017 41% think immigration from Asia will have a positive effect. Those with "most knowledge" were most positive (such as those who speak an Asian language).

As I said from the outset https://www.tvnz.co.nz/one-news/new-zealand/nzs-economy-wouldve-suffered...
I am expecting my cheque in the mail very soon.

The article's point is that our future with Asia is probably going to get more important, not less so, and reluctantly, I would have to agree with that. And Yes Ximowang, you're right, we do need to understand our Asian neighbours better. We need to understand how they treat themselves (each other) & their own huge migrant workforce (not too well) inside the police state that is China today. And look out if you're an Uighur living in China's west, there you will find how the Han really treat people who are 'different.' Like us. We're different. And they're not shy about telling us what to do when we exercise our global freedom of speech. China needs to know that they can act like thugs in their own land if they choose, but they need to allow other countries make their own decisions, even if they don't agree with China. The real problem here is that China doesn't agree with anything the rest of the world says or does. Wonder why? Perhaps they should take a closer look in the mirror.

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