'Around $60 million': Economists estimate loss in GDP each day Auckland spends in alert level 3

Economist Cameron Bagrie said that collectively under alert level 3, Auckland businesses would lose around $130 million of income (turnover) per day.
Economist Cameron Bagrie said that collectively under alert level 3, Auckland businesses would lose around $130 million of income (turnover) per day. Photo credit: Getty.

Each day that Auckland spends in alert level 3 will cost around $60 million in GDP ($130 million in business income), leading economists say.

The estimate comes after four Auckland-based Kiwis were tested positive for COVID-19 on  Tuesday, indicating the virus had spread within the community.

According to Statistics New Zealand March 2020 data, New Zealand Gross Domestic Product (GDP) is $314 billion. Current regional figures show Auckland represents around a third of that figure: $114.1 billion (March 2019).  

Confirming that each day the city spends in alert level 3 will carry an enormous price-tag, Cameron Bagrie at Bagrie Economics put a cost on it.

"Each day we're at alert level 3 in Auckland is a bit under a $60 million hit to GDP - or a bit over $130 million impact on the region's turnover," he said.

ANZ chief economist Sharon Zollner said around 19 percent of activity will be ruled out as non-essential or can't be done from home. Her assumption of the daily GDP impact was similar ($59.3 million). 

"Auckland has grown since then so this number will be on the light side...as well as the fact it's broadly assuming that all activity that can take place will take place," she added.

According to Bagrie, jobs advertised in Auckland showed slower recovery than other regions. The city had one of the larger percentage rises in job-seeker benefit recipients (38 percent versus 31 percent). Trade Me listings showed commercial leases available in the city had increased.    

As house prices were high relative to incomes, Aucklanders had taken on more debt.

"That combination is dangerous when income across the region is set to take another hit," Bagrie said. 

The effects of loss of tourism on areas such as immigation, housing and education was primarily going to be seen in 2021. Re-entering alert level 3 would compound the impact of those losses.

"Auckland was looking vulnerable compared to the rest of NZ...we hadn't seen the immediate flush out of border control...that was yet to come," Bagrie said

"Moving into a second lockdown, prior to the impact of shutdown following through is really problematic."

For the rest of the country in COVID-19 alert level 2, Bagrie estimates the hit to daily turnover at around $100 million - just over $40 million in GDP.

As the country came out of the March 2020 lockdown better-than-expected, the shift back to alert level 3 was "a huge wake-up call"

"NZ is not immune from the same challenges other countries have been dealing with, and will continue to do so for some time," he said.

In a scheduled Monetary Policy Statement released on Wednesday, the Reserve Bank announced it would expand the limit of its Large Scale Asset Purchase (LSAP) programme from $60 billion to $100 billion, by June 2022.  Lowering retail interest rates was a key focus. The Official Cash Rate remained unchanged at 0.25 percent.