The COVID-19 red setting is as bad for the economy as alert level 3 lockdowns, one leading economist says.
New Zealand has been under red restrictions for more than two weeks now, thanks to the recent Omicron outbreak.
The weekly rolling average of cases is 170, with Omicron recently overtaking Delta as the dominant strain.
"Omicron is walking through," economist Cameron Bagrie told Three's new morning show AM on Tuesday.
He explained foot traffic, across the economy, was down about 20 percent under red.
"It feels like an alert level 3 at the red level and that's got pretty negative consequences for small businesses."
Bagrie said he worried about how businesses will manage cash flow this year.
He explained the housing market and the recently-introduced changes to the Credit Contracts and Consumer Finance Act (CCCFA) could also have an impact on small businesses.
For example many business owners use their mortgages for credit should they require cash flow to inject into their company, Bagrie said.
"What you've got at the moment is the housing market's pretty obviously turned and what you've also got is higher tests that need to be satisfied before people can actually extract credit," he explained.
"The housing market is the working capital facility for small to medium-sized enterprises and if you're a little bit short on cash - you tack it on the mortgage… that's going to be extremely difficult in 2022.
"You've got a piece of legislation here with pretty good intent that is applying negative consequences across the economy."
A mortgage adviser survey late last month found banks were less willing to lend following the CCCFA changes.
"Largely, it's the CCCFA changes that are preventing home buying by a great number of people," economist Tony Alexander said.
Commerce and Consumer Affairs Minister David Clark has said he's asked the Council of Financial Regulators to bring forward an investigation into whether the CCCFA is being implemented as intended.