Adapting to the unfamiliar economic territory of living with COVID-19: Where are we at and is there any optimism out there?

A bleak reality. That's how New Zealand's key industries are describing the long journey we are facing as the economy recovers from COVID-19. 

The Reserve Bank (RBNZ) is hiking interest rates to rein in the highest inflation in three decades while gross domestic product slows and a recession could be on the cards. 

It's a stark situation for New Zealand's hard-hit industries such as tourism and hospitality which were forced to adapt to a world of closed borders and no visitors when the COVID-19 pandemic hit. 

New Zealand consumers are experiencing 30-year high inflation on the back of supply chain issues caused largely by lockdowns to contain the spread of the virus. 

Inflation has risen above 7 percent in New Zealand and the RBNZ has hiked interest rates accordingly. The bank raised the Official Cash Rate by 50 basis points last month and economists anticipate it will do the same at its next announcement on Wednesday. 

Amid all this, the highly transmissible BA.5 and BA.5 Omicron sub variants of COVID-19 are sweeping the country - causing headaches for employers as their workers are forced into week-long isolation periods. 

"It's not going to get any easier," said John Lawrenson, the chief executive of Lawrenson Group, which owns multiple hospitality firms across Auckland and Hamilton. 

"I don't think the optimism is there."

The Ministry of Health has continued to urge caution to help slow New Zealand's Omicron outbreak and prevent the already overwhelmed health system from collapsing. The Beehive last month issued an updated strategy to tackle rising cases, including the more widespread availability of free masks and rapid antigen tests. 

Economic scarring

With the severity of Omicron being less than previous COVID-19 variants, lockdowns have become a thing of the past - allowing travel restrictions to be scrapped. Retail, restaurants, sporting events and the wider industry tourism are starting to rebound but there's still a long way to go. 

"It's been a tough couple of years and whilst trade has picked up there are still a number of factors that will continue to have an impact on the industry," said Marisa Bidois, the Restaurant Association of New Zealand's chief executive. 

"Businesses are facing increased costs across the board and with two years of accumulated debt to repay, our sector is certainly not out of the woods yet."

New Zealand retail electronic card transactions in the hospitality industry were about 4 percent down from last year's levels, data from Statistics NZ shows. 

Marisa Bidois.
Marisa Bidois. Photo credit: File

Long term impact?

The Ministry of Health said last week the BA.5 variant made up about 75 percent of all new coronavirus cases. 

While cases soared in recent weeks - peaking at more than 11,500 in mid-July during the most-recent wave - the seven-day rolling average has dropped enough to suggest the country is through the worst.

The virus' impact on the country's labour market has been evident. People are leaving the country in their droves amid a "brain drain" and companies are crying out for workers. 

Cameron Bagrie at Bagrie Economics said additional waves of the virus would have an enduring impact on the economy. But it's unclear just how bad it would be. 

"No one is sure but we need to be able to manage potential future outbreaks or variants," Bagrie said.

Bagrie. Photo credit: File

Is there any optimism out there? 

The Canterbury region is no stranger to adversity. With Christchurch being forced to rebuild after the devastating earthquake just over a decade ago, COVID-19 was another setback for a city still in regeneration mode.

"Cantabrians are renowned for being pioneers - think Sir Angus Tait, Kate Sheppard and Bill Hamilton, and it's this continued innovation that stands out on the world stage that sets us apart," said Leeann Watson, the chief executive of Canterbury's Employers' Chamber of Commerce.

She was largely optimistic when Newshub quizzed her about the challenges posed by COVID-19 and the city's future.

"Cantabrians have demonstrated over the last 11 years they have the adaptability and buoyancy needed to navigate ongoing disruptions," she said.

"Most businesses in the Canterbury region have quickly rebounded from the impacts associated with COVID-19 however some of the challenges that were exacerbated by restrictive policies and labour market shortages, supply chain issues and inflation will have a longer-term impact.

"Consumer spending habits dip when economic performance dips and that does pose a threat to the retail sector, however, we're hopeful that the resumption of tourism will alleviate some of that pressure."

She was confident Canterbury businesses would continue growing, despite those economic threats.

That growth would be aided by New Zealand's borders fully reopening to visitors from around the world late last month - a much-needed boost for the country's hard-hit tourism industry, which was also optimistic. 

"Although it is too soon to say how the summer will compare with pre-pandemic levels of trade, and it certainly won’t be a return to 2019, the industry is growing increasingly optimistic," said Tourism Industry Aotearoa chief executive Rebecca Ingram. "We are also hearing that international travelers who are concerned about the war in Ukraine are finding New Zealand an attractive alternative to traveling to Europe."

But, like every industry, tourism is also struggling to manage ever-increasing costs. 

"Increasing costs and constraints on capacity are already pushing up the price of travel and it seems that is likely to continue in the short term," Ingram said.

"The need to attract great people to work in the industry is the biggest concern for many operators so they are able to offer the fantastic visitor experiences that New Zealand is known for.

"We are enormously grateful for the support Kiwis have given their tourism industry over the last two years. Now they have had a chance to discover what amazing holiday experiences Aotearoa New Zealand has to offer, we hope they will continue to enjoy holidaying locally."