Coronavirus: Assessing the economic impact of COVID-19 and preparing for Alert Level 3

'Sorry we're closed' sign.
'Sorry we're closed' sign. Photo credit: Getty

By Jane Patterson of RNZ

New Zealanders will get a better picture on Tuesday of the potential economic damage wrought by COVID-19 as the country prepares to move out of Alert Level 4.

The focus this week will not only be on the economy, but also what life could look like under Alert Level 3.

While the rate of new cases here is cause for "cautious optimism", the international outlook is grim and New Zealand's recovery depends heavily on the fate of other countries.

On Tuesday, Treasury will release scenarios looking at economic impacts under different Alert Levels, but these will not be firm forecasts.

Bounce-back timeframe

However, in its latest update, it flagged challenging times ahead.

"Despite the uncertainty, it is becoming more likely that New Zealand will see a deeper economic contraction in the June quarter than we have seen in our recorded history," Treasury said.

While many sectors were expected to "bounce back quickly", others would "take longer, possibly years" to recover, the March summary said.

"The recovery will also depend on the ability of the Governments of our trading partners to limit the spread of the virus and restore the confidence in their economic outlook."

But regardless, it expected a "substantial fall" in economic growth this year.

Finance Minister Grant Robertson said it was "nearly impossible" to do normal forecasting.

"The outlook for the New Zealand economy is difficult, but clearly we also have advantages, very strong fiscal position ... the ability to spend to support industries and businesses, the ability to redeploy our people, to be able to retrain as many people as we possibly can."

Support schemes

Another focus will be what further supports business needs, including once the 12-week wage subsidy scheme ends - now covering 1.3 million New Zealand workers.

That was a major concern for business with one likelihood, National Party leader Simon Bridges said - "very big job losses".

The question for the Government was whether the scheme could be extended, or if other forms of support would be put in place, he said.

"Sectors like tourism, hospitality, retail... even in 12 weeks, it's still going to be a very difficult trading environment for them."

Robertson said the scheme was designed to get money into people's pockets quickly, but also to give businesses a bit of leeway past the lockdown period.

"But we certainly recognise that for some businesses and many individual workers, at the end of the time of the wage subsidy scheme they may still have either a lot of uncertainty or a need to really shift the business.

"And so we're continuing now to work on what comes next, how we support both industry and workers, but also particular types of businesses who might be suffering more effects than others."

Exiting Level 4

Later in the week Prime Minister Jacinda Ardern will talk about the easing of restrictions under Level 3 - what businesses could operate, how some schools could reopen or resume teaching and a possible return for some to the workplace.

Bridges said there was a strong desire from business to be allowed to operate more freely under Level 3, if they could prove they could trade safely.

It would be more like a "Level 2 plus" with strong border controls but allowing more activity, as Level 3 was a bit of a "no man's land", he said.

Officials should move away from their stance of "no you can't" to "if you can meet certain safety and health assurances, you'll be able to operate", Bridges said.

The Employers and Manufacturing Association is calling for immediate changes to help business ride out the downturn including a return to 90-day trials, fast-tracked consenting and operating rules, looser foreign investment rules and bringing forward major infrastructure programmes.

RNZ

Contact Newshub with your story tips:
news@newshub.co.nz