Treasury scenarios released by the Government show unemployment could reach up to 26 percent if the coronavirus lockdown is extended beyond four weeks.
The data shows the range of scenarios Treasury has predicted for the New Zealand economy, based on assumptions of different amounts of time under the four COVID-19 alert levels.
The scenarios show that unemployment can be kept below 10 percent, and return to 5 percent next year, if the Government is willing to provide additional financial support.
The data also shows that without the Government’s support packages – such as the multibillion-dollar wage subsidy scheme - unemployment could have hit 13.5 percent during the four-week lockdown.
It goes on to say that, if the lockdown had to be extended beyond four weeks, unemployment could peak at 17.5 percent to 26 percent.
The scenarios also show that New Zealand's underlying financial strength means the economy can bounce back to be $70 billion larger by 2024 than in 2019.
Finance Minister Grant Robertson clarified that the scenarios do not foreshadow the Government's decision on extending the lockdown - that decision will be made by Cabinet on April 20.
Fiscal forecasts, including measures like the Government's operating balance and net debt, will be released as normal in Budget 2020 on May 14 - but Robertson has said that the Budget will look very different this time and will be focused on COVID-19.
"These should not be taken as any guide as to the Government's thinking or decision on changing alert levels," Robertson said.
"What they do show is how important it is that we continue to unite against COVID-19 and follow the public health guidelines; stay home and save lives – we know it's working."
Opposition finance spokesperson Paul Goldsmith described the scenarios as "terrifying" and said it underscores the importance of getting out of lockdown "as soon as we safely can".
He told Newshub: "The Government's task this week is to clarify what we can do across the economy, from next week, to reduce the damage. We cannot be ultra-cautious coming out of lockdown. "
Treasury Secretary Caralee McLiesh said the scenarios have been informed by discussions with All-of-Government response officials and the previously released public health modelling of the course of the virus.
She said there are a wide range of possible impacts depending on which scenarios you look at.
"Annual average GDP growth is shown to fall by as little as 0.5 percent or as much as 23.5 percent in the fiscal year ending 30 June 2021, and estimates of the unemployment rate in the June 2021 quarter range from 5.5 percent to 22 percent.
Two of the scenarios illustrate the cushioning effect of greater fiscal support on GDP and unemployment, she said.
"I must emphasise that these are indicative scenarios, based on assumptions and estimates subject to considerable uncertainty. They are not official Treasury forecasts or the Treasury's view of what will happen.
"What they do provide is insight into some of the possibilities that the Government and officials will consider as we develop responses to COVID-19 and plan for a solid economic recovery.
"Actual outcomes will depend on a range of factors, including the success of containment measures and the economic response, both in New Zealand and internationally."