As the impact of COVID-19 reverberates around the country, regional economies are in for a tough time ahead, a new report predicts.
As many as 250,000 jobs could be lost throughout the country over the next year or two as New Zealand experiences "the greatest economic shock in a century", according to the latest Infometrics Quarterly Monitor.
The Monitor analyses regional data over the 12 months to March 2020. Although it only captures the early stages of COVID-19's effect on the economy, including the first six days of lockdown, it is somber reading.
"The early impacts of COVID-19 are starting to show through in regional indicators and highlight that regional fortunes will be dependent on economic structures, with tourism and construction two obvious areas of weakness," said Brad Olsen, Infometrics senior economist.
"New Zealand is set to experience the greatest economic shock in a century, and Infometrics expects that 250,000 jobs could be lost in the next year or two."
Infometrics cites declining visitor numbers, lower tourism spending and waning construction as reasons for the negative outlook.
"New Zealand’s labour market is changing considerably, with more than half the labour force supported by the Government’s wage subsidy. Job losses are continuing to mount as businesses reassess conditions and adjust their operations and workforce to fit the ‘new’ normal," said Olsen.
He said although the rate of job losses had slowed in recent weeks with the lowering of the alert levels, this was just a "lull before the storm".
"We expect a second wave of job losses as the wage subsidy runs out, and another wave later in the year as the wage subsidy extension finishes and businesses look ahead to the new year. As well as job losses, fewer hours worked and pay cuts are rising in prominence, reflecting a tougher job environment into the future."
However, the fact the country's food-based primary sector had held up well in the fallout of COVID-19 gave the economy a solid foundation, Olsen said.
"Dairy and fruit exports remain above 2019 levels, and we expect food exports to remain robust, compared to other commodities, going forward. New Zealand, and the world, needs to eat, and New Zealand producers and manufacturers can provide high quality food and beverages."
He said regional economies with strong food-based primary sector economic activity were likely to "weather the economic storm of the pandemic better than others", particularly regions dependent on tourism and construction.
All in all, Olsen said, regional economies faced "uncertain times moving forward".
In last week's Budget, the Government promised to invest heavily in the regions in a bid to create thousands of new jobs, many of those on regional environmental projects.
In a bid to attract and retrain workers recently unemployed in other industries due to COVID-19, the Government allocated $19.3 million to be spent growing the primary sector workforce by 10,000 people.