Borders close as economy takes hit
Analysts predict coronavirus impact could be ‘sharper’ than expected as airlines cut flights to China. Tom PullarStrecker reports.
The New Zealand economy will take a significant hit likely to be in the hundreds of millions from the coronavirus epidemic, analysts are forecasting.
UBS economist Robin Clements forecast the virus would shave $300 million off the economy by the end of March, and was on course to have a larger impact on GDP than the Sars outbreak in 2003.
Air New Zealand’s decision yesterday to halt flights from Auckland to Shanghai between February 9 and March 29 will deal a further blow to tourism and trade between the countries.
It came after the DirectorGeneral of Health Dr Ashley
Bloomfield said tests on an Auckland man suspected of having the coronavirus had come back negative.
However, he cautioned it was ‘‘likely’’ to only be a matter of time before a case is confirmed in New Zealand.
In a speech last week, Reserve Bank assistant governor Christian Hawkesby pointed to the Sars outbreak as providing ‘‘some potential parallels’’ for the economy.
The bank is due to make its next call on resetting the Official Cash Rate on February 12, and Hawkesby said it would need to monitor the impact of the virus, particularly on travel and ‘‘confidence’’. ANZ has said the new 2019-nCoV virus appears more easily spread but less lethal than Sars.
But Infometrics economist Brad Olsen said a lower death rate might not be much of a silver lining when it came to the virus’s economic impact.
‘‘It doesn’t matter so much how deadly it is; it is the restrictions that we are seeing,’’ he said.
‘‘It might be a sharper hit than we have otherwise expected so far.’’
New Zealand’s trade dependency on China has increased massively since Sars, he and other analysts have warned.
BNZ senior economist Doug Steel said that in 2003 China consumed only 5 per cent of New Zealand’s agricultural exports, and that had since grown to 29 per cent.
The situation was similar with regard to tourism, he said.
‘‘In New Zealand, Chinese visitors account for about 10 per cent of total visitor numbers and more than 14 per cent of total spending, compared to just under 4 per cent of visits back in 2002.’’ Almost 10,000 Chinese visitors had so far cancelled trips to New Zealand, the Tourism Industry Association said on Friday, but it said that was likely to be the tip of the iceberg.
Olsen said the timing of the outbreak was unfavourable for already ‘‘soft’’ Chinese tourism, given about 35 per cent more tourists arrived from China during January and February than during other months.
UBS is now forecasting GDP growth of 2.1 per cent in the first three months of 2020, rather than 2.2 per cent, as a result of the virus.
Westpac chief economist
‘‘It doesn’t matter so much how deadly it is; it is the restrictions that we are seeing. It might be a sharper hit than we have otherwise expected so far.’’
Brad Olsen
Dominick Stephens didn’t think the virus outbreak would be enough to tip the Reserve Bank to cut the Official Cash Rate (OCR) from 1 per cent at its next meeting.
But he expected the Reserve Bank would ‘‘almost certainly say that it stands ready to cut the
OCR should the coronavirus severely impact the economy, or if something else untoward happens’’.
The virus has knocked hundreds of millions of dollars off the sharemarket value of businesses with the most exposure to international travel, such as Air New
Zealand, Tourism Holdings and travel technology company Serko.
It also appears to have sliced more than 1 US cent off the value of the New Zealand dollar, which on Friday was trading below US65c for the first time since early December.
ASB said in a research note that the export of live crayfish to China had ‘‘ground to a halt’’ and it expected a ‘‘low to moderate’’ impact on meat exports, but believed dairy exports should hold up better as they were mostly a staple part of Chinese diets and were storable.
Olsen said there were plenty of other lesser impacts that were rapidly starting to add up.
‘‘Cherries from Otago are also an area of concern.
‘‘My contacts in the seafood market are saying ‘look, just everything in China is shut’.
‘‘I thought meat might hold up better but I’ve heard businesses are having issues because of delays shipping products around,’’ he said.
BNZ’s Steel said it would be ‘‘purely speculative’’ to estimate the size of any downturn because that would depend on how long it took to contain the virus.
Last night Australia joined the United States in banning noncitizens arriving from mainland China from entering the respective countries. Australia had 10 reported cases of the virus.