Keeping NZ safe will cost jobs

Like an unwelcome pebble thrown into a pond, the coronavirus and drastic attempts to contain it are sending ripples through New Zealand’s economy.

So far the tourism and logging industries have been hardest hit, with exporters also feeling the pain thanks to Chinese factories shutting down and shipping disruptions.

But now that coronavirus cases are mounting, New Zealand’s borders are being tightened and events are being cancelled throughout the country.

The Government’s actions aim to keep New Zealand safe in the longer term, but put businesses and jobs at risk in the short term – a recession is already beckoning.

‘‘We are facing a huge tradeoff, we’re trading a hit to our economy in the short term for a better chance of being able to manage the health impacts,’’ ASB chief economist Nick Tuffley said.

The extent of job losses depended on the amount of support the Reserve Bank and the Government could provide, he said.

Some businesses could hang on for a while, but others were already on the edge.

‘‘It’s pretty clear that we will have a number of businesses where they won’t be able to support their current payroll outgoings because they’ll have quite reduced cashflows coming in.’’

The jobs most at risk in the tourism industry range from airlines, airports and hotels, down to tourism activity operators, caterers – not just for tourism but also events like rugby games – restaurants, cafes and bars.

‘‘The multibillion-dollar question is how quickly can the Government step up and get support through to businesses particularly in the tourism sector, because as of Monday they’re effectively going to be feeling a cashflow pinch coming through the actions of closing the borders.’’

People who would bear the cost would be those who potentially would not get paid and business owners who risked seeing their working livelihood and savings evaporate without support, Tuffley said.

With China now getting back to work, key exports should soon start to pick up. The next problem was the extent of social distancing, Tuffley said.

‘‘We do increasingly run the

risk that people are wary of getting work done, doing other appointments they might otherwise do out of risk of getting infected.

‘‘The probability of getting infected in New Zealand still looks relatively slim that you just randomly pick it up while doing your day-to-day business, but it is a growing risk and something that is on people’s minds.’’

The sooner countries took what seemed to be pretty draconian measures, the better their ability to deal with an eventual outbreak, he said.

‘‘There’s a cost in people’s lives of not acting soon, and even one day can make a huge difference when you have something that spreads exponentially.’’

But even if the borders opened up in a few months’ time, ‘‘we’re talking about the erasure of the foreign tourism sector for much of this year’’, economist Tony Alexander said.

A lot of tourism-related small businesses will close down, and the larger ones will slim down to the absolute basics – shedding staff – and hunker down, he said.

Most sectors will take a hit as people stay home.

‘‘We’re all going to be apprehensive about what we see around us, and we know exactly what consumers do in that environment, we pull back from making big purchases, and we pull back from making discretionary luxury spending – cars, electronics, expensive clothes, whiteware, and spend more on the basics.

‘‘I suspect the bulk of the pain for this is going to be concentrated in the tourism locations – Rotorua, Queenstown – and Invercargill which is heavily reliant on tourism as well.

‘‘In the main centres there’ll definitely be an impact but not as much.’’

There will be ‘‘quite a reality check’’ in regions that have done very well in the past five years from the boom in tourist numbers.

‘‘We are facing a huge trade-off, we’re trading a hit to our economy in the short term for a better chance of being able to manage the health impacts,’’ Nick Tuffley

ASB chief economist