Westpac: 200,000 jobs will go

Westpac is forecasting 200,000 jobs will be lost in New Zealand as a result of the response to the coronavirus pandemic.

Chief economist Dominick Stephens estimated that economic activity during the four-week lockdown would decline by a third, despite the Government and the Reserve Bank having ‘‘done a lot to calm financial markets’’.

It was obvious the country was going into a ‘‘severe economic crunch’’, he said.

Stephens said his feeling was that GDP (gross domestic product) in the three months to June would fall by more than 10 per cent ‘‘which is completely unprecedented in our lifetime’’. ‘‘Our early estimate is about 200,000 jobs will be lost, which is about 7 per cent of the workforce.’’

The unemployment rate would rise into the ‘‘high single digits for the first time since the 1990s’’.

BNZ research head Stephen Toplis also forecast on Wednesday that GDP could easily decline by 10 per cent and said its ‘‘central scenario’’ was that unemployment would rise to 9 per cent, though it has ‘‘pencilled in’’ only a 5 per cent GDP drop for the second quarter.

‘‘We think the unemployment rate will peak at the end of next year but that it will drop sharply thereafter,’’ Toplis said.

Stephens said he ‘‘did not believe for a second’’ the long-term value of firms had fallen as far as sharemarket prices over the past few weeks.

‘‘When financial markets calm, I would not be surprised by a rebound,’’ he said.

A rebound appeared in evidence in the United States overnight, with the Dow Jones industrial average closing 6 per cent higher at 9am NZ time yesterday. The index is now

‘‘Consumers were feeling pretty good in February, with a lifting housing market, plentiful job opportunities ... Times have changed rapidly.’’

Sharon Zollner ANZ chief economist

23 per cent up on the low it reached on Monday but 24 per cent off the record high it reached in February.

ASB economist Mike Jones said ‘‘a nervous calm’’ appeared to have returned to financial markets.

‘‘While Covid-19 continues to rapidly spread, there is increased confidence that unprecedented policy support will stave off the most dire outcome for the global economy,’’ Jones said.

But consumer confidence appeared to have plunged. The ANZRoy Morgan Consumer Confidence Index fell in March, new data showed yesterday.

The proportion of households which thought it was good time to buy a major household item plummeted from 41 per cent to 16 per cent, the bank said.

‘‘Even if consumers wanted to spend, their ability to do so is now severely curtailed,’’ ANZ chief economist Sharon Zollner said.

Perceptions regarding the 2021 economic outlook fell 42 points, with a net 39 per cent expecting conditions to worsen, the weakest since March 2009. ‘‘Consumers were feeling pretty good in February, with a lifting housing market, plentiful job opportunities, and low interest rates.

‘‘Times have changed rapidly,’’ Zollner said.