‘All at once shock’ to economy forecast
WELLINGTON: One economist says New Zealand’s unemployment rates could soar to 30% while another one described Covid19’s economic impact as ‘‘an everywhere, everything, everyone all at once shock’’.
Senior economists are predicting unemployment to reach 15%, one warning it could even hit 30% as the pandemic brings the economy to a shuddering halt.
Another said the sudden stop to most sectors would make the pandemic far more economically damaging than even the Global Financial Crisis.
Shamubeel Eaqub, an economist with
Sense Partners, said his benchmarks for previous crises kept shifting as the seriousness of the pandemic deepened.
‘‘We’ve gone from an expectation the unem ployment rate might rise to 6%, then we thought maybe 8%. Now we are thinking that maybe the Great Depression is a better kind of comparison, where the best estimates were the unemployment rate was between 15% and 30%.’’
New Zealand Institute of Economic Research senior economist Kirdan Lees said the unemployment rate, now 4%, could jump to between 10 and 15%.
He believed the hit to the economy from Covid19 was likely to be between two and five times greater than that of the Global Financial Crisis.
‘‘Right now we’ve got a sudden stop in terms of economic production so it’s not just a slowdown,’’ he said.
‘‘Make no mistake, this is a very, very significant event.’’
Rather than the usual tweaks he did when forecasting economic activity, he was now having to write off entire areas of the economy, as tourism, hospitality and export education were hammered.
ANZ chief economist Sharon Zollner said the bank predicted GDP would contract by 9%, which would represent a staggering shrinking of output.
‘‘The numbers are going to look awful. India has gone into lockdown. That’s over a billion people. So we’re not alone in this. It’s happening everywhere. It’s an everywhere, everything, everyone all at once shock. It is unprecedented.’’
However, Ms Zollner said New Zealand had advantages over other countries going into the crisis, including low levels of government debt. A drop in the dollar would help those who were able to keep exporting.
Being a world leader in selling food during this time was also an advantage.
Westpac chief economist Dominick Stephens said while the economy was going to take ‘‘a massive hit’’, New Zealand was wellpositioned to take advantage of a recovery in China, as it emerged from lockdown.
‘‘I’m absolutely certain that primary producers in New Zealand are going to experience a shock to the prices they receive,’’ he said.
Businesses selling products over the internet would have some insulation against the economic shock and online commerce could grow intensely even after the crisis was over, Mr Stephens said.
‘‘So commerce was already moving online — what we might get is three years of that trend all happening in a single month. And it will never reverse.’’