Tourism: ‘There’s light at the end of the tunnel’.
The tourism industry, which has taken a body blow from border closures and the disappearance of big-spending international tourists, is warned it needs to hang in there for one more year.
The economic data might be looking good, but it is still too early to say New Zealand has made it through the worst of the Covid-19 pandemic, say economists.
Kiwibank chief economist Jarrod Kerr said the economic scarring associated with the lockdowns did not appear to be anywhere near as bad as first thought, but the tourism sector was bearing the brunt.
While the coronavirus vaccine rollout was gathering pace, it would still be some time before immunity levels were high enough in key countries like the United States, Britain and Australia for New Zealand to relax its borders.
‘‘We’ve gone from counting Covid cases to vaccinations, that’s a huge shift in itself,’’ said Kerr.
The rates of global vaccinations per day had risen to 6.5 million from 4.5 million a week ago, and would continue to rise.
The United States was on track to reach herd immunity by the end of the year, and other countries would follow. Kerr said that by this time next year he expected to see New Zealand in a number of travel bubbles, including Australia.
‘‘The light’s at the end of the tunnel, and it’s getting brighter every day.’’
However, the tourism and education industries needed to accept they’re going to have to hold on for one more year, he said.
Queenstown and other tourist centres are facing an economic crisis, with adventure operators, hotels and bars forced to close their doors due to a lack of visitors.
‘‘It’s still a really tough summer. We’re hoping that by next summer at least some Australians and people from other countries can come. We’re asking a lot, though, of an industry,’’ said Kerr.
A shock drop in unemployment, and a big rise in gross domestic product highlight the rollercoaster ride in the official statistics at the moment.
ANZ senior economist Miles Workman said part of the problem was the delay between collecting the data and releasing it to the public. We usually get employment data two months after the fact, and GDP data is even later.
‘‘GDP and full employment are what we’re really looking for, and the unfortunate thing about the current environment is the headline data are still navigating an extremely volatile patch caused by the lockdown,’’ he said.
That data may start to stabilise around the middle of this year, but would not be released until the September quarter.
‘‘The starting point is awesome, but 2021 is probably more of a sideways year. Not only do we have to navigate the pandemic, but we also have to navigate how borders may reopen, and then we don’t get a normalisation until possibly 2022 once people flows are resuming,’’ Workman said.
In the December quarter, unemployment fell from 5.3 per cent to 4.9 per cent. ANZ economists wanted to see the unemployment rate around 4 per cent, but Workman said it would rise again before it started to fall.
In terms of economic growth, ANZ wanted to see solid annual GDP growth of about 2.5 or 3 per cent. Economic activity jumped a record 14 per cent in the three months to September 30, following an 11 per cent slump in the June quarter.
GDP was expected to weaken over this year producing a technical recession in the December quarter, but Workman said the small size of the drop, and the underlying strength of the economy, would be mitigating factors.
The Covid-19 vaccination programmes here and around the world, which would dictate when borders could reopen, were key, he said.
ASB chief economist Nick Tuffley said the recovery would not be so much data-driven as based on events, particularly the vaccination programme.
From a data point of view, though, ASB wanted to see signs the unemployment rate was consistently below 5 per cent, and closer to 4.5 per cent.
For GDP, a sustained rate of 2 to 3 per cent growth was key, and inflation needed to be sitting around 2 per cent as evidence that steam was building up in the economy.
‘‘We’ve gone from counting Covid cases to vaccinations, that’s a huge shift in itself.’’ Jarrod Kerr Kiwibank chief economist