Delta variant ‘likely to jolt recovery’ in New Zealand

NEW ZEALAND’S latest lockdowns are likely to stifle the country’s economic recovery, experts have warned.

Jacinda Ardern, the prime minister, has extended a nationwide lockdown until at least the end of the week in a bid to clamp down on an outbreak of the delta variant.

As part of a controversial “zero Covid” strategy, Auckland will remain in lockdown until the end of the month.

Josh Williamson, a Citi economist, said further lockdowns were likely as Ms Ardern’s government tries to snuff out the outbreak.

“We are not surprised at the decision to extend the Auckland lockdown and expect extensions for at least another few weeks,” he said, pointing to New Zealand’s slow vaccine rollout. Only a fifth of adults have received two doses.

Retail sales had been growing strongly ahead of the new lockdown, rising by 3.3pc during the second quarter. The gains were driven by increased personal mobility and a tourism boost from the no-quarantine travel “bubble” New Zealand had opened with Australia. That arrangement was ended in

mid-july after Australia was struck by a delta outbreak, presenting a further danger to growth in the coming months.

The warnings came as the assistant governor of the Reserve Bank of New Zealand revealed it had delayed a planned rate rise because it would have coincided with the new lockdown.

The central bank held rates at a meeting last week, defying expectations.

“It was less about Covid stopping us doing it and it was more about the timing of communicating our policy move,” Christian Hawkesby told Bloomberg. “Was Aug 18 the right day as the country went into lockdown?”

He added the central bank is focused on the economic outlook, rather than how long restrictions will remain in place. That echoed comments by the bank’s chief economist, Yuong Ha, who said that the new outbreak was not yet a “game changer” for monetary policy.

New Zealand is grappling with soaring house prices, increasing the pressure on officials to raise interest rates.

Francesco Pesole, at ING, said two rises were still likely this year.