Outlook grim but there’s hope – Infometrics

As many as 250,000 jobs could be lost in the next two years as New Zealand experiences “the greatest economic shock in a century,” says economic indicator analyst Infometrics.

In its quarterly monitor, Infometrics says how well the regions fare after COVID-19 will depend on their underlying structures, with tourism and construction “two obvious areas of weakness.”

The monitor examined data from the 12 months to March 2020 including the early stages of the pandemic and the first six days of NZ’s Level 4 lockdown.

Across the country, visitor numbers and tourist spending declined. Construction intentions also started to wane, with residential and non-residential consent lodgements softening in recent months. Infometrics expects the to drop away further as building needs change.

“New Zealand’s labour market is changing considerably, with more than half the labour force supported by the government’s wage subsidy,” says Infometrics senior economist Brad Olsen.

“Job losses are continuing to mount as businesses reassess conditions and adjust their operations and workforce to fit the ‘new’ normal.’

“However, the pace of job losses has slowed in recent weeks as the country has emerged from Level 4 and then Level 3.”

Olsen categorised that period as a lull before the storm. “We expect a second wave of job losses as the wage subsidy runs out, and another wave later in the year as the wage subsidy extension finishes and businesses look ahead to the new year.

“As well as job losses, fewer hours worked and pay cuts are rising in prominence, reflecting a tougher job environment into the future.”

The food-based primary sector is holding up well in the face of domestic and global downturns, providing New Zealand with a solid economic foundation.

“Dairy and fruit exports remain above 2019 levels, and we expect food exports to remain robust, compared to other commodities..,” says Olsen.

“New Zealand, and the world, needs to eat, and NZ producers and manufacturers can provide high quality food and beverages.”

He says regional economies with strong food-based primary sector economic activity are likely to weather the economic storm better.

Tourism-and construction-focused regional economies are most at risk.

“Regional economies face uncertain times…with the economy set to structurally change which will see communities and businesses reimage themselves to align with the new state of the economy.

“But strong regional leadership and rapid response to the economic downturn means that regional New Zealand is putting its best foot forward to get locals working again, and to rebuild an even stronger economy.”