Economic Note: Coronavirus economic impacts

  • The impacts of viral outbreaks on the global (and NZ) economies typically prove temporary.
  • It is early days, but we anticipate a short hit to Q1 NZ GDP, equivalent to roughly 0.6% of GDP.
  • At this stage, we assume no change to monetary or fiscal settings as a result of the outbreak.
  • Should the impact prove worse than typical, then we’d expect OCR cut(s) and/or fiscal stimulus.

Viral outbreaks typically result in a sharp, but relatively brief, shock to both the NZ and global economies.  Outcomes are highly sensitive to the location, severity and duration of the outbreak and measures taken to control it.  The mortality rate of the coronavirus looks to be low, but its long incubation period makes early detection and containment difficult.  The virus is still spreading rapidly.

The epicentre of the outbreak, China, is both the growth engine for the global economy and New Zealand’s largest trading partner. Already there are signs of a larger proportionate hit to global tourism from the virus. Economic impacts are also occurring because of the extensive (and disruptive) efforts to contain the virus that will impede the movement of goods and services.

For the NZ export sector, the impacts are likely to be uneven. Given the timing of the outbreak around the Chinese New Year, the impacts are especially acute for the tourism and education sectors. The goods sector will be impacted to varying degrees.  All up, we anticipate a 0.6% hit to Q1 GDP relative to our baseline, primarily via lower services exports. However, a more severe outbreak globally could result in longer-lasting disruption to NZ exports and broader economic activity.

We are not detecting many signs of the virus impacting NZ adversely via financial channels. Equity markets are off lows. The economy’s key shock absorbers are working: the NZ dollar and interest rates are lower than they would otherwise be. A severe virus outbreak in NZ could push the NZD lower and see markets price in higher NZ risk.

For now, we expect NZ policymakers will not change policy settings. If, however, the virus reaches NZ or the global virus impacts turns out to be significant, additional policy support will be required. The RBNZ will move the OCR lower. Fiscal policy will also have a key role to play.


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Nick Tuffley

ASB Chief Economist

Since starting out in 1997 as an economist, it's fair to say Nick has seen a few hair-raising moments over the years, including the Asian Financial Crisis and the Global Financial Crisis.

One of Nick's strengths is his ability to communicate complex ideas in a readily understandable and entertaining way.  He thrives on helping people understand the economic environment to help enrich the quality of their business or personal life. He’s proud to lead a team that has won two Forecast Accuracy Awards from Consensus Economics, and has a strong track record with their Official Cash Rate and dairy price forecasts. 

Nick grew up in Christchurch and graduated with a Master of Commerce degree from the University of Canterbury.  He learned his economic ropes at the Reserve Bank of New Zealand before a long stint as a Senior Economist at Westpac, and joined ASB as Chief Economist in 2007.

Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.