Economic Weekly: Don’t give up Auckland, we are on the right track

Over the weekend, it was very encouraging to see the number of new COVID-19 cases continue to trend down.  This demonstrates NZ’s Alert Level 4 lockdown is working – and not just slowing the virus spread but stopping the spread.  For now, elimination remains NZ’s best strategy for both the economy and health outcomes.  Elimination means back to “normal” faster and enables the economy to quickly bounce back.   We currently expect Q3 GDP to contract around 6-7% due to the NZ community outbreak and the subsequent lockdown.  And assuming elimination is successful, we expect GDP to bounce back over Q4 – with an 8% rebound pencilled in.

Some may have been disheartened last week to see Australian states New South Wales and Victoria give up on the elimination strategy, after failing to stop the spread of the Delta variant in these communities (RIP trans-Tasman Bubble).  But NZ should not take this is a sign of inevitable defeat.  Google uses its popular maps app to measure changes in people movement, and it’s provided a great insight into the effectiveness of lockdown restrictions.  Comparing Auckland with New South Wales (NSW) and Victoria (see charts below), NZ’s Alert Level 4 has been more effective at keeping more people at home and reducing the number of people needing to physically be at retail locations.  This comparison clearly shows that restrictions in NSW and Victoria were on par with NZ’s Alert Level 3 in limiting the movement of people, not Alert Level 4.  Alert Level 4 restrictions are hard and stressful, but a month here will be better than staying at Alert Level 3 for a number of months as has been the case for NSW.  Furthermore, disappointing US employment figures over the weekend show that living with the virus before most people are vaccinated does slow and inhibits economies’ ability to recover.