Economic Weekly: Go hard, go negative?

It’s been a pretty epic week.  We went from starting off by hitting 100 days without knowing about any community COVID-19 transmission to back into degrees of lockdown by mid-week.  We’ll be there for a couple of weeks.

Our estimate of the lost economic activity from the lockdown is around $440 million per week that Auckland is in Level 3 and the rest of the country is in Level 2.  Against that of course, are the health benefits from continuing the elimination strategy.  The cost of the lockdown is useful for starting a conversation about the value of taking actions to prevent and minimise COVID outbreaks.  Our feature piece this week explores several themes: the value of investing in border and tracing/tracing measures; understanding the trade-offs of containment actions; better understanding the cost/benefits of different strategies, and; working on our flexibility and adaptability.

The RBNZ announced last week that it will boost the ceiling on its asset purchases, and will start preparing to be able to enact a negative OCR and direct lending to banks (Funding for Lending Programme).  The RBNZ’s economic outlook still seemed a touch on the strong side.  That – and the extent of the latest lockdowns – means we now expect the RBNZ will implement the Funding for Lending Programme and a negative OCR early next year.  We will update our forecasts very shortly to account for this view change.  The RBNZ’s ‘unconstrained’ OCR (see chart) continues to flag the need for unconventional policy measures, though asset purchases remain the go-to for now.

Meanwhile, for some of us it’s back to running down the middle of the street, binge-watching Netflix, worrying about coffee supplies, and feeling less guilty about the cupboard full of toilet paper that has been gathering dust.  Take care out there, whatever your level.

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Jane Turner

Senior Economist

Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008.  As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts.  In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.   

During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy.  Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors.  She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.

Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand.  Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours.  In 2014, she took a career break from ASB to travel the world and learn to snowboard.

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.

Mike Jones

Senior Economist

Mike joined ASB in 2019 armed with almost 15 years of experience in applied macroeconomic and financial markets analysis.

Mike's career has been all about distilling the risks and opportunities of economic and financial market trends for business. Basically asking the "what does it all mean" question. Mike's enthusiasm and skill for drawing out practical, commercial insights from the murky world of economics has been honed over a relatively broad base of experience.

After spending the early part of his career on the tools at the Reserve Banks of both NZ and Australia, Mike had a lengthy stint at BNZ where he was NZ’s top-ranked currency strategist. His regular and topical macro research also saw him pick up several FX forecast accuracy gongs from Bloomberg.

Drawn in by the prospect of putting strategy into practice, Mike moved from Wellington to Auckland in 2013 to join Fonterra as GM Treasury Risk Management. In this role, Mike lead Fonterra’s macroeconomic research output, and was responsible for the strategy and execution of Fonterra’s foreign exchange, debt, and interest rate hedging programmes.