Sunday dinner got rudely interrupted by the unwelcome news that NZ is heading into some repeat of last August’s Auckland L3 and rest-of-NZ L2 lockdown. The UK COVID variant has made it out into the community, with the source of infection as yet unknown.
So, economically speaking, what does this mean? The key determining factor is how long the lockdown goes on for, and for that we will have to wait and see. If it is merely a matter of days, the economic impact will be minimal. Spending that would have happened (particularly in the services sectors) over this Monday – Wednesday period will likely be caught up on in following days or weeks. If restrictions continue over the weekend, the potential for foregone revenue in hospitality, for example, starts to step up.
But it is really important that we reflect on what we have learned about the economy since the August lockdown. NZ businesses proved surprisingly adaptable to operating under restrictions. Many retailers, for example, have stepped up their online or contactless sales methods, enabling a fair degree of commerce to continue. It is largely those activities that require face-to-face contact that bear the brunt. Even then, however, the longer-term impact will depend on the extent to which people catch up on what they originally wanted to do vs. outright cancellation.
When the August 2020 lockdown started, we estimated that the weekly value of lost activity was likely to be around 0.15% of annual GDP. These estimates were derived from estimating how much of the economy was not permitted to operate and didn’t take into account any potential for post-lockdown catch-ups activity. This time around we think the GDP impact could be slightly less than half that given how NZ adapted in the last lockdown. NZ GDP rebounded by a more than expected 14% in the September 2020 quarter even while spending a chunk of the time under restrictions.
One of the clear indications of how we adapted was that people movements to places of commerce during the August lockdown were greater for given levels of lockdown than was the case during the first March – June lockdown. We could also review the lockdown restrictions to focus on ‘safe’ vs. ‘essential’ activity.
On a final note, what is it about toilet paper? Unlike money it actually grows on trees (sort of) in NZ. It’s coffee supplies we need to be worrying about, plus whether or not it is now socially acceptable to watch Bridgerton during lockdown! Take care out there and we hope you have to hand everything you need to get through this latest – and hopefully – brief lockdown.
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 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 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.