Economic Weekly: NZ enters recession – now for the recovery

GDP figures for the June quarter released last week were within economist expectations and suggest economic activity contracted around 12% as a result of the initial COVID-19 pandemic response (see our full write up here).  The key learning from the Q2 data is that activity appears to have recovered faster and stronger over the second half of the quarter once alert level restrictions were gradually eased through May and June.

As mentioned in recent commentary, we believe more activity was able to take place under Alert Level 2 and 3 than we initially assumed. Using the Q2 GDP data, we have updated our estimates – while we still estimate that only 67% of activity was able to take place under Alert Level 4, we now estimate 88% of activity took place under Alert Level 3 (up from 80%) and 96% of activity took place under Alert Level 2 (compared to 93% previously).

Furthermore, movement data suggest the economy’s ability to adapt to the Alert Level restrictions has continued to evolve.  According to Google Maps movement data, there was more movement in Auckland’s workplaces, retail and recreation during August’s Level 3 restrictions compared to during May.  Likewise, we are seeing less impact from Level 2 – with the rest of the country seeing very little overall reduction in movement/activity relative to Level 1.

As a result, we have revised our H2 2020 GDP forecasts higher.  Other factors contributing to additional activity taking place include a higher number of international visitors remained in NZ than we initially expected.  Over time, as these visitors do leave and are not replaced, the impact will be felt – and will likely be particularly noticeable to tourism operators over summer during the typical peak in international visitor numbers.  However, we are also seeing some offset with New Zealander’s taking holidays at home – so do your part for the economy and book a summer holiday (and preferably not all at the same time – spread the demand through the summer months!).

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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.