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Coronavirus: New Zealand economy won't look 'normal’ for a long time

Wednesday 15th April 2020

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According to Treasury modelling shows that with government support and intervention unemployment could be reduced to 9.5% instead of a worse case scenario of around 26%. Treasury does not expect the economy to normalise for a long time. 

As a sign of the times we live, NZME announced that they had cut 200 jobs and NZ’s Burger King franchise operator was placed in receivership. 2 Degrees also reported that it had reduced staff by 10%, with the CEO saying that the group was “already seeing revenue impacts”. He saw uncertainty about how long the current environment lasted as a serious concern.

Stephen Toplis head of research for BNZ saw that that the recovery from the current situation would be framed by deep uncertainty and “there would be potential for the occasional big step backwards” and that the future might be quite different from the one before Covid-19.

With Government intervention Treasury says there could be a rebound in employment back to 95% by 2021 and the economy could grow to a value of $370 billion by 2024.

Finance Minister Grant Robertson says the Treasury's modelling suggests unemployment could be whittled back to 5 per cent next year. Toplis said that might be too optimistic. The ASB expected the quantitative easing programme in NZ to be around $40 by May compared to the current $33 billion

ASB economists said it was possible the Reserve Bank could end up pouring even more money than initially expected into the economy – they said its quantitative easing programme could end up being worth $40b by May compared to the current $33b.

Finance Minister Grant Robertson said the government would be announcing further fiscal support, with a significant financial package probably later this week.

Government’s focus is to keep people employed through wage subsidies and business support and they are very aware that money should be spent where it will yield the biggest impact in terms of employment and economic recovery.

Dominick Stephens Westpac’s chief economist is warned that staying in lockdown longer would be preferable than risking a return to level 4. 

Toplis that even after NZ recovers from Covid -19, the economy would operate at sub-optimal level for some time with the slump in disposable incomes being the biggest enduring hit.

The above was based on an article today by Susan Edmunds in Stuff

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