9 ways COVID-19 has re-shaped NZ's economy
Sharon Zollner, Chief Economist, ANZ NZ
There is little doubt New Zealand’s economy has taken a big hit from COVID-19 and the nationwide lockdown. The long-term impact on the country’s economy is the focus of these 9 insights from ANZ New Zealand’s Chief Economist, Sharon Zollner.
1. Increased demand to study in New Zealand
Despite – or even because of – the COVID-19 pandemic, interest from international students applying to study in New Zealand remains strong. Our progress towards eradicating the virus means New Zealand is seen as a safe destination to study. However, with our borders currently closed, it’s unclear when these international applications can be accepted.
2. Airbnb rentals entering the long-term rental market
With no international tourists and limited domestic tourism, Airbnb homeowners are turning to long-term rentals as an alternative way to earn revenue. This will result in Kiwis having more choice in terms of rental properties, more competition and a drop in rents, especially for newly advertised properties.
3. Kiwis report a pay cut
In an international survey, 20% of New Zealanders reported a pay cut since the COVID-19 crisis began, but relatively fewer people are reporting they’ve been laid off. This is because the Government’s wage subsidy is helping keep many businesses afloat. At this stage, we expect the unemployment rate will increase to around 11%. An extension to the government’s wage subsidy scheme is likely, and if this happens, we expect it to target our most vulnerable industries as opposed to continuing the across-the-board approach.
4. Agribusiness more concerned with drought than COVID-19
New Zealand’s agriculture sector has continued to export products during lockdown and is expected to perform relatively well through the crisis. People have to eat after all. However, our severe summer drought has made life tough for many farmers.
5. Globally, people will prioritise domestic travel
Global research suggests the first activity people want to do after lockdown is travel. However, surveys suggest domestic travel will be prioritised over international. This may result in less trans-Tasman travel, even if our borders are opened to Australia. People will be in saving mode, and international holidays are a ‘nice to have’.
6. House prices are expected to drop by 10% - 15%
A decrease in house prices is likely to occur as a result of the rise in unemployment making it hard for some to meet their mortgage payments. Lower interest rates will provide some offset, and it should also be remembered that in most regions a fall of this magnitude would just take prices back to where they were 12-18 months ago.
7. We’ll never need as much office space again
People have had a taste of working from home and business owners have rapidly improved their remote working infrastructure. And it’s gone pretty well, on the whole. It’s expected that more people will continue to work remotely, even when the lockdown lifts.
8. New Zealand exchange rate unlikely to drop much
Typically, in global slowdowns the NZ dollar falls sharply, because we’re a small commodity-producing nation. A lower exchange rate helps our exporters. But this time round, it’s not clear that we’re worse off than anyone else, so there’s no clear reason why the New Zealand exchange rate would drastically decrease. Fortunately, the international demand for our exported goods is still strong. Dairy, meat and wood products are our largest exports and overseas demand for these products is expected to continue, but the world’s ability to pay premium prices for New Zealand’s premium products has taken a big hit and we have to be realistic about that.
9. New international opportunities
Once the border is re-opened to foreigners, though quarantine measures are a huge hurdle for tourism, New Zealand is expected to be an increasingly appealing destination for foreign economic activity, as it will be seen as a low-risk place to operate. Sectors such as the film and television industry are well positioned to benefit from this. The appeal of moving a production to New Zealand, where they are less likely to be shut down due to further possible COVID-19 outbreaks, is clear.
for ANZ New Zealand’s full Quarterly Economic report which has more detail about New Zealand’s economic outlook.
Sharon joined the ANZ NZ Economics team in 2010 and became Chief Economist in late 2017. She started her career as a macroeconomist at the Reserve Bank of New Zealand in 1998, and has also worked at the Central Bank of Norway. Sharon created the Truckometer in 2012.