BNZ released an economic outlook earlier this week, which outlines the need for us to remain grounded and realistic about New Zealand’s economy's recovery, post Covid-19.
We know that many businesses will be forced to shut their doors, and unemployment is set to rise from the current 4% level. The primary focus for the Government currently is to keep people in jobs. The wage subsidies to businesses are helping them hold onto staff and therefore, in the next quarter, we may see that unemployment will be around 5.5%. However, in the next quarter, once the subsidies have dried out, we may see this number rise to approximately 9-10%.
This is huge and along with the fact that our exports will be slashed in the next couple of quarters and disposable household incomes have taken a massive reduction, our economic growth is set to decline by 13% by the end of the year.
We have to be real. After the 4 weeks lockdown period, things aren't going to be back to the way they used to be, and it could take years before we bounce back to the same level of economic activities we saw before Covid-19, which was already considered to be slow.
We don’t know if the Government will extend level 4 for another week before reducing the restriction to level 3 which also has tight restrictions. It could be best to do it now, to make sure that the future tracks back on plan, rather than having to be thrown a curveball because we rushed it.
