A week at current alert levels is likely to cost New Zealand’s economy abut $240 million, ASB bank economists estimate.
But the bulk of that cost will fall on Auckland’s economy, which is estimated to take a hit of about $200m per week.
While one week isn’t likely to change New Zealand’s long-term outlook, the re-occurrence of lockdowns was becoming very challenging for parts of the economy, said ASB chief economist Nick Tuffley.
These were rough estimates, which treated the industry composition for Auckland as the same as the rest of the country, he stressed.
They also didn’t factor in the likely catch-up activity that occurs afterwards.
“The challenge is that we’re increasingly seeing the same set of sectors getting hit each time and it is very much the hospitality and event sectors which really feel the brunt of this and are likely to be operating at a very low level of capacity,” he said.
“So we are concentrating the sacrifice in those key areas.”
At less than one tenth of a per cent of annual GDP, the overall cost was unlikely to effect the long-term economic outlook for the country, he said.
Last year, for the August lockdown, ASB had an estimate of about double that ($440m) for the weekly cost.
But New Zealand businesses were getting better at switching in and out of alert levels, particularly those around the country now operating at level 2, Tuffley said.
It was encouraging that we had so many businesses that were able to adapt and operate fairly well.
“When we’re looking outside of Auckland, in level 2, for the vast majority of businesses the impacts are not going to be too great.”
“What we have learned is that the economy did stand-up surprisingly well,” he said.
“I think the issue is around what it is doing to confidence and certainty.”
“We’ve had a long period where businesses are starting to het back to normal, thinking about looking ahead, which is what we need them to do because we haven’t seen much capital expenditure.”
That was likely to be undermined as we yo-yo’d in and out of alert levels and would be the issue to watch, he said.
“So that will be the thing, whether this makes any material dent in people’s views and confidence in making those longer-term decisions.”
But as long as lockdowns were relatively short, there was likely to be pent up demand and a degree of catch-up out the other side,” he said.
“So if you delayed your haircut for a week you are still going to get it done, catch-ups you were planning you might get on and do the next week after.”
Auckland mayor Phill Goff today said that Auckland Council estimated level 3 restrictions would cost the city 200 jobs and more than $30m per day.
He called for Auckland to be prioritised for the vaccine roll-out over other areas that are at less risk.
“We need the vaccine roll-out to be prioritised in Auckland to help avoid future lockdowns, protect jobs and incomes, and ensure Auckland can play its role in supporting the national economic recovery,” he said.
Auckland Chamber Commerce chairman Michael Barnett described the upgrade in alert levels as a massive blow to New Zealand’s recovering economy.
“It is frustrating and a blow to recovery, but we will rally and accept the help put in place to save jobs,” he said.
“Businesses will be eligible for both the wage subsidy and the resurgence payments to mitigate some of the costs and liabilities from having to limit activities for the next week in such short order even though we all could see the warning signs.”
Barnett said business and the community would be “bitterly disappointed” that Auckland had been plunged back into a level 3 lockdown for seven days while the rest of New Zealand reverts to level 2 as health authorities work to contain the latest community outbreak.
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