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Sharon Zollner: what the lockdown means for New Zealand's economy

Antoinette Spicer
Sharon Zollner
Sharon Zollner, ANZ   Getty images

Tourism, education, exports, accommodation, sport and entertainment, hospitality, commercial property and the housing market are just some of the sectors to be hit worst by the lockdown.

In a webinar last week, ANZ chief economist Sharon Zollner compared the services exports sector to a “gaping black hole in terms of tourism and education”, while likening “Queenstown turning into Greymouth overnight”.

Zollner said in Queenstown a lot of people had built houses and increased their mortgage to build additional Airbnb units, which are now just extra debt with no return. Despite this, cruise ship bookings for next year were extremely strong.

While there is hope Australia may open its boarders to New Zealand, Zollner said many believe New Zealand boarders will not open for another year.

One-third of hotels have closed around the country already. While low-end motels/hotels eligible for WINZ emergency housing were set to do rather well, she said, hotels being used in quarantine for arrivals would only be a short-term fix as that would continue to drop off.

In contrast, Zollner believes sectors including groceries, agriculture, online retail, forestry, food manufacturing and construction will be some of the least affected after lockdown.

For the forestry sector it was relatively well-timed because China had a huge amount of inventory from their shutdown so it was helping rebalance demand and supply to some degree.

In the agriculture sector, meat processors are down to just 50 percent capacity from having to space their workers out more. However, Zollner said New Zealand was in a better situation than the US, where firms were shutting down because of COVID-19 among their workforce.

The Government has already spent $20 billion and is expected to spend another $20 billion, to bail New Zealand out. Zollner expects this will see New Zealand’s net debt double 20 percent to 40-50 percent of GDP.

She believes the Fees-Free scheme and minimum wage increases will likely be scrapped while the superannuation age will increase from next year, due to the initiatives being conditional on the state of the economy.

“When the unemployment rate is much higher next year the Government will have to pull back on those plans or risk even higher unemployment rate driving bad outcomes for the people they are trying to help,” Zollner said.

“By just doing the maths we believe they [the Government] are going to double Quantitative Easing or possibly even more, to $60 or $70 billion to absorb the new issuance and hopefully prevent long interest rates from lifting.”