Top Kiwibank economist says NZ should come out of level 3 now

Monday, 4 May 2020

Kiwibank has broken ranks with the Government in a report from its economics team.

Kiwibank's chief economist has attacked the Government's response to the coronavirus pandemic, saying it is difficult for the country to justify staying at alert level 3.

The Government will soon review whether the country could drop back to alert level 2 potentially as early as on Wednesday week.

But Kiwibank chief economist Jarrod Kerr said he believed the country should come out of alert level 3 now, and that he was not just opposed to an extension.

Kerr said he was concerned by the social costs of the lockdown.

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Jarrod Kerr says 'lack of clarity' from Government on how it would respond to future cases is disappointing.

'I think it is time to get passionate and broaden the debate.

'It is not just about the spread of the virus. We are protecting one vulnerable group … but we are hurting another vulnerable group with mental health issues.'

Police and the Mental Health Foundation have said there is no evidence to back a claim that suicides have increased during the coronavirus lockdown.

The foundation slammed the rumour as false and potentially dangerous.

Kerr acknowledged he had no evidence that suicides were increasing.

But he said he had heard 'horrific things' from friends in the police about what they had seen in the past five weeks, including about domestic violence.

The bank's economic forecasters, headed by Kerr, said earlier in a written report that they could not criticise the Government's move into lockdown level 4 as it had 'worked'.

Westpac's forecast suggests unemployment could be kept to single figures.

'But we must criticise the exit strategy, knowing the economic and social cost it has caused,' the report from the state-owned bank said.

Kerr said he was 'disappointed' by a lack of clarity from the Government on how it might respond to future coronavirus cases or clusters.

He suggested that if there was a future coronavirus case in a suburb of Whangarei for example, the Government could consider returning just that suburb to level 3.

A broader return to higher alert levels would 'really hurt', he said.

'We are in quite a precarious situation right now where a lot of companies are up against a wall, hanging on to lifelines.'

Westpac has meanwhile forecast unemployment will rise to a 27-year high of 9.5 per cent in June, before dropping back to somewhere above 7 per cent by the end of the year.

The bank said in a weekly update that while the economy was starting to open up again 'we're still a long way from business as usual'.

'Health and safety restrictions will be a handbrake on activity for some time,' it said.

'The coming months are likely to see restrained spending and job losses.'

It suggested Covid-19 would take the wind out of pay rises into next year, forecasting wage inflation will fall 'from rates of over 2 per cent per annum in recent years' to about 1 per cent in 2021.

'That would be the slowest pace of wage growth in more than two decades,' the bank said.

'Together, job losses and weaker wage growth are going to be a significant drag on household spending.'

Statistics NZ is due to reveal March's unemployment rate on Wednesday.

But that is not expected to reflect much of the hit on the jobs market from Covid-19, which appears largely yet to arrive.

Westpac forecast Statistics' data would show unemployed had edged up to 4.3 per cent at the end of March, up from 4 per cent at the end of December.

The bank calculated about 13 per cent of normal economic activity was still on hold during the level 3 lockdown.

But the bigger worry was the longer term impact from the closed border and the collapse of international tourism which meant 'hospitality and tourism have a long hard road ahead of them'.

Westpac forecast a mixed long-term outlook for manufacturers even once Covid-19 'eventually passes', due to increasingly protectionist trade policies and rising economic nationalism.

'For New Zealand manufacturers that have struggled with international competition, the domestication of supply chains is likely to mean more domestic opportunities.

'However, for those that have achieved export success, the global shift towards onshoring is likely to pose a direct threat.' it said.

WHERE TO GET HELP:

1737, Need to talk? Free call or text 1737 any time for support from a trained counsellor

Lifeline – 0800 543 354 or (09) 5222 999 within Auckland

Youthline – 0800 376 633, free text 234 or email talk@youthline.co.nz or online chat

Samaritans – 0800 726 666

Suicide Crisis Helpline – 0508 828 865 (0508 TAUTOKO)

What's Up – 0800 942 8787 (for 5–18 year olds). Phone counselling is available Monday to Friday, midday–11pm and weekends, 3pm–11pm. Online chat is available 7pm–10pm daily.

Kidsline – 0800 54 37 54 (0800 kidsline) for young people up to 18 years of age. Open 24/7.

thelowdown.co.nz – or email team@thelowdown.co.nz or free text 5626

Anxiety New Zealand - 0800 ANXIETY (0800 269 4389)

Rural Support Trust - 0800 787 254 (0800 RURAL HELP)

Supporting Families in Mental Illness - 0800 732 825