When will we be back to normal? BNZ says it might be sooner than you think

Thursday, 5 November 2020

BNZ is feeling increasingly optimistic about the New Zealand economy’s ability to recover from the impact of Covid-19, bringing forward its expectation for a return to normal activity by a year to late 2022.

“The economy is showing remarkable resilience, and we are optimistic,” said chief executive Angela Mentis. “We think that GDP will return to pre-Covid levels much earlier, in fact a year earlier than we thought a few months ago.”

The bank’s latest analysis suggested the economy would return to pre-Covid levels in the second half of the 2022 calendar year, she said.

New Zealand’s economy slumped 12 per cent in the second quarter, but the Government’s Covid-19 elimination strategy has allowed many businesses to rebound.

BNZ chief executive Angela Mentis says many of the bank’s customers are recording record trading months.

* Coronavirus: Treasury unemployment forecast unrealistically rosy, economists say

* Covid-19 has ushered in a digital revolution that will build more resilient businesses

* Coronavirus: BNZ predicts tough times ahead for some customers

“New Zealand is doing very well,” Mentis said. “The Government response was speedy. It was the right response. I think it has put us in the best position. I get quite excited when I see the strength.”

Kiwis who are foregoing overseas travel during Covid-19 are spending up large in the domestic economy instead.

While the airline, travel and education sectors were not back to their pre-Covid levels, many businesses were thriving, Mentis said.

“I speak to many customers every week and by and large many of them are having record months, record trading,” she said.

“There is a real opportunity for New Zealand to continue to benefit from its Covid-free status. You can see the opportunity to generate significant business opportunities in New Zealand,” she said, citing the film industry.

“I think there are lots more of those opportunities as well,” she said.

Among others doing well, Mentis singled out primary producers, construction, the state sector, IT and technology, homewares and furniture, chemists, office supplies, internet payment companies and supermarkets.

“We can see many of our sectors are doing much better, and we can see that turning up in many of our numbers,” Mentis said.

“I believe the shape of the economy will be different than pre-Covid and really it is pointing to that innovation and digital and business-led growth.”

One of the factors helping the local economy was New Zealanders spending their money in the domestic market instead of travelling overseas, she said.

“Typically the $6 billion that they would spend going offshore, that was all spent domestically so that has really helped the domestic economy as well,” she said.

BNZ had a record home-lending month in October, which showed consumers were feeling confident, she said.

The uptake in mortgages was spread across owner-occupiers, first-home buyers, and investors, she said.