Covid case: Businesses would support 'short, sharp' lockdown

Tuesday, 17 August 2021

'Oh, you're kidding': ACT leader David Seymour learns of the latest Auckland community Covid-19 case while on a walkabout with a Stuff reporter.

Businesses are preparing for the worst, the New Zealand dollar has slid, and bets are off over what the Reserve Bank will do with interest rates after a Covid community case was discovered in Auckland.

Auckland Business Chamber chief executive Michael Barnett said he believed there would be support for a “short, sharp” lockdown after a Covid case was found in the city.

ANZ chief economist Sharon Zollner said her best guess was that Auckland would move into a level 4 lockdown and that the rest of the country could move to level 3 “as we gather information”.

Barnett said word of the diagnosis on Tuesday afternoon had spread quickly and businesses were preparing for the worst.

* Covid-19: 'Swift and severe' level 4 lockdown possible if case confirmed as Delta variant

”Most people have been looking at this and thinking the way we handle this in the next 24 hours is going to be the measure of Auckland,” Barnett said.

The message was “out there” about the case for a level 4 lockdown if Covid reemerged, he said.

“Most employers are looking at who is essential, what is essential, and what communications they need to be having with staff and all of those things are happening now,” he said.

“Most businesses are planning for the worst.”

The Treasury estimated in May that a level 4 lockdown slashed economic activity by between 25 and 30 per cent, while alert level 3 reduced it by 10 to 15 per cent.

Michael Barnett, CEO, Auckland Business Chamber, is set to step down after a 31-year run of the top job.

It revised down the expected impacts of level 3 based on the experience of the lockdowns last year.

Economists have been expecting the Reserve Bank to raise interest rates on Wednesday on the back of buoyant economic news.

Zollner said there wasn’t yet enough information to know what the community case would mean.

But the Covid case had an immediate impact on financial markets and on expectations of what the Reserve Bank might do, she said.

The market had been fully pricing-in the chance of a 25 basis-point increase in the OCR on Wednesday with a 20 per cent chance of ‘double’ 50bp hike.

But it had moved back to now only pricing-in a 76 per cent chance of a single, 25bp hike and the New Zealand dollar had fallen as well, she said.

The dollar dropped about three-quarters of a US cent to US69.5c and the NZX top 50 also slid into negative territory, trading down 0.5 per cent shortly after 4pm.

Infometrics economist Brad Olsen said the Covid case would be unnerving and unsettling, but Infometrics was confident that if changes to alert levels were required, the economy could “weather this setback”.

“Previous challenges have shown the economy is able to bounce back swiftly from any changes to restrictions or other Covid obstructions,” he said.

Relatively little is left in the Government’s Covid Response and Recovery Fund to fund wage subsidies or other economic supports in the event of an extended lockdown.

The fund was run down from $10.2 billion to $5.1b between February and the Budget in May, mainly due to a $3.8b allocation to the Government’s Housing Acceleration Fund.

But Olsen said the Government remained in a healthy fiscal position and could provide additional support for the economy as needed.

Going “hard and going early” had provided New Zealand with a strong foundation from which the economy had grown, he said.

Barnett said it was possible that if the city rapidly went into a lockdown of “two or three days” the city could get a better result than had been experienced in Sydney and Melbourne.

“Short and sharp would probably be very acceptable,” he said.