Border mismanagement NZ's 'biggest economic threat'

Friday, 19 June 2020

Six states emerge as serious COVID-19 hotspots in the US, even as moves intensify to reopen the economy.

Mismanaging the New Zealand border is the most damaging thing the Government could do to New Zealand’s economy, economists say.

There has been concern this week after two women infected with Covid-19 were released early from quarantine, without testing.

It put an end to a run of more than three weeks with no new cases in New Zealand.

New Zealand remains at alert level 1, which allows almost all of the economy to operate and begin to recover from the effects of lockdown – except international tourism.

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But economist Tony Alexander said it was at the border that the real risk to that recovery came.

Level 1 allows most of us to get back to work. Economists say it's vital we don't go up the alert levels again.

“The most damaging thing they could do is so badly mismanage border control that we need to go back to level 4 or level 3 alert.”

Shamubeel Eaqub agreed: “The big call for New Zealand was to eliminate and then protect the border until a vaccine or treatment was available.

“If we don’t protect the border, then we would have experienced the severe restrictions of levels 3 and 4 without the gains of an unfettered domestic economy.

“Although I suspect we are more likely to have localised movement restrictions, and those restriction are likely to be very different to what we experienced in April-May. More like localised lockdowns a la Beijing currently.”

Infometrics economist Brad Olsen said the recent missteps from the Government had caused a collapse in confidence about its ability to protect the country’s Covid-19-free status.

“It’s worth noting that at alert level 1, the main restriction was border protection – and this has failed at the first hurdle.

“Any need to move back up the alert levels would be devastating for both economic activity and also economic confidence in New Zealand’s ability to recover. Business operations would struggle again if New Zealand were to move back up the alert levels, with higher business costs, lower revenue, and even greater risks that continued restrictions will diminish the ability for the economy to recover. Although New Zealand already faces challenges to recover, a move back up the alert levels would be devastating for jobs and New Zealand’s economic recovery.'

The Reserve Bank has warned house prices could halve and unemployment could hit 18 per cent if there was another lockdown.

Olsen said he expected the Government would be “incredibly reluctant' to move back up the alert levels.

There could be less public support for such measures.

“The recent new Covid-19 cases do show that this pandemic will not be over for a long time, and highlights the economic realities of having to have strict border protections for an extended period.”

ASB economists said the unemployment rate would be just over 6 per cent for the June quarter, along with a fall in participation rate.

“The big test for the NZ labour market will come over the second half of this year, as firms are forced to adjust to life without the government’s wage subsidy. We expect unemployment to peak around 8 per cent in the fourth quarter of this year and remain above 7 per cent for all of 2021.'

Alexander said there would be more redundancies at the end of the wage subsidy.

“That is why the challenge for the government in the next few weeks is to sow a seed of doubt in the minds of businesses regarding how weak the economic outlook will be.

'They need to display enough mastery of the outlook for our economy than when push comes to shove as the subsidy ends that businesses will decide they should keep staff on because it looks like they will need them come spring or late this year. That is why the Government’s border mismanagement is so damaging and needs radical correction and installation of confidence in isolation procedures right away.”