Aucklanders back to work, but is it the best call for the economy?

Tuesday, 21 September 2021

There’s a limit to how long Auckland can be kept in level 4, Sharon Zollner says.

Hundreds of thousands more Aucklanders will be back at work on Wednesday – but whether the alert level move is a good one for the economy overall will be seen over the coming weeks, one economist says.

The move to alert level 3 at midnight would mean 84 per cent of the Auckland workforce could operate, according to Infometrics, up from 62 per cent at level 4.

That would mean 207,000 more people back at work.

Economic activity was expected to return to 89 per cent of normal, compared to 74 per cent at level 4.

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“As we’re sitting here in lockdown it doesn’t seem to make a lot of difference whether we can get takeaways or not but behind the scenes there are a lot of businesses that can get back to work,” said ANZ chief economist Sharon Zollner.

She said there was a risk that the shift to lower alert levels when there were still new community cases being discovered could mean a longer lockdown and bigger economic blow overall.

“There is a risk that what we gain in terms of weekly economic activity is lost in terms of the length of the lockdown.

“Level 3 can’t be expected to be as effective as level 4. That’s the unknown. But there’s a natural limit to how long you can run your largest city at level 4 both for the sake of the people and businesses within that city and the supply chain ramifications for the rest of the economy. There’s a huge amount of manufacturing and warehousing in south Auckland. You have to be realistic about the limits of how long you can maintain level 4.”

Both Kathmandu and Metroglass warned on Tuesday that this latest lockdown had had more impact on their businesses than last year’s.

Zollner said she was optimistic that, in aggregate, the move to level 3 should mean a smaller hit to the economy than remaining in level 4.

“But we’re all going to be watching the case numbers with great interest to get a sense of whether this is us until Christmas or whether we remain on a path to freedom.”

Infometrics economist Brad Olsen said substantial levels of manufacturing and construction would happen at level 3.

“The delays due to Lockdown 2.0 will mean that building activity timeframes are pushed back, and manufacturers will be working through a backlog of orders as well.

“The move to level 3 in the rest of New Zealand in early September saw spending activity sitting 33 per cent down on average, compared to 46 per cent down at level 4 – Auckland spending is likely to see a similar bounce in spending.

“So far, south Auckland and central Auckland have seen the greatest hits to employment since the pandemic hit, with the largest rises in benefit rates in these two areas.”

A BusinessNZ survey showed about 40 per cent of New Zealand businesses could not operate under level 4 but suggested the Auckland proportion could be twice as high.

Chief executive Kirk Hope said his organisation would advocate for improved Covid policies in future.

He said businesses wanted policies to increase the uptake of vaccinations and make saliva testing more freely available.

The survey also showed they were supportive of compulsory QR code scanning and record-keeping but not vaccine passports.