Around 45,000 jobs will be lost this year because of the coronavirus outbreak, says Westpac.
The bank said in an economic bulletin today that the figure equated to the unemployment rate rising from 4% to 5.5%.
“The Covid-19 situation has escalated dramatically. New Zealand is inevitably heading for a severe recession – we are forecasting that the economy will shrink by 3.1% over the first three quarters of this year,” said Westpac.
However, this recession would have “a completely different character” to the Global Financial Crisis of 2007-2008. This would be a briefer recession than the GFC so long as the banks and the Government remained in good financial shape.
“Allowing people to congregate and travel again will lead to a rapid initial uplift in activity, meaning a briefer recession. However, it will take years for the economy to fully recover from the damage to business balance sheets,” said Westpac.
“We are forecasting that unemployment will rise from 4% to 5.5%, less than the 6.5% reached in the GFC due to the temporary nature of the disruption and the Government’s response.”
New Zealand’s banks were in “a very strong position” to weather the downturn, said Westpac, which was vital for a good economic turnaround.
The bank also predicted “that the Government [would] create some form of loan guarantee scheme to slow potential company failures in the tourism and travel industries”.
The Government has faced criticism for the lack of support for large businesses, particularly in tourism and hospitality, impacted by the coronavirus outbreak.
The Government’s $12.1bn support package announced on Tuesday capped the total wage subsidy support for a single company at $150,000 – a lot less than the monthly wage bill for a large business.
2 Apr 2020 Banks resistant to lend to tourism – TIA