Up to 250,000 jobs could be lost in the biggest economic shock in a century, according to economic consultants Infometrics.
The latest Infometrics Quarterly Economic Monitor showed the first signs of New Zealand’s economic slowdown, said the consultancy’s senior economist, Brad Olsen.
“New Zealand is set to experience the greatest economic shock in a century, and Infometrics expects that 250,000 jobs could be lost in the next year or two,” he said.
“The early impacts of Covid-19 are starting to show through in regional indicators and highlight that regional fortunes will be dependent on economic structures, with tourism and construction two obvious areas of weakness.”
Olsen said the latest monitor captured activity for the 12 months to March 2020 and showed visitor numbers and tourist spending on the decline, construction intentions waning and traffic volumes falling.
“New Zealand’s labour market is changing considerably, with more than half the labour force supported by the Government’s wage subsidy,” Olsen said.
“Job losses are continuing to mount as businesses reassess conditions and adjust their operations and workforce to fit the ‘new’ normal. However, the pace of job losses has slowed in recent weeks as the country has emerged from level 4 and then level 3, with this period a lull before the storm.”
Infometrics expected “a second wave of job losses as the wage subsidy runs out, and another wave later in the year as the wage subsidy extension finishes”.
“As well as job losses, fewer hours worked and pay cuts are rising in prominence, reflecting a tougher job environment into the future,” Olsen said.
New Zealand’s food-based primary sector was “holding up well” in the face of domestic and global downturns, which provided the country with a solid economic foundation.
“Dairy and fruit exports remain above 2019 levels, and we expect food exports to remain robust, compared to other commodities, going forward. New Zealand, and the world, needs to eat, and New Zealand producers and manufacturers can provide high-quality food and beverages” Olsen said.
Regional economies with strong food-based primary sector economic activity were likely to weather the economic storm of the pandemic better than others, with tourism and construction-focused regional economies most at risk.
“Regional economies face uncertain times moving forward, with the economy set to structurally change which will see communities and businesses reimage themselves to align with the new state of the economy,” Olsen said.
“But strong regional leadership and rapid response to the economic downturn means that regional New Zealand is putting its best foot forward to get locals working again, and to rebuild an even stronger economy.”