Welcome to Swoosh Finance’s first Business Bulletin! Each week we’ll be bringing you the latest news in New Zealand. We’ll tackle the issues that are relevant to you, the economy, and your finances.
Economy
Let’s start with the elephant in the room. New Zealand has been one of the quickest countries to bounce back from the Coronavirus. As our country’s economy starts to get back to normal, we are still facing a recession. As the government prepares to release the new budget, they confirmed the news that New Zealand would enter a recession. This is the first recession since the 1990s, and possibly the worst since the great depression.
The economy shrunk by 0.3 percent over the first three months of this year. This is the first quarterly contraction since 2011. Treasury analysis has claimed that maintaining the Coronavirus shutdown is costing the economy $4 Billion a week. Mass business closures due to coronavirus have caused Gross Domestic Product to fall by 10 percent. This equates to $50 billion wiped from the economy. On the plus side, New Zealand has completely eradicated the threat of coronavirus.
Treasury has predicted unemployment will double to 10 percent in the June quarter. This is the highest rate in New Zealand in 26 years. Whilst this may seem like bad news, the lifting of restrictions will give the economy a much-needed boost. As trade resumes more money will enter the economy, and more people will return to work. This will result in further money circulating and an increasing return to normality.
Among the industries most affected were hospitality, tourism, and retail. The housing and construction markets are looking to take a hit also.
Construction
In order to support the flagging construction industry, the Federal Government has unveiled a stimulus package. They are offering $25,000 for people to upgrade or build their homes. Labour and The Greens have slammed the scheme, saying it is too tightly focused to be useful.
The Government’s program, which it has dubbed “HomeBuilder“, will only apply to substantial renovations and the construction of new homes. To be eligible, recipients must spend at least $150,000 on building or renovations. The grants are means-tested to exclude couples making more than $200,000 per year and individuals making more than $125,000 per year. Limits are also placed on the value of the property the grants are to go toward.
The government is expecting about 27,000 homeowners or builders to access the scheme.
Construction industry bodies are projecting another drop for the second half of this year. They forecast that the economic downturn associated with the COVID-19 pandemic could see the number of building projects in the pipeline plummet.
In addition to the Homebuilders scheme, the government has announced it is bringing forward it’s public building projects. This will create projects worth 2.7 billion dollars in Victoria alone.
Travel
Travel restrictions have been slowly easing domestically, with all states now allowing unlimited intrastate travel. Queensland remains firm on its border closure to interstate travellers, while other states are now allowing interstate visitors. Many state leaders are calling on Anastacia Palaszczuk to open Queensland borders to stimulate the flagging tourism industry.
The pressure is mounting on governments to reopen trans-Tasman travel as industry groups ask for travellers’ expressions of interest in New Zealand flights leaving as early as 1 July.
The Australian Chamber of Commerce has proposed the Canberra to Wellington route as “a proof of concept” for the resumption of international flights for “post-COVID-19” travel.
Canberra Airport has opened a register of interest for flights on 1 and 2 July, however, it notes that the dates are subject to government approval. If this proves successful, it will extend to twice-daily flights before opening up to other Australian capital cities.
“The symbolic route will show we have developed a safe and effective method of air travel and encourage the extension of the aviation networks to other destinations across Australia and New Zealand over time,” the Australian Chamber of Commerce and Industry’s tourism chair, John Hart, said.
“The tourism opportunity for Australia is to tempt more of the 3.1 million New Zealanders that travel overseas to come to Australia this year. Pre-COVID we received around 1.3 million visitors from New Zealand, leaving about 1.8m holidays up for grabs.”
Retail
Australians and New Zealanders lead the world in panic buying in the early months of the coronavirus pandemic. This is according to new research that has analyzed Google searches. The searches analysed included those for toilet paper and supermarket opening hours.
Researchers from the University of New South Wales said they had to build a new scale for graphs showing Australian panic. Panic buying levels were four to five times higher than in countries like the UK and Italy. This is a shock as those countries were hit worse by Covid-19.
New Zealanders experienced a spike in panic buying in the lead up to the crisis. New Zealanders reportedly bought enough food for 10 million people. This is despite the current population being only 5 million. We were also one of the least affected countries in the world. This suggests that the media’s coverage of hoarding could have contributed to the world-leading levels of panic.
As restrictions have eased and government stimulus has been delivered, businesses in the retail industry have seen a small recovery. However, with consumer confidence down, discretionary spending is forecast to remain low.
Weekly Summary
- New Zealand currently has no new Coronavirus cases
- The economy is predicted to shrink by 4.6 percent
- Unemployment is forecast to peak at 9.8 percent
- All restrictions have now eased, except for border restrictions
- Some experts are calling for a travel bubble between Australia and New Zealand
- An Australian packaging company has stood down over 100 workers after an employee returned a positive COVID-19 test on Sunday
- The global death toll from coronavirus has passed 378,000. There are more than 6.3 million cases of infection
- Focus has shifted from containing infection to recovering the economy
With interest rates forecast to stay low for as long as 5 years, now is the perfect time to invest in your assets with a business loan