Covid-19 coronavirus: Auckland economy braces for more pain from another lockdown

Auckland makes up about 40 per cent of the country's GDP. Photo / Brett Phibbs

Auckland, which responsible for about 40 per cent of the country's GDP, is bracing for the economic effects of the latest alert level 3 Covid-19 lockdown.

At level 3, a large portion of businesses - hairdressers, gyms and cinemas, among others - will keep their doors shut and operations on hold as trading restrictions are re-implemented for at least a week.

Supermarkets, dairies, petrol stations, butchers and greengrocers will remain open to shoppers as normal, while cafes, eateries and restaurants move to takeaways only.
The rest of New Zealand has been put at level 2. The latest lockdown follows a three-dayer for Auckland in mid-February.

ANZ chief economist Sharon Zollner said Auckland's contribution to New Zealand's GDP was "massive".

What it might do is push some firms, who have been close to the edge, over it,

Sharon Zollner

"What it might do is push some firms, who have been close to the edge, over it,"

Zollner said much would depend on what happens over the next 48 to 72 hours.

"We should have by then a better picture as to how far things have gone," she said.

"Once you get to two weeks (of lockdown), it starts to put a pretty meaningful hole in the economy at that point," she said.

The first lockdown last year highlighted the difference between production and income.

"The wage subsidy was very generous so the fall in income was a fraction of the size of the fall in GDP," Zollner said.

With this lockdown the support would hopefully be there for people affected by the cash flow hit.

"What it might do is push some firms, who have been close to the edge, over it," she said.

Economists expect the economy to crab sideways this year, largely due to the absence of international tourism.

Much to the surprise of everyone, the economy staged an impressive "V-shaped" recovery last year.

Zollner said the weekend's announcement would deal another blow to already faltering business confidence.

"These types of events put back the day when businesses feel like they have any certainty."

Looking ahead, the timing of the rollout of vaccinations could prove crucial "unless this thing really gets away on us," she said.

Many businesses were better prepared for lockdowns after last year's experience.

New website design had been done for those "click and collect" businesses but lockdowns "tilted the playing field" towards the big box retailers.

ANZ chief economist Sharon Zollner

Zollner said there had always been the potential for a Covid-19 flare-up.

"It's really hard for the hospitality sector in particular," she said.

Unfortunately over the weekend businesses in need of urgent financial support were unable to apply for the Government's Covid-19 Resurgence Support Payment as IRD's website was down "for maintenance".

The Restaurant Association said the change in alert levels was a "major blow" for the hospitality industry that was already "struggling for survival".

"This is another major blow for our industry who are already struggling to recover from the compounded impact of changes to alert levels and border closures. With borders closed, our revenues continue to suffer and these changes of alert levels are incredibly difficult to manage," Restaurant Association chief executive Marisa Bidois said.

Hospitality NZ echoed Bidois' concerns, saying businesses would be hit hard by the second lockdown in a month.

The lockdown announcement means a wave of cancellations throughout the country and hospitality operators would have no doubt worked through the night and have held last-minute crisis meetings, Julie White, head of Hospitality NZ, said.

"As the week goes on, all hospitality businesses will be hit hard. In Auckland they will have to close for the second time this month and the impact will ripple throughout New Zealand," she said.

"Hundreds of thousands of New Zealanders rely on hospitality businesses for their living — from hotel, cafe, bar, casino and restaurant staff through to cleaning contractors, bakeries and delivery drivers."

The hospitality and tourism sectors collectively contribute $40 billion to the economy each year and employ more than 400,000 people.

The Auckland Chamber of Commerce says it is disappointed for the sectors that will be "adversely affected" by the upgrade in alert levels, but it says the public needs to do its part to keep Covid-19 out of the community.

"Government cannot be blamed for having to take this drastic action and nor be accused of failing to contain this outbreak. We have let the Government and ourselves down. We were trusted to follow the rules and do what is right to keep us safe. Those rules were broken and now we all have to live with the consequences," Michael Barnett, chief executive of the Auckland Chamber, said.

- Additional reporting by Aimee Shaw