Birdflu cost to NZ 'up to $30bn in first year'

A birdflu pandemic would cost New Zealand between $15 billion and $30 billion in the first year, Treasury said today.

The loss to the economy would be around 10 to 20 per cent of GDP in the year that a pandemic occurred, it said in a report.

The cost over four years would be up to $40 billion.

"The economy would take several years to recover from a shock of this scale and losses could amount to 15-30 per cent of annual GDP over the medium term," Treasury said.

The report, written on November 2, was published on its website today (link at foot of page).

Normally, the risk of flu pandemic is considered to be 1 to 2 per cent over any one year, or 20 to 30 per cent over 20 years, but Treasury quotes Australia's Chief Medical Officer as putting the odds of a pandemic over the next few years at 10 per cent.

The World Health Organisation (WHO) has warned that the risk of an influenza pandemic on the scale of the "Spanish flu" outbreak in 1918 has been raised by the emergence of a highly pathogenic strain of avian influenza in Asia, H5N1.

H5N1 has killed more than 60 people since January 2004 in Vietnam, Thailand and most recently, Indonesia, all of whom were infected by contact with diseased birds.

If birdflu mutates so it can be transmitted from human to human, the risk of a pandemic is seen as high by the WHO. Under the most severe scenario, the Ministry of Health estimates up to 40 per cent of the population could contract influenza, with 2 per cent of those infected dying. This could result in up to 33,000 deaths in New Zealand.

Border controls imposed either in New Zealand or in other countries would disrupt trade and tourism.

There would be possible shortages of raw materials such as oil, and a major disruption to global supply chains.

"Schools, universities, creches, libraries, bars, cinemas, and other places of gathering may close, either as a public health measure to prevent the spread of disease, or through a downturn in customer numbers," the Treasury report notes.

"Many people would be absent from work because of sickness, caring responsibilities, fear of infection, or because they had been requested to stay home by their employer.

"A large number of households may come under financial stress."

It said demand for non-essential goods and services would be likely to fall, and some firms would close up for the duration, or go out of business. The retail and hospitality sectors would be hard hit.

Treasury and the Reserve Bank are helping develop plans so the financial system and Government payments keep running.

The report said: "Issues of financial support or compensation are also being considered, including who should pay if businesses have to furlough their workers (either as a health and safety measure for their staff, or as a result of a public health intervention), and the possibility of support for industries heavily affected by a pandemic."

Banks' decisions on maintaining credit to distressed firms, for example, and IRD's treatment of tax liabilities, may have an important bearing on firms' resilience, it noted.

- NZPA