The move out of lockdown this week has prompted a lot of celebration and reflection about New Zealand's success.
But we need to be wary of a "Wile E Coyote moment", says ASB chief economist Nick Tuffley.
In other words, the economy might already have gone off the cliff, we'rejust briefly hanging in the air with our legs spinning, like the ill-fated Looney Tunes character.
"We've been in lockdown, which is the artificial moment were we were suspended in mid-air and now we find out how deep that drop is," Tuffley said.
"So we're into that fall and now we're seeing where things settled. We've got a number of businesses finding out that moment of truth, finding out where their revenue has settled on a sustainable basis."
But in typical economist style, the message came with a heavy dose of realism about the challenges New Zealand now faces.
"In terms of the impact on the economy, the lockdown is likely the biggest decision an NZ government has taken outside of a declaration of war," Tuffley writes.
"The impact will be felt for generations, and the Covid downturn could be NZ's biggest in a history of data going back to 1870."
So as we head back out to the shopping malls and restaurants, have we become too optimistic?
"We are seeing in some of the data that the economy is back and moving," he said. "Electricity usage has been back to normal levels for some time now, Tuffley said.
"Even under level 2, retail card spending in recent weeks has been back to above or around the levels we saw just going into lockdown, so people are starting to get their wallets out to spend again."
But, coming back to that Wile E Coyote moment, we could expect businesses to face challenging times and more tough decisions about staffing in the next two to three months if revenue doesn't come back to where they hoped, he said.
The wage subsidy was working to cushion some of the blow.
What was important from the Government now was to provide some broad direction about how it intended to steer the economy from here, including how we might handle any potential second wave of the virus, Tuffley said.
"I think there will be a lot of businesses that will be very fearful about moves back into level 4 or level 2 and they will be quite nervous about what they do now for fear of over-extending themselves."
While there was pressure mounting to open the border in a managed way it was going to be important that we didn't take too many risks.
If we can do it safely, limited border opening (such as a transtasman bubble) would certainly make a difference to the tourism sector and the wider recovery.
Historically, Australians have been worth about 25 per cent of all our tourism spending.
"So you get some money back in the tin, although [Kiwis] will be flying over to the Gold Coast to warm up so you lose some of the benefits there.
ASB chief economist Nick Tuffley. Photo / File
But going back into lockdown mode would come at a very high economic cost and would likely face much greater push back and non-compliance from the public, Tuffley said.
"Those border procedures will need to be ironic-clad," he said. "Otherwise we risk reversing some of those gains we've just made."
Tuffley and his ASB team are currently forecasting that GDP will shrink by about 6 per cent over the course of the year.
"A lot of that is reflecting the loss of those sectors like tourism and international students that we're not going to make up for in the short term."
Unemployment was forecast to rise to 9 or 10 per cent.
This was the central scenario forecast, Tuffley said.
If we could continue to stay on top of the virus with no more major disruptions then a scenario where GDP ended the year down just 4 per cent and unemployment peaked at 6.5 per cent was possible, he said.
But it was important to remember that we were still in a world that was in the grip of the by pandemic and taking a lot longer than us to get through it, so global growth would be hit hard and that would limit the strength of our recovery.
"I think we can be grateful that we've dodged the deaths we've seen overseas," Tuffley said.
"I think we've learned that we can't take a lot of things for granted. That's the people that we care about and also some of the businesses that we care about, including those things that have made our lives a bit more special and enjoyable, like restaurants cafes and bars".
There were still a lot challenges but New Zealand could at least start looking forward now.
"We can see a light at the end of the tunnel, we can start thinking about the future and planning and learning to be resilient so we can cope with any future shocks coming down the track," he said.
"Because we still don't really know where the Covid virus is going or how persistent it will be."
