Economy Hub: Businesses need to "hold breath" for Coronavirus rebound. Video / NZME Vision ...
Video Player is loading.
Current Time 0:00
/
Duration 0:00
Loaded: 0%
0:00
Stream Type LIVE
Remaining Time -0:00
1x
Chapters
descriptions off, selected
captions settings, opens captions settings dialog
captions off, selected
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.
Tauranga Special School: Diamond jubilee
UP NEXT:
Autoplay in
3
Disable Autoplay
Cancel Video
Economy Hub: Businesses need to "hold breath" for Coronavirus rebound. Video / NZME Vision
NOW PLAYING • Economy Hub: Coronavirus rebound
Economy Hub: Businesses need to "hold breath" for Coronavirus rebound. Video / NZME Vision ...
Cash is king as firms "hold their breath" to survive the coronavirus shock, says Westpac chief economist Dominick Stephens.
The longer the disruptions lasted the more likely we'd see "firms running out of cash and folding" doing lasting damage to the economy, Stephens told the Economy Hub video show.
"It'sa really dramatic effect on the likes of tourism, forestry, education and price-wise for a lot of food exports, but it is hopefully going to be temporary," he said.
"So how long can they last, in some cases earning very, very little, before they start running out of cash?"
Based on previous examples, such as the Sars outbreak in 2003, there was likely to be a strong rebound effect as the Chinese economy played catch-up later this year.
Keep up to date with the day's biggest stories
Sign up to our daily curated newsletter for the day's top stories straight to your inbox.
But firms needed to survive long enough to benefit from that, Stephens said.
"It's not just that the economy rebounds to its previous levels of activity, which involves rapid rates of growth," he said.
"It's that, for the likes of lumber mills in China, their customers have run out of products. So once those factories re-open, loggers in New Zealand will have to work double-time to meet demand for wood."
The difficulty for some firms would be surviving long enough to reap the benefits of the rebound and that was where targeted Government assistance could be vital, Stephens said.
"It would certainly be a shame to see good firms go under... a good solid business, with a solid business proposition that just isn't able to maintain cash through the downturn," he said.
"So if there is Government assistance that's the sort of area that it would be in."
The big risk in any economic forecasting right now was uncertainty around the timing of the disruption.
"A long-lived series of disruptions would cause lasting economic damage," he said. "We're not virologists, we don't know how this is going to play out."
The forestry sector is feeling the pinch as China shuts up shop amid the coronavirus outbreak. File photo / Michael Cunningham
"We can look at historical episodes. What they tell us is that it's not the effects of the illness itself, it's the quarantine efforts."
Those effects looked to be much more severe than with the Sars virus, he said.
"So all we can do is make reasonable assumptions based on what quarantine effects there might be.
"I think we, the Reserve Bank and everyone else, has been very clear that these are starting assumptions," he said.
"If that travel ban lasts two months then the effect on the economy is 0.4 [per cent off GDP] that's my assumption. If it lasts longer, then the effect will be more."
The Reserve Bank last week estimated the impact at 0.3 per cent of GDP in the first quarter.
On Monday the Prime Minister said her latest advice was that the impact would likely see GDP come in 0.3 per cent lower across 2020.