Australia is likely to recover from recession faster than New Zealand. Photo / 123RF
Australia is likely to recover from recession faster than New Zealand. Photo / 123RF
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
The New Zealand economy will be hit harder by this recession than the Australian economy.
Let's just concede that one and move on.
It should be plainly obvious to anyone with a passing knowledge of both economies but it feels like something we need to get over before we getto debate about the different political approaches.
International tourism is likely to be "the last cab off the rank" in the global recovery, BNZ chief economist Stephen Toplis says.
We could complain about the lack of diversity in our economy and an over-reliance on tourism, but we'd have to direct those complaints at every government for the past 25 years or so.
Toplis also notes that New Zealand's economy is broadly more reliant on exports than Australia.
In New Zealand, exports account for around 30 per cent of GDP. In Australia, the weighting is around 22 per cent.
"So, by definition, all other things being equal, New Zealand is more leveraged to global growth than is Australia."
It's true that our lockdown was initially tougher than Australia's.
That may have cost us in the short term, although it also ensures we can now make choices which should speed up our recovery.
Regardless, that safety-first approach has been embraced by the New Zealand public, who rewarded the Government with record approval ratings in the polls.
Certainly early attempts to critique the lockdown didn't work out well for former National leader Simon Bridges.
In politics, as in comedy, timing is everything.
Bridges may just have played his hand too early.
Australia has an economic edge over New Zealand. Photo / File
As focus shifts from the health crisis to the economic crisis and job losses mount, debate about the timing of the move to alert level 1, and the speed with which a transtasman bubble can open, will hit harder.
And these issues will all make a difference.
They might be marginal in the big macro-economic forecasts but they loom large in people's lives.
At a macro-economic level we already have a pretty good idea of what is in store over the next few months.
A range of forecasts are expecting unemployment to peak this year at between 8 per cent and 10 per cent.
But the reality of the job losses we're seeing played out in daily headlines will resonate far more emotionally than economist forecasts.
It is worth remembering that there are no forecast scenarios that actually look good - just degrees of bad.
Does a successful recovery equate to more optimistic unemployment forecasts by the NZIER (at 8.1 per cent) – and Treasury (8.3 per cent)?
That's still a near doubling of unemployment from 4 per cent at the start of the year.
That's an extra 110,000 or more people who have lost their jobs.
And another 1 or 2 per cent above that won't seem marginal to the 20,000 to 50,000 extra unemployed people it will represent.
When you put it in human terms, the finer details of what the Government does to mitigate the economic pain from here will be crucial.
So we should expect to see more political pressure going on in coming days and weeks.
It already seems unlikely that the Prime Minister can hold the line on staying at level 2 until June 22.
With the success of the virus-elimination campaign continuing to surpass expectations, calls are mounting to open the borders - not just from business groups but from sometime political allies like Auckland Mayor Phil Goff and Deputy Prime Minister Winston Peters.
We compete with our transtasman neighbours in many ways but post-Covid recovery should not be one of them. Photo / File
Who knows, perhaps the Opposition will also get organised enough this week to add some weight to the debate.
If daily case numbers continue to track at zero it would not be surprising to see a quicker move signalled after the June 8 Cabinet meeting.
Progress on the transtasman bubble is also likely to be accelerated in the weeks ahead.
The Government has proved adept, right through this crisis, at shifting policy as either the facts change or public opinion swings - or both.
New Zealand still has a good shot at surprising on the upside of recovery forecasts.
But we shouldn't be looking across the Tasman as if this is some sort of sporting rivalry.
In fact, the better Australia's economy performs, the better things are likely to go for New Zealand.
The country is still our second biggest export market and our largest two-way trading partner.
We should hope it does recover faster than us and in doing so gives us an extra lift.
Meanwhile, New Zealand should play its own game and focus on the best choices for our own small but unique part of the world.
