Flu adds extra pain to recession

Swine flu could knock up to 2 per cent off the economy's output over the coming year, lengthening the recession by six months, according to Westpac estimates.

While acknowledging the economic impacts could be hard to quantify, bank economists - building on work by the Treasury since 2006 - believe the biggest impact will be from people being off work.

The number of people infected with the influenza A (H1N1) virus in NZ is rising sharply. Yesterday, it hit 153.

A further 19 cases were regarded as "probable". The extra cases confirmed yesterday included two clusters in Canterbury and Wellington, with a dozen patients in each.

Although cases are generally milder than the normal seasonal flu, the fact that it is a new virus to which we have no immunity means far more people will catch it.

"Estimates of how many people will be affected range from 20 to 60 per cent, with 30 per cent a number commonly bandied about," the economists said. "For comparison, around 5 per cent of adults and 20 per cent of children currently get a flu-like illness in any given year."

The main effect of the outbreak would be a drop in work done, though there might also be a drop in income if sick pay did not cover all the time off.

A second effect would be a tendency for people to avoid places where others congregate, such as bars, shopping malls and sports grounds.

Consumer confidence and spending might take a knock as this became one more thing to worry about on top of all the existing ones, they said.

The magnitude of these sentiment effects is largely guesswork and may depend on the fatality rate.

The World Health Organisation describes the fatality rate so far as only "slightly higher" than the 0.1 to 0.2 per cent for normal seasonal flu.

"So far New Zealanders seem to be taking a 'she'll be right attitude' to it," economist Sharon Zollner said.

Economist Doug Steel said an outbreak like this was never good, but right now could hardly be worse.

"When businesses have a lot of other negative factors to cope with, their ability to absorb another shock is much less."

To put a 1 or 2 per cent loss of GDP in context, the Treasury already expected the economy to shrink 1.5 per cent this year.

- NZPA