Foot-and-mouth outbreak 'would be horribly bad' for economy

An outbreak of foot-and-mouth disease would be devastating for the economy, says Bank of New Zealand chief economist Tony Alexander.

"No one really knows how it would play out exactly. But it would be horribly bad."

A what-if study of the impact of a limited foot-and-mouth outbreak by Reserve Bank and Treasury officials two years ago predicted an immediate drop of 4 per cent in economic output in the first quarter, almost certainly enough to put the economy into recession.

It estimated 20,000 jobs would be lost, perhaps more and put the cost of the loss of exports at $5 billion over two years. There would be a long-term loss of output and income running into billions of dollars.

An analogy might be a person who was badly injured and spent a year in hospital. Even if the person made a full recovery, the time and income lost would not be recovered.

"You would struggle to find anyone who would benefit," Mr Alexander said. "Maybe there would be a benefit from a lower dollar for non-pastoral exporters such as the manufacturing, forestry and fishing sectors."

But the downtown would be likely to be compounded by a surge in emigration, he said. "When times get tough Kiwis tend to leave the country."