Liam Dann - Covid 19 coronavirus elimination's economic cost

More pain is expected as a result of the Covid-19 pandemic. Photo / Michael Craig

COMMENT:

New Zealand's lockdown will go down in history as a national success story.

But we can't celebrate that success without acknowledging what it has cost us.

Big sacrifices were made by many people – businesses and jobs were lost, lives have been turned upside down.

And the sacrifices haven't finished yet.

Economists expect unemployment numbers to keep rising to a peak later this year – somewhere between 8 and 10 per cent.

The hope then is that we'll then see a relatively quick recovery which marks this recession out from many in the past.

There is a strong case to be made that getting through alert levels quickly and eliminating Covid-19 has enhanced our economic outlook.

We still face a very difficult period.

But the good news is the steady progress of the past few months has put us ahead on the recovery curve.

We beat the virus quicker than most economists dared to forecast and, in doing so, we also beat our own expectations.

That's an important point because exceeding expectations has a huge influence on our psychological outlook.

Our outlook feeds into consumer and business confidence. If that stays strong, we can maintain some momentum in the economy.

We should hope the Government can help keep that sense of momentum rolling as it addresses new challenges like the gradual opening of borders.

While the move through alert levels was no easy thing, it was a relatively linear process.

What comes next may be more complex and controversial because while our borders remain closed our economy will struggle.

The reality is there are very few developed nations that have suffered such a dramatic hit to foreign exchange earnings.

The closure of our borders translates to the loss of 30 per cent of our total export revenue once you add tourists and students.

That could translate to a hit of as much as 5 per cent of total GDP – which is a huge hole.

Passion, enthusiasm and national pride can only go so far to fill it.

Government support has helped and the billions in spending that have been unleashed have spread the shock.

But wage subsidies will come to an end and we can expect another wave of job losses.

So too, when summer comes and the tourists don't. Many businesses will take another hit.

The accelerated adoption of new technology like video conferencing has many excited about new working habits and the possibility of improved productivity.

But it is also bringing challenges, accelerating disruption for retailers and resulting in more store closures and jobs losses.

So it is important to temper the relief and pride we may feel at New Zealand's relative success in the first phase of this crisis.

Without giving in to pessimism, we need to maintain a realistic outlook.

We shouldn't forget what we've just been through and what a truly world-shattering event it has been.

Fears of Great Depression-style catastrophe have passed.

Instead, we must navigate a serious recession, one which comes with some major structural changes to the way we live and do business.

The big unknown is how this pandemic will play out around the world.

But our time in lockdown has kept us safe to watch and bought us time to learn and adapt.

We can be thankful for that.