Stocks around the world dipped as news of the coronavirus began to build. Photo / AP
Stocks around the world dipped as news of the coronavirus began to build. Photo / AP
We shouldn't panic about coronavirus.
Even if the outbreak takes us into uncharted territory for pandemics in the modern era, even if starts to spread in New Zealand, panic will still be futile.
How bad this thing gets still isn't clear yet. although the number of cases and fatalities arelikely to get worse before they get better.
By definition panic is a pointless emotion. Where fear and concern motivate us, panic is what we call it when it we let fear overwhelm us and cloud our judgment.
I was initially worried that panic was setting in around coronavirus.
The run on sales of masks and hand sanitiser, incidents of xenophobia and racism - the levels of fear didn't tally with the immediate risk to us here in New Zealand.
I wondered if social media was exacerbating the panic.
It certainly seemed more intense that previous epidemics such as Sars in 2003 and swine flu in 2009.
Then I made the mistake of making that observation on Twitter. The tweet went viral - if you'll pardon the pun.
Suddenly I was being championed by those who saw this thing as an overblown media beat-up and demonised by those who thought I was not taking it seriously at all.
For the record, I am very concerned about it but I'm in favour of staying calm.
Disinfection equipment is carried by a worker at Budapest Liszt Ferenc International Airport in Hungary. It can be hard not to panic when confronted by such scenes. Photo / AP
The Twitter experience was a reminder of the power of social media.
It did reinforce my view that it tends to polarise and exaggerate the public response to many issues.
Now, I'm not sure that there is so much panic and fear out there in New Zealand.
Perhaps the travel ban and relatively low rate at which this is spreading outside of China is calming people about the health risk.
Perhaps Waitangi Day helped.
Markets around the world also appear to have shrugged coronavirus off.
Looking back to Sars and swine flu for their lead, they've decided to look through the economic impact as a short-term event.
That may yet be premature in my view. The world is a different place in 2020.
China's economy is much bigger and much more directly tied to New Zealand's fortunes.
And perversely the economy is in much better shape - in other words we've got more to lose from a downturn.
When the world suffered a nasty epidemic with the H1N1 swine flu in 2009, I wrote the economic impact was "akin to a hardened heroin user being told by his doctor to give up coffee".
The global economy was already too battered and torn to care.
Now, after a decade of slow and fragile recovery, we are hyper-sensitive to recession risk.
Central banks move quickly to head off the slightest hint of a downturn, as we saw from the Reserve Bank last year.
I'm nervous that markets have bounced too soon.
But speculation remains pointless.
For now, from the relative safety of the New Zealand summer, all we can do is contemplate what we know to be the case already and consider how that changes our expectations for the year ahead.
Adrian Orr, Governor of the Reserve Bank of New Zealand. Photo / Bloomberg
I'd expect that kind of response from Reserve Bank Governor Adrian Orr when he delivers his first Monetary Policy Statement next week.
We do know for sure is that 2020 isn't going to be the same as it was before the outbreak.
All those carefully crafted economic reports for the year ahead – from the IMF down to the local bank economists – have been rendered obsolete.
For starters we've seen oil prices plunge as much as 20 per cent since January 1.
That alone is enough to shift many of the big economic equations.
Other commodities are falling too - copper, iron - even milk powder was off sharply in the latest global day auction.
These are all indicators of falling demand as China shuts up shop.
It does raise the likelihood that central banks will cut rates again just when things were starting to stabilise.
That could perpetuate a familiar pattern from the past decade.
Lower rates, for longer - which keeps upward pressure on property and equity prices.
No wonder equity market investors are looking through the negative impact.
Another certainty is that China's growth path will be lower this year.
It had GDP growth of 6.1 per cent last year. The Communist Party typically sets a new target for the year when it meets in March.
Most analysts had expected it would target 6 per cent.
Now many economist estimate first-quarter growth could fall to an annualised 4.5 per cent - with growth for the year around 5.5 per cent.
Air New Zealand flight ANZ1942 touches down at Auckland International Airport last week after a rescue flight from Wuhan in China to repatriate New Zealanders. Photo / NZ Herald
That would represent a big shift for the world, and for New Zealand exporters.
Our economy has been solid and very steady with very low unemployment.
It has been supported by government stimulus and that will only accelerate as the big infrastructure spend-up progresses.
But this will be an external shock, what economists call a "head-wind".
It will slow our growth by a little or a lot.
It makes us vulnerable if something else - like a drought - were to hit.
Regardless, panic still won't be a good option.
As it did in 2008, fear of a recession can prompt business and consumers to stop spending.
That just makes things worse.
The more serious things get, the more we need to keep cool heads.
