Covid 19 coronavirus: Liam Dann: Don't panic, this will not sink our economy

Let's not sugar coat it. This is not good.

We can all agree on that.

But 12 more days with Auckland in Level 3 won't sink our economy.

Based on the estimates by ASB economists it is likely to cost the New Zealand economy roughly an extra billion dollars - about one third of a per cent of GDP.

That figure is based on a broad brush assessments of Auckland's relative GDP contribution (38 per cent) and estimates by Treasury of how much economic activity can take place at various alert levels (80 per cent activity at Level 3).

The final cost might be a little higher. It might also be lower.

RBNZ chief economist Yuong Ha said this week that estimates of the damage that alert levels do to economic activity had thus far proved to be on the high side.

Workers and business people have proved more adaptable than initially expected.

"This event won't be a repeat of the March - May shock, and while it is definitely a negative development, won't stop the underlying improving trends in our economy," said independent economist Tony Alexander said.

In the grand sweep of this historic downturn and long recovery, the final economic impact of the new lockdown will be modest.

That's a point that ASB's Mark Smith, the economist who did the cost estimate, made himself in the same report.

Let's also not forget also that a return to lockdown was already baked into forecasts by both the Reserve Bank an Treasury back in May.

The fact that as an economy we've been doing better than expected makes this step back into lockdown hurt more.

Like, making it to a Cricket World Cup final, being odds on to win in the final over and then having the win snatched away.

Or being 8-1 up in the America's Cup before going on to lose 9-8.

We need to keep the next two weeks in perspective of the epic scale of events this year.

To get a sense of that scale, the RBNZ this week boosted its capacity to print money by $40 billion - to $100 billion.

At a macro-economic level that's what we were dealing with Monday - and its what we're still dealing with today.

But of course, its at a micro-economic level where the pain happens.

There's no getting around the fact that the new lockdown will sink more businesses and cost more jobs.

That's a cruel and heartbreaking blow.

This is a wake-up call, a reminder that the world we face now is more fraught with uncertainty than ever.

ANZ economists Miles Workman and David Croy make this point in their latest report.

"Risks to our outlook are now skewed firmly to the downside, with the Quarter three rebound in activity likely to be weaker for it. How much weaker, and for how long, will depend on what follows."

But even with more clarity on alert levels "uncertainty around the economic implications will be extreme."