Covid 19 coronavirus: Whangārei economy to take $197 million hit in next year

Whangārei's economy is set to take a $197 million hit from the impact of the coronavirus crisis over the next 12 months. Photo / Michael Cunningham

Whangārei's $4.5 billion economy is in freefall - as Covid-19's impact intensifies amid the biggest economic shock in living memory.

The district's economy is forecast to lose $197 million in the next 12 months in an already-underway recession.

This is the stark news in a hard-hitting new Whangārei District Council (WDC) report looking at the pandemic's impact on the local economy. The report, "Economic impacts of the Covid-19 pandemic on the Whangārei district – early estimates", by economics researcher Infometrics, paints a grim picture.

"There are obviously significant implications for Whangārei district," WDC chief executive Rob Forlong said.

The report describes Covid-19's sudden impacts as the greatest economic shock in living memory.

"This contraction is set to be significantly larger than anything seen in New Zealand since the great depression," it said.

"The speed with which the economic outlook changed during March far exceeded anything experienced during the global financial crisis of 2008/2009."

Forlong said the report provided the detailed information needed to help short-term pandemic response and longer-term recovery planning for the council and the district.

"Whangārei's economy was going pretty well until Covid-19 hit. Six to eight weeks ago, everything was looking rosy, now it's completely flipped on its head."

"We are still absorbing the hit and will do for some time," Forlong said.

It was not possible to say how deep the recession would be or how long it would last, he said.

"I don't think anyone is prepared to forecast on this any more."

Forecasts had changed from even a month ago.

"At that stage most were talking of a short, sharp shock but people aren't convinced about that any more."

Northland Chamber of Commerce boss Steve Smith said campaigns like NZME's Go Local!, urging people to spend locally, could help ease the impact of the impending loss.

But, Smith said, there was no automatic right for Northland businesses to get the local spend.

Steve Smith, chief executive of the Northland Chamber of Commerce, says Northland firms need to be able to compete on price and quality if they want to get people to spend locally.

"They've still got to be competitive in price and they still have to be good quality, or the reality is many will spend their money elsewhere or online," he said.

He said Northland's unemployment rate would hit double figures and small businesses could be particularly hard hit.

Smith said many people seeking work after the Covid crisis would need to retrain and upskill to meet industry requirements.

"A lot of people are going to be thinking about their future and for many that means getting new skill sets to meet the needs of industry."

More than 3500 jobs are expected to be lost across the district in the coming year.

The areas hardest hit are forecast to be non-food manufacturing, transport, postal, warehousing and retail and wholesale trade.

Smith said initiatives such as Job Lab, which ran for four weeks earlier this year linking local employers and job seekers, would help getting people into jobs in the future.

The Job Lab initiative ran in Whangārei's Strand Arcade in February.

Smith said it was hugely successful at linking people with employers or the training needed to get work.

Job Lab was a partnership between NorthChamber and Ministry of Social Development and Smith said he hoped the initiative could be brought back, and expanded elsewhere in Northland to help more people find work.

The report said the district's large non-food manufacturing sector would lose almost $135m, Marsden Point refinery accounting for about 11 per cent of the district's economic output.

"Lower demand for oil products is expected, with substantially lower aviation activity and generally lower ground transport activity as economic output nationally declines. These expectations will reduce activity in the petroleum refining and petroleum fuels manufacturing industry," it said.

Transport, postal and warehousing would lose almost $41m, retail and wholesale trade $36m and construction $28m.

Whangārei district construction was forecast to fall by almost 55 per cent in the next year - residential by just over 25 per cent and non-residential by almost 30 per cent.

But there are some brighter points.

"Although the economic effects of Covid-19 will reverberate around the economy for years, our estimates point towards Whangārei district weathering the economic storm better than many areas," the report said.

Forlong said the district's diversified economic base would work towards Whangārei holding its own better than it had done in its most recent previous recession after the 2008 GFC. It was forecast this time to fare roughly at the same level as New Zealand did.
This had not been the case in the 2008 where it had fared worse.

The report said Whangārei's agriculture sector would help aid economic recovery.
Education and training's contribution to the district's economy would lift by almost $5.7m.

The higher portion of domestic visitors in Whangārei's tourism sector would potentially help.

"We expect once restrictions are relaxed and more usual economic activity resumes, domestic tourism will bounce back to a degree," the report said.