Covid 19 coronavirus: Unemployment could jump to 26 per cent, Bay businesses hope for best

Unemployment could jump to 26 per cent after Covid-19 but Bay business leaders believe if people can return to work sooner, the economic forecasts might not be so grim.

Hospitality and retail experts say industries face severe financial uncertainty' and impacts would be felt for years to come, but they hoped restrictions would loosen once the country's level 4 lockdown was lifted.

Rotorua mayor Steve Chadwick says the city's economy would face big challenges but there was too much uncertainty to accurately determine the best-case scenario after lockdown.

New projections from the Treasury that showed New Zealand's unemployment rate could reach as high as 26 per cent in the worst-case economic scenario, if the lockdown was extended without extra financial support from the Government.

The best-case scenario was unemployment climbing to 13.5 per cent, if the lockdown remained at four weeks.

NeedToKnow3

Rotorua mayor Steve Chadwick. Photo / File

"Our community and our economy have been significantly impacted already and we face some big challenges in the coming months and years," Chadwick said.

"Council is working closely with local stakeholders and with central government and its agencies to support and plan for local recovery, aligned with the Government's strategy to fight the virus, cushion the impact and prepare for recovery."

Rotorua Chamber of Commerce chief executive Bryce Heard said the scenarios were "wide open" and it was difficult to comment until the Prime Minister announced on April 20 what its next move to eliminate the virus would be.

"We know what level 4 is and it is certainly having a massive impact," he said.

Rotorua Chamber of Commerce chief executive Bryce Heard. Photo / File

"The way in which we respond is going to determine how we recover from this."

• Covid19.govt.nz: The Government's official Covid-19 advisory website

Retail NZ chief executive Greg Harford said strong and continued government support through an extended wage subsidy and support for lease payments were required to help retailers survive the Covid-19 crisis.

"The consequences of the four-week lockdown will likely be felt for years to come and lifting the lockdown simply won't be enough for business to return to normal."

Harford said Bay retailers will be hoping scenario one played out and that "we can get back to a more usual environment after a couple of months".

Retail NZ chief executive Greg Harford. Photo / File

"However, businesses need to be planning for the worst case, and thinking about what will happen if they are forced to remain closed for a prolonged period."

Hospitality New Zealand regional manager for the Bay of Plenty, Alan Sciascia, said hospitality "will be critical to our recovery socially, culturally and economically".

"Our hospitality businesses are facing severe financial uncertainty and further potential job losses."

Sciascia expected 10 per cent of hospitality businesses nationally will not reopen after level 4 with scenario one and a potential 30 per cent at risk if level 3 was extended for longer than a month.

Hospitality New Zealand regional manager for the Bay of Plenty Alan Sciascia. Photo / File

"I recommend that businesses prepare for option 1, being a drop to level 3 next week.

"Scenario 1 is the best possible option with, hopefully, some relaxation in the restrictions applied and also hopefully with a reduced time frame for level 3."

Tourism Bay of Plenty chief executive Kristin Dunne said a "strategy under uncertainty" approach was needed and it was too soon to know the "breadth, length or depth of the impacts for the industry".

"We need to be planning for a number of potential futures and these guidelines are useful as a framework for us all to start reimagining the future."

Tourism Bay of Plenty chief executive Kristin Dunne. Photo / Andrew Warner

Michelle Templer, on behalf of Rotorua's Economic Development Agency, said the agency was setting up a Rotorua Inc Whakahouhia te Whare Ohanga Steering Group to foster a collaborative approach to rebuilding the economy, driven by the business sector and Te Arawa.

Templer said the Treasury's scenarios would feed into their recovery planning, "and they are also useful in calculating Covid-19's potential impact".

"Equally, there are data sets that show, for example, that the domestic tourism opportunity has increased by an estimated $10 billion in the near term."

This was the money New Zealanders traditionally spent overseas each year being used domestically, she said.

"There is a real opportunity for Rotorua to enhance our position as a favoured domestic holiday destination."

Today, Finance Minister Grant Robertson will deliver an online speech to Business New Zealand setting out the next steps in the plan to cushion the impact of the lockdown.

This will include further measures to assist businesses.

Next steps

The future of New Zealand's economy is uncertain, but local businesses are ready to bounce back.

Rotorua Treewalk director Bruce Thomason said Rotorua was in a fortunate position in that it did not rely solely on overseas customers.

"We must remember that 60 per cent of Rotorua's tourists were domestic pre-Covid and obviously, moving forward for the next six to eight months, it will be 100 per cent domestic."

In terms of whether or not the lockdown is extended, Thomason said it should continue until the virus is completely stamped out so that, when it is lifted, domestic customers can support local business with confidence.

"People supporting local, people buying New Zealand-made, going to cafes and doing what you'd normally do is important for this economic rebound. We have a chance, as an island nation, to stamp out the disease and our best chance for the best domestic recovery is to do that, so New Zealanders can travel and travel with confidence.

"The big date that I'm looking forward to is April 20 when the Government makes definitive comment on what's happening with the lockdown. What's important for me is the next steps – what level 3 and level 2 look like and those timeframes."

Waiariki Labour Party MP Tamati Coffey. Photo / File

Waiariki MP Tamati Coffey, who owns eateries Our House and Ponsonby Road, said despite financial support from the Government, "we've always acknowledged that there would be job losses".

"I don't think we truly understand the full impact of how this is going to affect jobs in our community.

"I am concerned about what the impact is going to be for Maori unemployment, which is constantly twice the general rate of unemployment. That is a major concern for our community, which has a high Maori population.

"The best economic recovery relies on a really strong health response, which we are seeing now, while in lockdown.

"As a sector, the future of hospitality is still very uncertain. As the alert levels get scaled back, customers still need to have certainty they wouldn't contract Covid-19 before they had the confidence to go out again, to spend and socialise. Businesses will definitely need more assistance.

"All businesses will have to make the hard calls based on what they think is best. Some will choose to fold. Some will fight. We will fight."

Scenarios explained

Scenario 1
Level 4 – 1 month
Level 3 – 1 month
Level 1/2 – 10 months

Scenario 2
Level 4 – 3 months
Level 1/2 – 9 months

Scenario 3
Level 4 – 6 months
Level 3 – 6 months

Scenario 4
Level 4 – 3 months
Level 3 – 3 months
Level 1/2 – 6 months

Scenario 5
As in Scenario One

Source: Treasury Report T2020/973: Economic scenarios - 13 April 2020

-Additional reporting by David Beck