A slight bounce in the economy is brightening the outlook as the country heads into the winter months, Radio NZ reports.
Retail spending is up and NZ shares rose on Thursday for a third day running. Key indicators have led some economists to point to a faster recovery than expected.
Finance Minister Grant Robertson, never afraid to cite how well the economy has done under his stewardship, told Parliament earlier in the week:
“We are already seeing a significant lift in economic activity from moving from alert levels 3 and 2”.
Robertson reported the weekly economic update from Treasury showed improvements in economic activity.
Heavy traffic movement is now only 5% below its normal levels, while electricity demand is now above pre-COVID levels, and electronic card spending during level 2 has been nearly equal to pre-COVID levels.
Robertson also noted the NZIER, while acknowledging the difficulty in forecasting under the current uncertain circumstances, sees a decline in activity concentrated in the June 2020 quarter, largely reflecting the conditions of alert level 4 that occurred during that quarter.
“However, NZIER did forecast unemployment to peak at 8.1%—below Treasury forecasts and far better than a number of other countries”.
The NZIER went on to say:
“Given the relatively short amount of time spent in lockdown reflecting our success in eliminating COVID-19, the NZ economy looks increasingly likely to be at the optimistic end of the scenarios that had initially been considered …
“With NZ moving down the alert levels, more businesses are reopening and offering a [wide] range of goods and services.”
The Finance Minister is convinced as the country moves through level 2, it can expect to see further gains from the early success in getting COVID-19 under control. He reckons this lift in activity is thanks to all New Zealanders supporting the government’s strategy of going hard and going early.
Cabinet is fortunate to be in a position to now be considering a move to alert level 1 next week.
Whether those New Zealanders who have lost their jobs (or are about to) share Robertson’s delight in how the economy is performing is more debatable.
There is some irony in the fact that just as some New Zealanders who have never done so before are queuing for food parcels or jobseeker allowances, others are building fortunes from the gains on the NZ stock exchange.
Shares in companies like Auckland International Airport, hard hit initially in the Covid-19 pandemic crisis, have recovered and investors who took part in AIAL’s $1.2bn share offer have had big gains as those shares have shot up from $4.50 to above $7.
Of course those who participate in share activity on the NZX expect a rather different return on their money than the taxpayer will get from what the Finance Minister calls the government’s “investments”.
Consider, for example, this sentence from Hansard on a reply to a question in Parliament to Robertson:
“The government has set aside $62bn for investments to support the economy through this one-in-100-year pandemic”.
Those “investments” include the $50bn COVID-19 Response and Recovery Fund announced in the Budget and the initial $12bn economic package announced on March 17
Robertson says about $43bn has been announced and allocated over the forecast period, including for schemes to protect jobs and support businesses like the wage subsidy scheme, the Small Business Cashflow (Loan) Scheme, and changes to the tax system.
At the same time, the government has committed significant new investment for essential public services like health and education. Treasury forecasts that more than $26bn will be spent in the current year to June 30 to support the economy through this one-in-100-year event
Robertson told Parliament the big difference in terms of the operation of the economy is between level 3 and level 2, where there’s about a 10 percentage point improvement in output, versus the move from level 2 to level 1, which would be about half of that, at 5 percentage points.
“Like all New Zealanders, I want to see our society and our economy opened up as quickly as possible and in the safest possible manner”.
So does the government (and its finance minister) deserve full marks for their handling of the economy?
The answer to that may depend on where you stand in the job market – and on whether you worry about issues like widening inequality in society.