While some people are queuing for food parcels or the dole, others are prospering from NZX investments

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.

2 thoughts on “While some people are queuing for food parcels or the dole, others are prospering from NZX investments

  1. The full economic impact of the lockdown, particularly regarding unemployment, is still to come. It is masked for the time being by the government’s extensive subsidies. The government clearly intends to try to paper over the widening cracks with debt and to talk up confidence until the election. Make the most of the next three months, the reckoning comes the day after.

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  2. Well of course we would expect Electricity demand to be higher than Pre Covid…Duh
    Its about the weather Early March (pre Covid) late May post Level 4, 3

    Retail spending up. Duh!! Did w enot just release everyone from house arrest?

    Ho hum.

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