NZ’s domestic economy is tracking much better than many predicted, as it adjusts to something closer to normality after the Covid-19 lockdown. Just how well may emerge when the Reserve Bank delivers its verdict this week on whether there is any need for new monetary policy moves.
Bank economists are divided on the issue: some argue it needs to apply more stimulus through its quantitative easing programme, others that because the economy is doing better than anyone expected, there is no compelling reason to lift the cap on QE just yet.
The most recent data on how the economy is performing came from the ANZ’s Truckometer, which underlines how NZ is back in business.
ANZ chief economist Sharon Zollner reported the Light Traffic Index lifted 5.6% in July, while the Heavy Traffic rose 2.7%.
Light traffic in the month of July was 9.5% higher than the same month the previous year while heavy traffic is up 10.2% on year-ago levels.
“It’s very encouraging to see both indexes bounce back so strongly – heavy traffic likely reflects a degree of restocking, and light traffic enthusiast domestic holiday-making, given the lack of alternatives. However, it is too early to draw any conclusions about where the data will settle in trend terms.
“Just as business and consumer confidence and activity measures have started to wobble, traffic may also give up its overshoot in coming months. But the data certainly highlights how lightly New Zealand has gotten off in terms of disruption to everyday life for most people. Touch wood…”
She believes it will take some time for the dust to settle,
“ … but having traffic there or thereabouts versus where it was this time last year certainly sets New Zealand apart from the rest of the world, where ‘normality’ remains a distant dream”.
At present some catch-up overshoot is occurring in both the heavy and light traffic indexes. On a three-month average basis light traffic is still slightly lower than a year ago, whereas heavy traffic is higher – pretty impressive, considering the three-month average captures two weeks of alert level 3 and nearly four weeks of level 2.
In the broadest terms, heavy traffic reflects the movement of goods; light traffic the movement of people. The latter was much more impacted by lockdown.
One of the leading companies in the industry, Mainfreight, heard its chairman, Bruce Plested, tell shareholders at its annual meeting last month that deep in the company’s culture is a strength to challenge and overcome whatever circumstances are put in front of it.
He said the company has so far been fortunate to not have been as seriously affected as businesses involved in travel and tourism.
“Almost every year we have to cope with one or more earthquakes, droughts, floods, tidal waves, riots, snow, bush fires or volcanic eruptions occurring somewhere where we operate. We learn from all these, and have been aware for decades that somehow we almost always emerge stronger from them in the longer term.”
In its latest year Mainfreight’s profit rose $15m to a record $159m before abnormals and its share price moved up to $45.37, a rise of 10% in the 12 months.
Another major company in the industry, Freightways, has expanded its operations with the integration of the Big Chill trucking business.
Freightways has also diversified through its participation in the governments international air freight capacity scheme which has been extended until at least the end of August.
Though an international airline cargo newcomer, Freightways has become one of the largest trans-Tasman operators.
The freight operator has found a strong niche for its trans-Tasman flights, with crayfish, blue cod, flounder and mussels making up a large portion of the 1m kgs per month of Kiwi product landing in Australia’s top restaurants and retail outlets as a result.
Neil Wilson, General Manager of Freightways says the company adapted quickly to provide Kiwi export businesses some certainty after freight became near impossible to move when the borders closed.
As a result of the scheme’s success and extension, Freightways has purchased over 200 extra airfreight containers – mainly from Singapore – to cope with the volumes which have it moving over 250,000kg of produce per week.