March has certainly been interesting month. In the Bay we’ve gone from being flat out, with concerns about how we’ll cope with growth, to staring at an impending recession.
The speed of the Covid-19 crisis and associated economic downturn has been rapid.
It’s very hard to see how long and severe a downturn might be. Media and economists tend to favour the more negative end of the spectrum. Adopting a local view is important alongside understanding the national and global impacts.
In the Western Bay, we came into this downturn in pretty good shape. Our economy was probably the strongest in New Zealand, with low unemployment, rising income levels and strong business and economic growth.
Covid-19 has had some immediate and strong effects on our local businesses, particularly tourism and hospitality – due to border controls and social distancing. The effect on some of these businesses has unfortunately been severe and will get much worse now we are going into community lockdown
“Positivity is important in these times, as well as good information, so let’s try to keep a good perspective on the situation in the coming months.”
While it is troubling and very uncertain, this situation feels different than our last recession, the Global Financial Crisis. Right now we’re dealing with the effects of a health crisis and its associated economic fallout.
The economy should spring back
The structure of the world economy is in a very different place to what led to the GFC. When the health crisis is eventually solved or mitigated, the economy should be able to spring back.
We are also fortunate that the New Zealand economy is in good shape to combat the economic effects of this problem.
On the flipside, the lockdown could create economic damage of a level we haven’t seen before, and we don’t know how long the after-effects of that would last.
In the Western Bay we are so far fortunate that our key industries (construction, distribution / logistics, manufacturing, healthcare and horticulture) are not structurally affected right now.
While businesses in these sectors have concerns, in general the fundamentals remain stable.
Markets remain open for our exported goods and trading conditions at the time of writing are close to normal for most businesses.
While I’ve painted a picture that’s perhaps not as bad as we see in mainstream media, there are certainly big risks ahead of us: labour supply will likely be a problem in horticulture (although that may be good if workers from other industries need employment), we would be at risk if access to markets for our exports was restricted, and consumer / business confidence will be reduced, which will have an effect on demand for most industries.
The ability to get people to and from productive work will be a big determinant of economic outcomes.
So while this is a shock and a very difficult time for some, it doesn’t look like the end of the world yet.
Positivity is important in these times, as well as good information, so let’s try to keep a good perspective on the situation in the coming months.