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28 Mar 2021

The impact of a closed NZ

Compared to many other western nations, New Zealand went hard early when it came to shutting down the country and the economy.

Travel restrictions began in early February to combat the spread of COVID-19, followed by a shutdown of New Zealand’s borders to all non-residents from 19 March. While these measures were undoubtedly successful in terms of their health benefits, the economy and New Zealand people have suffered as a result.

According to trade data from Statistics New Zealand, the nation has suffered a $342 million fall in spending by international students and visitors since the shutdown. Additionally, overall services exports were down $460 million and transportation services exports down $83 million. Services imports were also down $376 million during the quarter, with travel services imports down $165 million and transportation services imports down $63 million. Volatility in global financial markets has also caused large valuation changes in New Zealand's international assets and liabilities, with a net rise of $10.1 billion recorded in the quarter ending March and a larger rise likely in the months ahead.

While New Zealand has managed the pandemic very well by global standards, non-existent migration and international tourism has hit many businesses hard. According to ANZ senior economist Miles Workman in a forecast on migration, recent migration-induced population growth has been something of a false economy. Migration has been "one of the most dominant drivers of economic activity in recent years" according to Workman, with actual per capita GDP growth trailing behind the official GDP measure. "This was never a sustainable source of growth," he says.

It's not just a lack of tourists, with fewer jobs and a shrinking market leaving little to attract non-NZ citizen arrivals. "This will be particularly true in industries like tourism, construction and hospitality. Further, the slow recovery and persistent spare capacity in the labour market will mean that firms previously reliant on migrant labour may be more easily able – or at least will more likely be expected – to find domestic workers, although in some cases retraining will be required." said Workman.

The economic effects of the pandemic will also have a profound social impact. According to Sir Peter Gluckman, chief science advisor to New Zealand’s prime minister from 2009 until 2018, some groups are more susceptible than others: “With that will emerge some groups of people who will do well, they will find in the change opportunity, but many people who will be very uncertain, very scared, frustrated, angry, and we know from other disasters that about 10% or more even will progress to actual depression and to suicidality.”

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek financial advice.

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