Vaccine 'risk' to New Zealand economy
New Zealand’s economy is unlikely to be one of the world’s top performers this year, as the uptake of Covid-19 vaccinations lags other countries’ rates, an economist says.
New Zealand has so far administered 232,588 doses of the Covid-19 vaccine, including 60,000 second doses. The United States has fully vaccinated almost 30 per cent of its population and 43 per cent have received at least one.
ASB economist Mark Smith said there was a potential risk to the New Zealand economy over the next year from the rate of vaccination.
“The starting point for the New Zealand economy is a lot better than that of the rest of the world,” he said.
“We won’t be the outperformer compared to other countries, when we were last year. This year is consolidation for us.”
He said others would experience a lift in economic activity and, next year, New Zealand should catch a global tailwind.
Smith said the impact of Covid-19 on the economy had not been as big or long-lasting as was feared a year ago.
Levels of economic activity and employment were now broadly back to pre-pandemic levels, he said.
Some sectors, such as tourism, had been most keenly affected by the closed borders, but most had done well – with some standouts, such as consumer durables, which benefited from people staying at home.
“Going forward, we expect anaemic growth over 2021 although risks are tilting towards a stronger than expected rebound in economic activity and employment from sectors that copped the bulk of the hit in 2020.”
He said economic forecasting was “tricky at the best of times” and “downright impossible” during a global pandemic.
“Sometimes it is good to be proven wrong, and it was pleasing to see the NZ economy get through 2020 in much better shape than we could have hoped for a year ago.”
ASB had expected gross domestic product to fall 7 per cent over 2020 and not return to pre-Covid levels until 2023. It only fell 1 per cent and there were now more filled jobs than before Covid hit.
Those that would outperform over the next year were tourism, hospitality, accommodation, transport, art and recreation, non-primary manufacturing and education – all sectors that were affected by lockdowns and closed borders.
Underperformers were likely to be consumer durable spending, the rental and real estate sectors and construction.
“The economy has been through the wringer in the last year and this year is consolidation,” he said.
Things would be starting to pick up again by the end of the year, he said.
Smith had calculated households had built up about $20 billion in savings through not being able to travel overseas. Businesses had also cut back on investment spending and there was scope for that to return.