NZ’s borders shut for up to a year under new Treasury scenarios

14th April 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

New Zealand’s borders could remain closed to foreign visitors for up to 12 months under new economic scenarios from Treasury.

The five main scenarios, based on assumptions of varying amounts of time under the different Covid-19 alert levels, all assume the borders are closed to inbound foreign visitors. Services exports would take a $16bn hit in the year to March 2021.

Unemployment could range between 13.5% – 26% under the different models released by Treasury today.

“We are seeing dire forecasts for global growth and unemployment levels rising rapidly in many countries. As an open export-led economy, New Zealand will feel these global effects for some time to come,” finance minister Grant Robertson said in a statement this morning.

“The best way to protect the economy is to fight this virus, which is why we’ve acted swiftly and decisively to stamp out Covid-19. This will give our businesses and the economy the best chance to get going again on the other side.”

The Treasury scenarios were guided by a range of previously released public health modelling and included what might happen if the lockdown had to be extended, or if the country had to return to alert level 4 in the future.

Each scenario begins with a deep contraction in activity in the present June quarter, however, Treasury acknowledged the significant uncertainty surrounding the evolution of the crisis.

“What is clear is that whatever path the global and domestic economies follow, the effects of this recession will be severe and long lasting,” said Treasury.

“Activity levels in some sectors, notably international tourism, may take many years to recover. Substantial amounts of income will be irretrievably lost for many businesses and households, and for the economy as a whole.”

Source: Treasury

Scenario 3 limits the ability of the economy to recover in the September quarter and enables only a partial recovery in the following two quarters. Scenario 5 uses the same alert level assumptions as scenario 1 but assumes a larger contraction in world output and a more gradual recovery.

Tresury’s report also showed:

• That unemployment could be kept below 10%, and return to 5% in 2021 with additional Government support.
• Without additional support, unemployment could hit 13.5% under scenario 1 (four weeks in alert level 4), while scenarios requiring more time in level 4 showed a peak of 17.5%-26%.
• New Zealand’s underlying strength could see the economy bounce back to be $70bn larger by 2024 than in 2019.

Work was already well advanced on further fiscal support, Robertson said.

“The Budget is also another important part of the response, and it will include significant support to respond to and recover from Covid-19. As is usual with the Budget, there may well be pre-announcements, especially where they relate to urgent Covid-19 response activities.”

Cabinet would make a decision on whether to exit alert level 4 on April 20.

The full Treasury report can be downloaded here.