New projections from Treasury show that the unemployment rate can be kept under 10 percent if the Government comes to the table with extra financial support to help the country weather the fall out of Covid-19.
Without new support measures, however, the Treasury is predicting the unemployment rate in New Zealand could reach as high as 13.5 percent if the lockdown remains at four weeks.
If the lockdown were to be extended, that figure could reach between 17.5 and 26 percent.
Finance Minister Grant Robertson said that under the scenario where New Zealand stays at level 4 for the planned four weeks, and the Government provides extra support to businesses, the unemployment rate can return to 5 percent by 2021.
"These should not be taken as any guide as to the Government's thinking or decision on changing alert levels," Robertson said in a statement this morning.
"That decision will be taken on April 20 as the Prime Minister has foreshadowed."
But he said the economic scenarios released by Treasury today show the Government was right to adopt its "go hard and early" approach in the fight against Covid-19.
Robertson points out that due to New Zealand's underlying economic strength, the economy can bounce back to be $70 billion larger by 2024 than in 2019.
He is signalling that the Government has even more spending planned outside of the more than $25 billion it's already spent on the Covid-19 fight.
"The Budget is also another important part of the response, and it will include significant support to respond to and recover from Covid-19.
"That, however, needs to be seen alongside the fact that 1.3 million New Zealanders are receiving the wage subsidy.
He also indicated the economy could shrink by more than 15 percent were "in the ballpark of where we are".
Almost all economists are expecting New Zealand to go into recession – the question for many, however, is how long and how deep it would be.
"As is usual with the Budget, there may well be pre-announcements, especially where they relate to urgent Covid-19 response activities," Grant Robertson said.
He added that work was already "well advanced on further fiscal support" – in other words, more Government spending.
Tomorrow, Robertson will deliver an online speech to Business New Zealand setting out the next steps in our plan to cushion the impact of lockdown.
This will include further measures to assist businesses.
"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."
Speaking to RNZ this morning, Robertson said the numbers were scenarios, rather than forecasts because forecasting was very hard at the moment.
But Robertson said all the scenarios show a "significant hit" to the economy.
In the best-case scenario, GDP would contract by 4.5 percent in the year to June.
He said the more "drastic scenarios" are the ones where the lockdown is extended for longer.
Robertson said it was still the Government's plan to come out of level four "as soon as possible'"
New Zealand's unemployment rate is currently just over 4 percent, or 111,000 people, however that figure is expected to increase significantly.
Treasury Secretary Caralee McLiesh has previously said New Zealand's unemployment rate could likely head "well into the double digits".
The unemployment at 10 percent would imply the number unemployed would be around 275,000.
In an interview with the Herald, Finance Minister Grant Robertson appeared to firm expectations that unemployment would rise into the double digits.
He said the true state of unemployment could be masked by a wage subsidy scheme which has seen the wages around half of New Zealand's workforce subsidised by the taxpayer, but would eventually come to an end.
"I think the low double digits is where we're going to be in the near-ish term," Robertson said of the unemployment rate.
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Comments
Up to 700,000 unemployed, in addition to a mountain of debt!!! Reminds me of a quote from the Vietnam war "It became necessary to destroy the town to save it". So it looks like many more lives will be lost through the cure than would have been saved from the disease. Note that Taiwan (population 24 million) has had no lockdown yet only 388 cases and 6 deaths. Even though Taiwan is exemplary in its response, and a role model to follow, it is excluded from the World Health Organisation, and its early warnings were ignored. Perhaps we should have been following Taiwan's approach, rather than emulating the authoritarian Chinese Communist Party. In addition to the economic cost (and consequent impact on life expectancy, suicides, crime, etc), we are going to be entrenching a police state, complete with cell phone surveillance, an army of narks and an unquestioning compliant media into NZ culture so that it will end up being Covid19..84.
'Insight'. Yes, probably, to save lives. A pragmatic response to a deadly virus. Tough. The economy can wait. Then, back to the so called 'Normal'. What a winner that was.
Hill, you should first attempt to understand a comment prior to writing a response to it. You clearly did not understand what was being said, as a 'winner' your response was not. If more lives are lost due to the cure than are saved from the disease then overall it does not save lives and it is not a pragmatic response to a deadly virus. The economy cannot wait, as the longer it is left the worse it will get, and the greater the negative downstream consequences will be, especially on peoples health and life expectancy. New Zealand's health system is run on tax dollars, not fairy dust. GDP will probably be down by at least $20 to $30 billion which is a $10 billion reduction in tax, impacting improvements in road safety (costing lives), lack of timely cancer treatment (just see how people died from cancer recently due to SDHB funding issue), mental health leading to suicide, etc.