Authorities expect the most recent nationwide lockdown, prompted by the return of new COVID-19 cases, to cost the NZ economy a billion dollars.
BNZ bank economists estimate that the lockdown measure will impose a 1-2% impact on NZ’s 3rd quarter GDP. A spokesperson for the bank explained: “This estimate will grow if the restrictions are extended. It is clear the government is still on an elimination rather than suppression strategy, which ultimately raises the question of whether the country will face ongoing lockdown restrictions over the next year or two. If that is the modus operandi then, economically speaking, this could potentially be quite damaging and is clearly NZD-negative, a possibility that needs to be priced in.”
In addition, the measures taken by the Reserve Bank of New Zealand (RBNZ) have an inflating effect on the currency. Despite tentative signs of recovery elsewhere, the NZ dollar is lagging behind.
RBNZ’s Assistant Governor said that the balance sheet is acting as a guide in monetary regulations, due to the pandemic. One of the possible monetary policies that could result is the use of a negative interest rate to amplify spending.
The diverging approaches made by various nations around the globe – from the more relaxed strategies of countries like Sweden and the United States, to stricter pandemic response policies in places like South Korea and Australia – will likely be studied for decades, both in terms of their impact on public health as well as their short and long-term economic outcomes.
New Zealand’s COVID-19 “elimination strategy” is seen as one of the most aggressive responses, by developed economies, to combat the COVID-19 pandemic.