Three Factors Highlighting NZ Economic Recovery From Virus Crisis

Tuesday, 21 September 2021, 5:47 am
Press Release: Kalkine

Summary

• New Zealand has caught the attention of experts across the globe due to its resounding recovery journey yet again.
• Many have started speculating if the current flourishing economic indicators could warrant a rate hike in the coming months.
• Major green shoots aiding the New Zealand recovery include rising GDP growth, robust export growth and improving labour market.

New Zealand’s economic recovery has time and again trumped the expectations of experts. In fact, the country’s latest reports covering the performance of economic indicators in 2021 seem to be substantiating its increasing resilience against the pandemic. Even as NZ was intermittently in a shutdown, some bright spots have surfaced in the economy, underlining the country’s strong fundamentals.

Interestingly, major improvements have been observed across some economic indicators over recent months, pushing the case further up for the country’s bolstering strength against the pandemic. While a slight slowdown can be expected in the economic growth data for the September quarter amid the lockdown effect, the country appears to be safely navigating its way through the first half of 2021.

Additionally, the promising economic data has again raised the possibility of an interest rate hike. Despite the troughs and crests brought along by the pandemic, speculations are rife that the current economic recovery may prompt the central bank to embrace a contractionary monetary policy. However, considering the distress caused by the Delta variant, withdrawal of monetary stimulus may not be an ideal scenario.

In the given scenario, let us quickly take a look at some economic indicators that are contributing to New Zealand’s resounding recovery from the virus crisis:

Encouraging GDP numbers

Statistics NZ recently reported a 2.8 per cent jump in the country’s GDP in the June 2021 quarter, which was well beyond the expectations of forecasters. The GDP numbers have once again re-instated the faith of the population in the country’s ability to curb the virus spread and emerge out of an economic slowdown.

This stellar growth observed in the second quarter has its roots tied to the opening of the trans-Tasman travel bubble with Australia. Simply put, revenues from the tourism sector have been especially significant in fuelling GDP growth.

While June quarter GDP numbers are enticing, it is worth noting that the lockdown restrictions were not at their peak during the June quarter and were less stringent than the months that followed. Thus, it is safe to say that while the second quarter’s recovery instils some positivity, it does not fully demonstrate the impact the pandemic had on the country and may be subject to further drops.

GOOD READ: NZ GDP beats all forecasts, grows 2.8% in June quarter

Robust export growth

Another green shoot that reflects the New Zealand economy’s recovery from the virus crisis is the strong export growth observed during the June 2021 quarter. Stats NZ recently reported that its goods exports surged by NZ$1.4 billion in the last quarter, while its services exports rose by NZ$1.7 billion.

Additionally, the export price per unit of logs also rose steadily during the period. Meanwhile, the country’s seasonally adjusted current account deficit narrowed to NZ$3 billion during the June quarter, indicating a decline of NZ$2.2 billion from the previous quarter.

The growth in export numbers has once again underscored the importance of opening the economy to the rest of the world. For decades, foreign trade has been especially significant for the New Zealand economy. Since the June 2020 quarter lockdown, the country’s domestic industries engaged in dairy products and wood articles have gained immense spotlight for exhibiting consistent growth. In a way, domestic production has been an integral factor in bringing about the necessary change in the functioning of the economy.

Improving labour market

During the second quarter of 2021, the country’s unemployment rate dipped to an 18-month low level of 4 per cent. Moreover, the recent figures from Stats NZ suggest a 0.7 per cent rise in filled jobs during the same quarter.

Notably, the construction industry contributed to the largest increase in filled jobs. The surge in construction jobs indicates the improvement in demand for construction experienced since the beginning of 2021. In a way, export growth has resonated with a subsequent improvement in the labour market.

With restrictions pushed back further during the interim third quarter of 2021, an additional improvement in employment figures could be on the horizon. As the economy gradually reopens, people seeking jobs are likely to witness lucrative opportunities.

In a nutshell, New Zealand seems to be weathering the COVID-19 storm in an unparalleled manner, exhibiting green shoots way ahead of forecasts. The crux of the solid recovery lies in the country’s sound and efficient alert system against the virus that has helped contain the pandemic in a fashion unseen in any other advanced country. In a way, New Zealand’s journey has highlighted the long-lasting impact of maintaining discipline and having a sound decision-making process in place.

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