Three Green Shoots Reflecting NZ Economic Recovery From COVID-19 Crisis

Tuesday, 1 June 2021, 3:00 pm
Press Release: Kalkine

• Some economic indicators suggest that New Zealand is actively returning to its pre-pandemic shape.
• Budget forecasts expect the economy to grow at 2.9 per cent in the year ending June 2021.
• The central bank recently hinted at an interest rate hike as early as next year, given the impressive recovery in the country’s economy.

Thanks to New Zealand’s early success in curbing coronavirus transmission and dedicated fiscal and monetary support, the country has managed to withstand the disruptions of the pandemic better than expected.

Riding on its way to “winning the COVID-19 war”, the nation seems to be powering out of a once-in-a-generation recession better than its peers. In fact, some recent economic statistics reveal that New Zealand is swiftly returning to its pre-pandemic shape.

As per the recently released Government Budget, the country’s economy will revive from the pandemic faster than previously anticipated, with a much lower peak in the jobless rate. Budget forecasts predict the economy to grow at a rate of 2.9 per cent in the fiscal year ending June 2021, before touching 3.2 per cent and 4.4 per cent in the following two years.

Furthermore, the Treasury expects the unemployment rate to peak to 5.2 per cent in the June 2021 quarter, before gradually falling to 5 per cent in Q2 2022 and 4.2 per cent in three years. Previously in December 2020, the Treasury anticipated the jobless rate to peak much higher to 6.8 per cent during the second quarter of next year.

Must Read: Budget 2021: Is A Stronger-Than-Expected Economic Recovery Ahead for New Zealand?

At the same time, the central bank’s recent indication to increase the official cash rate in the second half of 2021 made New Zealand one of the first advanced countries to signal a move away from the stimulatory settings embraced during the coronavirus pandemic. It indicates that the central bank’s confidence in the economic outlook is improving.

In addition to these projections, some economic indicators are also stirring hope and optimism over the country’s strong recovery from the pandemic:

Job Numbers Breaking Records

The recently released figures from Statistics NZ revealed that the country’s filled job numbers reached a new high in April 2021, surpassing pre-coronavirus levels. There were about 2.24 million jobs in the nation in April this year, reflecting a surge of more than 2.5 per cent from April 2020 when filled jobs plummeted to approximately 2.18 million over the coronavirus alert level 4 lockdown.

Also Read: New Zealand’s Filled Job Numbers Hit a New High in April 2021

This ‘upbeat result’ for the labour market was in line with the jobless rate data released early in May, indicating a fall in the unemployment rate to 4.7 per cent in the March 2021 quarter. In a more positive sign, the jobless rate for women declined from 5.3 per cent to 4.7 per cent, matching the level with men.

While the rate of unemployment is still above pre-COVID-19 levels, the labour market is proving itself to be far more resilient than was initially expected after the country’s first lockdown. The ongoing vaccination programme and potential re-opening of international borders are further expected to underpin the recovery in the labour market while bolstering hiring and business confidence.

Retail Spending Continues to Shine

With the spending appetite of consumers remaining buoyant, New Zealand saw a higher-than-expected rise in retail sales in the March 2021 quarter. The latest data from Statistics NZ shows that retail sales marked a Q-o-Q rise of 2.5 per cent last quarter, following a 2.6 per cent decline in the December 2020 quarter. The figures exceeded analysts’ expectations of about 4.4 per cent contraction.

Notably, the retail sales results emerged stronger despite the loss of international tourists during the summer months. The country seems to be observing a diversion of spending earlier earmarked for overseas holidays, offsetting the drag from the absence of international tourists. Besides, the recent figures reflect the underlying strength of the nation’s economy, which is actively recovering from pandemic blows.

Trade Surplus Gaining Momentum

The latest data from Stats NZ demonstrated that the country recorded a trade surplus of NZ$388 million in April 2021, considerably higher than the upwardly revised NZ$39 million trade surplus seen in March. While the value of total goods exports increased by NZ$65 million compared to April 2020, the value of imports surged by NZ$1.0 billion.

Although April 2021 trade surplus was considerably lower than the NZ$1.4 billion trade surplus seen at the same time last year, it remains closely in line with the figures witnessed during the pre-pandemic stage. Besides, one need not neglect that the last year’s data reflected a sharp drop in imports due to domestic and international travel restrictions and widespread business closures, widening trade balance.

While uncertainty remains over the potential re-opening of overseas borders, both imports and exports are likely to improve once the normalcy returns in international trade. The active progress of the COVID-19 vaccination programme will be instrumental towards this end.

Overall, the New Zealand economy seems to be in an incredibly fortunate position. The nation’s recovery from the coronavirus crisis is moving better than expected and zero COVID-19 cases existing in the community.

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