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Regional economies suffer pandemic hit

Experts warn it will take years to fully recover from the drops in spending and increasing job losses that happened in just a few months.
Posted on 20 August, 2020
Regional economies suffer pandemic hit

Regional economies have “taken a battering” from Covid-19 but businesses are showing “incredible resilience”, according to analysts.

The latest Infometrics Quarterly Economic Monitor shows the coronavirus pandemic delivered a substantial hit to the regions as the country went into a level four lockdown and then moved down through other alert levels. 

Brad Olsen, senior economist at Wellington-based Infometrics, says the immediate economic ramifications from April to June 2020 vary by region but “the end results are clear to see”.

“Economic activity has fallen in all regions, nearly 50,000 Kiwis have lost their jobs, businesses have struggled to cope with lower earnings, and incomes were reduced,” he explains.

“Infometrics currently expects that economic activity was down 12.6 per cent per annum in the June 2020 quarter, as the economy endured a dramatic shift in focus, from life support at level four to an adrenaline rush at level one over the three-month period.

“Regional economies have taken a battering from the pandemic, but local leaders, businesses, and communities have shown incredible resilience to get their local areas moving ahead. 

“Rapid deployment of support, and strong local co-ordination, has meant that regional economies have responded immediately to get the economy moving again, with a focus on building the economy back better.”

Olsen, pictured, says the economic effects of the pandemic have not been felt equally across the country. 

Otago suffered the biggest hit to economic activity, with a 15.6 per cent per annum drop, as the collapse in tourism activity affected a number of local economies. 

Meanwhile, the Manawatu-Whanganui and Gisborne regions were among the better performers with economic activity falling by less than 9 per cent per annum.

Spending dropped considerably during the level four lockdown and during level three restrictions that were in place during March, April and May this year, but bounced back at alert levels one and two. 

However, the Infometrics study shows this rebound has not been enough to make up for what was not spent during the quarter. Marketview data shows spending between April and June quarter was down 20 per cent compared to the same quarter of 2019.

Job losses have also mounted, with more than 50,000 additional people on a jobseeker support benefit or Covid-19 income relief payment by the end of June. This took the total jobless support numbers to more than 200,000 and Infometrics warn job losses are likely to continue mounting as the economy adjusts.

Olsen says: “The June 2020 quarter likely represents the largest single hit to the New Zealand economy on record, but the economic scarring and restructuring will continue to occur over the coming years.”