Is New Zealand’s Economy Recovering After the Pandemic?
New Zealand has shown great resilience throughout the pandemic, and benefitting from the good management of the crisis as well as the discipline of citizens. While the country has resisted the negative effects remarkably well in many measurable ways, the economy has taken a hit – but is that changing, and how fast?
While economic recovery is making steady progress, it seems that predicting the time to full recovery is more difficult than previously thought. Now is the time to pay closer attention to a number of economic elements.
New Zealand has risen above on many fronts during the Covid-19 pandemic – not least of which are the comparatively low number of fatal cases, the determined populace, and being one of the first nations to remain virus free for an extended period. New Zealand has also shown marvellous flexibility within the pandemic, changing tack and applying new information as it came into play.
The nations dedication to changing conditions and getting ahead of things before they come to a head have helped the country return to a way of living closer to pre-pandemic style than would otherwise be possible.
New Zealand was one of the first countries to adopt a monetary policy contraction and deviate from expansionary measures, and there are a number of economic indicators that have shown improvement in recent months.
Electronic card transactions are on the rise
With lockdown restrictions removed and business activity continuing strong, there has been a real increase in consumer activity in the retail shopping sector using debit or credit cards.
New Zealanders have spent 9.5 per cent more on their debit and credit cards in October relative to the last month, according to Stats NZ. In addition to card spending in retail rising 10.1 per cent, spending in core retail industries rose by 8.7 per cent in the same time frame.
The month of October 2021 saw the largest increase in electronic card spending since June 2020, which is demonstrative of the significant boost that ending the lockdowns had on businesses. While retail boomed, other sectors such as medical and healthcare services did not show a similar boost in card spending.
Unemployment and underutilisation are down
Two major wins for New Zealand in its journey of recovery from the pandemic have been the plummeting unemployment and underutilization rates.
The jobless rate in New Zealand fell to record lows in the previous quarter and have far exceeded the expectations of forecasted labour market variations.
The third quarter of 2021 saw that unemployment rate bottom out at 3.4 per cent - significantly lower than the predicted 3.9 per cent. The unemployment rate behaving this way is a good indicator of New Zealand’s rapid recovery.
In addition, the underutilization rate fell from 10.5 per cent in the June Quarter to 9.2 per cent in the September quarter. Interestingly, at the same time the employment rate rose to 68.8 per cent in the last quarter and wage rates increased by 2.4 per cent on an annual basis.
These rates reflect the build up of the labour market strength in New Zealand, though it cannot be ignored that despite the recent improvement in employment rate it is still one of the lowest among OECD countries.
Strengthening of the government accounts
The new financial year results exhibited similar strengths, with government accounts for the September quarter showing an improved starting position than they have previously.
This Crown improvement was largely due to the core Crown tax revenue, which came in at NZ$2.3 billion above the Budget 2021 forecast. The GST revenue was also significantly higher than estimates thanks to consumer demand - NZ$184 million higher than the estimates, to be precise.
However, due to the Delta outbreak the operating balance before gains and losses showed a deficit of NZ$5.4 billion.
Not quite a comeback, but definitely on its way
While the swing to pre-pandemic ways is progressing nicely in New Zealand, the residual effects of Delta haven’t been surmounted quite yet. Regardless of the continuing effects of outbreaks and lockdowns on the economy, the nation has recovered well and is at the forefront of the global race to normalcy.