Covid 19 coronavirus: Editorial – New Zealanders saved our economy

EDITORIAL:

Well done New Zealand, take a bow.

When an unprecedented global crisis required a national spending spree to save the economy, we rose to the challenge.

We went to the pub, we ordered extra takeaways, we booked baches and we renovated our kitchens.

On the scale of heroic sacrifice it may not match that of previous generations.

But, joking aside, it did make a difference.

Our economic performance in the face of the Covid-19 pandemic has been nothing sort of incredible, as yesterday’s third-quarter GDP figures showed.

Economic growth rebounded by 14 per cent in the three months to September 30.

That has seen our year-on-year GDP rise. By that measure it is among the strongest economic performances in the world.

We’ve had some familiar fair winds – export prices have held up and production volumes have been good.

There’s been all that stimulus from the Reserve Bank and Government.

But that just put conditions for recovery in place.

We had to do the work.

At the coal face, that was as business people and as workers.

We sucked up the stress of the pandemic and put in the hours to pivot, reinvent and reposition for the new world we faced.

As consumers, we spent like our lives depended on it.

It’s hard to say whether that’s because we thought the world was ending and we might as well enjoy ourselves, or because we believed it wouldn’t, so we might as well upgrade the telly.

Perhaps a bit of both.

But all the post-lockdown action has proved that our economy is more resilient than anyone dared imagine when the pandemic hit.

Economists underestimated the net effect of closed borders.

Yes, tourism accounts for 5 per cent of GDP, but the extent to which Kiwis had been spending offshore was significant.

In making the effort to spend that money domestically, the damage has been greatly mitigated – in the short term at least.

So now what?

We know the absence of visitors through the peak of the tourist season will hurt.

Even if unemployment peaks at lower levels than first forecast, it will still be on the rise in coming months.

We may yet see another dip in GDP before this rebalancing is complete.

But there is cause for more optimism.

The third-quarter GDP figures included the second lockdown in Auckland, so the rebound effect may linger longer in our largest city.

Although wage subsidies have finished, the Government still has plenty of capacity for targeted support.

Spending on big infrastructure projects is just getting in to gear.

And there is no immediate prospect of interest rates rising.

Add to that the psychological effects from a steady stream of recovery announcements in 2021 – transtasman bubbles, the vaccine rollout – and there is cause to hope that economic momentum will be maintained.

The economic outlook of a nation can quickly become a self-fulfilling.

It is important that we remain optimistic and remain confident.

In doing so, through the darkest days of the pandemic, we have avoided the kind of recessionary spiral that traps economies in perpetual downturn.

That, as anyone who remembers the recessions of the 1980s and 1990s can tell you, is progress.

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