In a rare mood of consensus both the Prime Minister, Jacinda Ardern, and the Opposition Leader, Judith Collins, yesterday both warned that Covid 19 would be with us for “some time”.
Collins went as far as to support the Government’s “elimination” strategy.
But that strategy comes at a huge cost as it relies on a tightly closed border and tough lockdowns if a Covid case manages to get through that border.
The economic impact of this policy was clear yesterday with the release of retail trade figures for the June quarter.
The closure of the border and the lockdowns are now making massive holes in retail trade.
The economies of Otago and Southland are affected by the lack of tourists in the Queenstown Lakes district.
Statistics NZ figures out yesterday show that while the Auckland region had the largest dollar value fall during the June quarter, down 13 per cent ($1.2 billion); the largest falls in percentage terms were in the South Island.
The Otago region, including Dunedin and Queenstown, had the largest fall in percentage terms, down 27 per cent ($343 million).
“The big drop in sales for the Otago region in part reflects the significant fall in overseas tourists visiting the Queenstown lakes region,” retail statistics manager Kathy Hicks said.
Other regions affected by less international and domestic tourism spending were: West Coast, down 22 per cent ($33 million), Southland, down 19 per cent ($89 million), Nelson, down 18 per cent ($51 million), and Tasman, down 18 per cent ($42 million).
Auckland, on the other hand, was hit hard by the lockdown.
Overall retail sales values across the country fell a historic 15 per cent in the June 2020 quarter during the Covid-19lockdown, the biggest drop on record in figures going back 25 years.
Spending on eating out, accommodation away from home, vehicles, and fuel all fell sharply in the June 2020 quarter compared with the June 2019 quarter. This was only partly offset by strong supermarket and grocery sales.
“This unprecedented fall in the June quarter was not unexpected, with Covid-19 restrictions significantly limiting retail activity,” Hicks said.
“Non-essential businesses closed temporarily for about half of the quarter during alert levels four and three.
“Most industries saw unprecedented sales falls in the June quarter.
Sales for food and beverage services fell 40 per cent or $1.2 billion in the quarter, the largest drop of any industry.
“For a team of 5 million, that is equal to each person spending about $18 a week less on eating out over the June quarter,” Ms Hicks said.
Fuel retailing had the second-largest fall, down 35 per cent or $770 million.
These falls were followed by:
- motor vehicles and parts retailing, down 22 per cent ($729 million)
- accommodation services, down 44 per cent ($418 million)
- hardware, building, and garden supplies down 16 per cent ($350 million).
But supermarkets boomed during the lockdown.
There was a substantial increase in supermarket and grocery stores, up 12 per cent ($615 million) from the June 2019 quarter.
This followed a record rise of 13 per cent ($665 million) in the March 2020 quarter.
“Supermarkets and grocery stores were essential services that stayed open during the lockdown, and the strong increase in sales values reflects that,” Ms Hicks said.
Sales values for the non-store and commission-based industry rose 20 per cent ($94 million) in the June 2020 quarter.
Online businesses were in demand during the lockdown period, providing a wide range of products and the advantage of home delivery.
Electrical and electronic goods retailing was up 5.4 per cent ($49 million).
“These businesses were able to operate online under lockdown as an essential service.” Ms Hicks said.
“They provided food deliveries and electronic supplies, such as heaters or computer monitors for home office set-ups during lockdown.”
Despite the falls in spending, ASB senior economist Mike Smith said the easing of restrictions and pent-up demand looked to have contributed to a strong rebound in retail activity towards the end of the June quarter and into the September quarter.
“A sizeable retail rebound is in the wings that looks to be led by hardest-hit sectors in the June quarter,” he said.
“NZ looks to have endured the COVID-19 maelstrom better than most.”
However, the worst is not yet over.
Smith said the return to Level Three lockdown in Auckland and Level two elsewhere would temper the retail recovery and would sorely test the resilience and viability of a number of struggling retail and hospitality operators.
“Widespread job losses and a non-existent overseas tourism and educational boost will also crimp consumer spending,” he said.
“More policy support is needed to support consumer spending and we expect the Official Cash Rate (OCR) to fall below zero by next April and to remain below zero until the NZ economy looks to have conclusively turned the corner.
“A difficult period lies ahead for the retail sector.”
The Government has come under some criticism for its “elimination” policy and the tight lockdowns and border restrictions that has implied.
But announcing yesterday that Auckland would stay in the level Three lockdown until midnight on Sunday, the Prime Minister defended the elimination strategy.
“As I look around the world and at the experience of others, we are still of the view that now more than ever, a stamp it out strategy is best for our people and our economy, for the long term wellbeing of New Zealand,” she said.
National Leader Judith Collins wants the public to have input into decisions about alert levels.
“As Prime Minister, I will convene an immediate Public Health Summit that would bring all aspects of our community together, from public health specialists, primary care teams, iwi leadership, Business New Zealand, manufacturing and the unions, so we can all agree on what’s best practice for the country,” she said yesterday.
“While we’re committed to the elimination approach, the Summit’s reviews of the levels will give us the best chance of recovering the jobs lost and preventing further loss.
“What’s clear is that Covid-19 is going to be with us for some time. We need to find the best ways of ensuring that we continue to eliminate this disease.”
Collins’ support of the elimination strategy is significant; it means that the core plank on which the whole Covid management plan rests now has bi-partisan support.
The Prime Minister also yesterday was telling the country to prepare for a long haul before Covid is beaten.
“This is the world’s reality that Covid is ever-present,” she said.
“It is a hard reality to accept.
“Now, we may not have any choice about whether or not the world is in a global pandemic, but we do have choices around how we deal with it.
