- New Zealand’s economy has weathered the COVID-19 storm by enforcing appropriate protocols during the virus outbreak.
- Key economic indicators such as retail sales, employment and national accounts have shown improvement in recent months.
- Despite some improvement, the ongoing recovery does not entirely reflect the economic slowdown triggered by the Delta outbreak.
New Zealand has powered through different phases of the pandemic with great resistance, showcasing the strength of discipline and good management. While economic revival is gradually taking place, it is hard to determine the total time the economy may take to return to normalcy. However, the progress made within the economy on several fronts demand closer attention and can be a good yardstick to measure the future rate of recovery.
New Zealand’s pandemic journey has been marked with some exceptional instances, wherein the nation’s efforts stood out among all other advanced countries. Most notably, New Zealand became one of the first nations to initially become virus-free with no new cases for an extended period. However, when the nation’s virus-free run turned out to be short-lived, the country modified its approach to accept coronavirus as a perpetually lasting disease. In a way, the country retained its flexibility during the pandemic while adjusting to the volatile conditions.
The country’s fight against the pandemic remains unmatched. It was also one of the first few nations to adopt a monetary policy contraction and deviate from expansionary measures. This shows the nation’s steadfast approach to changing conditions and its solid financial build-up against evolving headwinds. These fundamental strengths have also helped the country move one step closer to the pre-pandemic way of living.
Against this backdrop, let us discuss a few economic indicators that have shown similar improvement over the past few months.
Improving electronic card transactions
With the removal of lockdown restrictions and the continued business activity, more and more consumers are indulging in retail shopping through debit or credit cards. This is reflected in the latest electronic card transactions data released by Statistics New Zealand.
As per Stats NZ, New Zealanders spent 9.5 per cent more on their debit and credit cards in October relative to the last month. The card spending in the retail industries rose by 10.1 per cent in October over the previous month, while spending in the core retail industries rose by 8.7 per cent during the same period.
October marked the largest increase in electronic card spending since June 2020, reflecting a significant boost received by businesses following the end of lockdowns. On the contrary, non-retail sectors such as medical and healthcare services did not show a similar rise in card spending, underlining the gap still left to cover.
Reducing unemployment and underutilisation
New Zealand’s recovery journey from the pandemic has exhibited two other green flags in the recent past - reducing unemployment and underutilisation rates. The country’s jobless rate fell to a record low level in the September quarter, exceeding expectations of an improvement in the labour market.
According to Statistics New Zealand, the unemployment rate plummeted to 3.4 per cent in the third quarter of 2021, against the market expectation of 3.9 per cent. A better-than-anticipated unemployment result points to the country’s rapid recovery from the pandemic.
Interestingly, the underutilisation rate also fell to 9.2 per cent in the September quarter from 10.5 per cent in the June quarter. However, 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 figures indicate the build-up of strength in the labour market and a reduction in spare capacity within the sector. It is worth highlighting that New Zealand’s employment rate stands lowest among OECD countries despite the recent improvement.
Strengthening government accounts
The government’s first results for the new financial year have also exhibited the continued strength of the country’s economy. The Crown accounts for the September quarter have shown an improved starting position from the last financial year and sustained strength in economic activity.
The improvement in the accounts was majorly reflected in the core Crown tax revenue, which stood at NZ$24 billion, i.e., NZ$2.3 billion above the Budget 2021 forecast. Moreover, the GST revenue turned out to be NZ$184 million above the estimates due to better-than-expected consumer demand. However, the operating balance before gains and losses showed a deficit of NZ$5.4 billion, primarily due to the Delta outbreak.
In a way, while the New Zealand economy is on its way to swing back to the pre-pandemic state, there are still some residual impacts of the Delta outbreak that have not yet been absorbed. Despite that, the country has continued to display exceptional resilience against the crisis and remains well-positioned to set another example of quick economic recovery for the entire world.