Today's Top 5 is a guest post from Jeremy Couchman, senior economist at Kiwibank.
As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.
And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.
NZ has done extremely well to crush the Covid-19 curve and allow the rapid reopening of the economy. But we are still far from out of the woods, with borders remaining closed for the foreseeable future – bar the possibility of a trans-Tasman bubble. Closed borders will hobble industries reliant on foreign arrivals such as hospitality, retail and education. But from a crisis there comes opportunity. And NZ is well positioned to make the most of these opportunities. Below are five key industry developments and opportunities that have come out of the current crisis. Today’s top 5 is based on Kiwi Economics latest research.
1. The Covid-19 crisis won’t be shared evenly across industries
We know industries reliant on foreign visitor arrivals will be hardest hit. And even when borders are reopened, the appetite for people to travel will likely take time to recover. Tourism-related industries are broad and include firms in sectors such as retail, hospitality, accommodation, recreation and transport services. Kiwis are being encouraged to get out and see their country. Unfortunately, domestic tourism, while doing its best, is unlikely to completely fill the void. Domestic tourism was estimated to have contributed almost $24bn to the economy last year. Meanwhile, NZ’s imports of travel services (Kiwi’s spending on overseas holiday’s) was around $6.5bn. In contrast, tourism exports (our largest foreign currency earner) was $17.1bn.
A glimmer of light for the tourism sector is the plan to allow NZ to share a trans-Tasman bubble with Australia. Australia is easily our largest source of short-term visitor arrivals. Eventually tourism will recover. But a recovery is dependent on borders reopening, and the desire of people to explore the world again.
The construction sector’s medium-term outlook is mixed, at best. Residential building is likely to remain supported by the shortage of affordable housing for a while longer. However, net migration – a key driver of housing demand (see below) – will fall sharply while borders remain closed. Commercial construction has a less rosy outlook. Some commercial tenants look to be moving away from having a large office footprint and encouraging more staff to work from home. The Government’s boost in infrastructure spending should help offset some of the slack in commercial construction in the years ahead.
The ongoing need to feed the planet should continue to provide primary producers with some insulation from the worst of the Covid-19 crisis. A positive to hang on to. However, the hit to global demand from the Covid-19 crisis has already weighed on export commodity prices and farm incomes. There are also concerns, farmers will find it difficult to find seasonal workers, while borders remain closed.
2. Covid-19 is feeding anti-globalisation sentiment
The GFC is widely accepted as an accelerant of growing resentment towards globalisation. And the Covid-19 crisis has reinforced anti-globalisation sentiment. Global trade will feel the effects of Covid-19 for years to come. Partly justified, with the crisis exposing vulnerability of an overly concentrated global supply-chains. But also, the uglier Trumpian variety of protectionism is growing. For instance, US and China tensions have intensified under Covid-19. Amongst the chaos there are opportunities for some local niche producers. NZ wasn’t immune from the global supply-chain disruption seen in the early stages of the Covid-19 crisis. And we are likely to see more onshoring of some vital production – PPE production is one example.
3. Covid-19 to accelerate trends
Even before the Covid-19 crisis, there were trends well in train around how Kiwis consume, work, and travel. Trends that are expected to now accelerate. Online shopping was already a pastime for many Kiwis and the lockdown forced many more of us online for bargains. And this is how old habits are broken and new ones formed. A development born out in Kiwibank’s own card transactions data (see our latest data insights). None of this comes as a surprise, but it is happening much faster.
Alert levels 3 and 4 provided proof of concept that a decent chunk of NZ’s workforce could work successfully from home. Thereby reducing the need for the daily commute. A shallower peak in transport takes some pressure of clogged transport infrastructure and reduces carbon pollution. Another benefit of working from home includes the increase of effective catchment areas of our largest cities. If commuting to work is no longer a daily ritual, is there a need to live as close to centres of employment? The ability to work from home could alleviate some of the housing shortage in the heart of a sprawling city such as Auckland. And we may see more households moving to the regions.
4. Fertile ground for Innovation
Another opportunity for the NZ economy is the accelerated adoption of new technologies. New technologies of Artificial Intelligence (AI), automation, and data-driven technologies were increasingly being adopted globally over the last decade. The Covid-19 crisis, like any major economic downturn, will see the destruction of firms and jobs. But from this destruction comes creation as resources are channelled towards the most productive firms and new jobs are formed. A silver lining to the current upheaval would be increased adoption an investment of more of these technologies by NZ firms.
5. Consolidation of market power
The economic upheaval generated by Covid-19 will likely create fertile ground for an increase in merger and acquisition behaviour. Previously viable firms, now struggling, may be picked up by rivals. The merging of business is an outcome that can be beneficial by saving jobs for instance. Larger firms will likely have the wherewithal to acquire smaller competitors and increase market share. A concern though is the risk of too much market concentration and power from merger behaviour. Power which can be abused, working against innovation and offering consumers less choice at a higher price.
Nevertheless, the recovery from Covid-19 will also be fertile ground for innovation – aiding the creation of new businesses and jobs. We’ve already seen many examples of customer facing businesses pivoting during Covid-19 to stay alive. The type of entrepreneurial spirit that will allow start-ups to break new ground as we emerge from the current recession.
29 Comments
I don't think NZ is at the risk of being divided like that.
There seems to be more integration and eqaulity here compared to many other countries and our democracy and laid back work and lifestyles do not encourage too much dissent.
No doubt, there has to be improvement in sharing of health and welfare by all but the government and the populace aware and are already working on that, right ? The progress may be slow but we are doing something, unlike many other countries which do not even reccognise the inequality.
The Japanese were making a good fist of colonizing China from the early 1930s with brutal military force.
Who should save China from this exploitative colonization but mainly the USA, with a late contribution by Russia who routed the Japanese armies in Manchuria and Northern China towards the end of the war.
Has China thanked the USA for saving them from Japanese colonialism?
I have quite a few Maori relatives going back three or four generations. I don't see them marching. I can remember Harry Dansy, NZ's second race relations conciliator, attending large family weekend afternoon teas in the 1950s and 60s. There are Maori on my mother's side too. Most Maori seem as satisfied or unsatisfied with their lot as Pakeha . There are many ordinary Pakehas out there who have the same problems as Maori, and I do think disparity of wealth has to be addressed.
The funny thing is I don't see any assimilation between recent Chinese arrivals and Maori; why might this be xingmowang? You need to answer this question! It seems to me that Chinese migrants, especially those who arrived in the last decades, are possibly the most racist ethnic group in NZ.
Agreed Streetwise. The equity problems are not race based, they are opportunity based. The low socioeconomic groups, irrespective of race are largely denied. These are the groups who suffered the most as a result of globalisation and the so called 'neoliberal' economic policies. COVID19 has taught us another flaw in that ointment - resilience. How do we provide for ourselves when 80% of what we need is manufactured somewhere else?
I am hoping our Government will develop a plan that supports the recreation and growth of more manufacturing.
Thank the US for saving China from Japanese cruel colonization??
LOL
you gotta be kidding me.
Everyone knows that Chairman Mao and CCP founded new China.
the US on the other hand confiscated many data from Japanese unit 731. in exchabge, it pardoned many Japanese war criminals.
look up the history not the fabricated ones.
In terms of No 4 you have AI and automation, what is the result ?
Basically more job loses and the odd offset of IT / electrical jobs. So really more bad news but is a trend the Govt has pushed by increasing minimum wage rather than looking at the tax side (or govt being the problem).
Automation takes the repetition out of work. Most workplaces just have more work to do after automation projects complete. Have a list of obsolete jobs, although it's missing all the book keepers banks used to have and typing pools.
https://bestlifeonline.com/obsolete-jobs/
e: this really needs a list of old time jobs that have gone too. https://www.mentalfloss.com/article/513343/jobs-no-longer-exist
Not so sure. There are a lot of 'gofer' type tasks which exist. And the really specialised tasks need proper certification such as:
- How not to fall off of a Ladder
- How not to set the Whole Shebang Alight when laying asphalted roofing
- How not to Nail Yerself to the structure with a framing gun
- How not to test for a Gas Leak while Smoking
All these and more can be gained from Yer Local Tertiary Ed establishment for a Modest Fee.....and then Yer a Builder!
e.g. https://www.stuff.co.nz/taranaki-daily-news/news/121769840/unemployed-b…
If you enjoy what you see and are keen to learn, then push on.
1. The Covid-19 crisis won’t be shared evenly across industries
2. Covid-19 is feeding anti-globalisation sentiment
3. Covid-19 to accelerate trends
4. Fertile ground for Innovation
5. Consolidation of market power
is there a competition for most boring top 5? Giving it 5 seconds thought this is my top 5
#1 Cruise liners for quarantine
#2 Export blue cheese not milk powder
#3 Bollywood comes to Dargaville
#4 Jacinda new head of UN
#5 Kiwi's paid to be spectators at matches between European soccer teams for the sake of atmosphere
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