Liam Dann @ NZ Herald is reporting (paywalled) “Historic wave of returning Kiwis has just begun – new expat survey“. The press release from KEA is here. The results of the survey are here. I’d just comment that this survey is effectively self-selected and more about intention than plans.
But the rush back home has definitely been happening and appears to mainly be constrained at present by the limits on quarantine facilities. Liam Dann also did a piece over the weekend “What went wrong? Why is the economy doing so well?” that looked at some of the immediate implications.
Why are things going so well for the New Zealand economy?
Latest unemployment numbers came in at 5.3 per cent last week – a figure that for most of the past few decades would have been considered pretty good.
It isn’t good, of course.
The pandemic and the closure of New Zealand’s borders made about 37,000 more people unemployed in the September quarter.
And that doesn’t include those who have lost work but don’t qualify as officially unemployed for a variety of statistical reasons.
But relatively speaking, 5.3 per cent unemployment is not bad, either.
In April, for example, Treasury forecast that unemployment would hit 9.8 per cent in the September quarter.
In the early 1990s it was close to 11 per cent.
If we were able to send this week’s data back to our panicked selves of seven month ago – we would breath a sigh of relief.
The forecasts of bank economists have also proved overly pessimistic.NZ Herald: “What went wrong? Why is the economy doing so well?“
As he points out, there is a point of view that keeps looking at the data and persisting in saying that it isn’t going to last. That it is all being propped up by the money flowing out of government debt. And yes – there is some truth that happened – especially during the lock downs. But the wage and business subsidies are either stopped or winding down.
Sure, we’re going to keep hearing that from the likes of David Seymour. Richard Harmon @ Politik in “The debate we didn’t have” (paywalled). But I have sparrows from winter who appear to have similar memories than David Seymour @ ACT – short-term and related to feeding. My partner was feeding some young sparrows when it got cold and they still pop in hopefully months after we stopped. Seymour is still repeating the same motions and words he did early this year and clearly hasn’t engaged his brain yet.
Kiwibank Chief Economist, Jarrod Kerr said the unemployment figure highlighted the damage from the lockdown.
“The spike is essentially payback for a counterintuitive fall in the number unemployed – and the unemployment rate –in the June quarter,” he said.
He pointed out that to be counted as unemployed someone has to be actively seeking work and for many, that was not possible during the lockdown.
“An inability of those unemployed to seek paid employment during lockdown masked the true damage,” he said.
“We got lucky on Covid-19,” said Seymour.Politik : “The debate we didn’t have“
Seymour then proceeds to compare it with the much smaller increase in absolute employment in one quarter that happened in the GFC – ignoring that the GFC was unfurling for over than eighteen months in NZ before it had its full effect. Comparing a one-off event an increase in unemployed after the release of a wage subsidy is a comparison between a rising flood and a tsunami.
But also in case he hadn’t noticed, the sugar rush part of the fiscal stimulus has been pretty well finished for a while now. It currently requires that businesses are able to demonstrate that they had something like a drop of 40% from the same months last year.
Larger businesses have been regularly paying back subsidies received because they no longer met the requirements when they took them for. This is the only sensible and rational approach when you have the IRD eventually going to have a look at businesses wholesale using a massive computer system to compare time data not only of the business, but also their employees.
But we are approaching a crunch point for this view.
The wage subsidies are finished and we are about to feel the absence of international tourists more acutely as we reach the traditional peak of the season.
But if anything, the risk of that narrative proving incorrect appears weighted to the upside.
In other words, the bigger risk is that things keep going better than expected.
Perhaps our economy was just more robust than we thought.NZ Herald: “What went wrong? Why is the economy doing so well?“
Exports have been doing well. Most of our major target markets haven’t been overly affected by the pandemic. The virus is out of control in the North and South Americas and Europe. As Liam Dann says “Overall something like 75 per cent of our exports by value are now to the Asia Pacific.”. If you look at any trade page you’ll see something like this (I highlighted the Americas and European destinations).
Top export destinations of commodities from New Zealand in 2019:
- China with a share of 27% (11 billion US$)
- Australia with a share of 14.5% (5.74 billion US$)
- USA with a share of 9.4% (3.71 billion US$)
- Japan with a share of 5.84% (2.31 billion US$)
- Korea with a share of 2.81% (1.11 billion US$)
- United Kingdom with a share of 2.47% (980 million US$)
- Hong Kong with a share of 2.12% (838 million US$)
- Other Asia, nes with a share of 1.95% (773 million US$)
- Singapore with a share of 1.87% (741 million US$)
- Malaysia with a share of 1.77% (703 million US$)
We haven’t got full data yet, but even the badly afflicted destinations appear to have been not doing too badly for our exports. Wines in particular appear to be valued during lock downs.
The other three main sources of income for NZ are flight related.
It looks like this year we’ve had something like 50,000 kiwis or permanent residents returned – keeping our immigration industries like real estate agents busy. Plus stacked immigration or refugees who’d like to get some place that isn’t quite as traumatic as they’ve been observing.
According to KEA’s survey there are upwards to half a million kiwis who think that they may be heading our way. Now I suspect that is over the top. But there are a lot of people I know who are planning or thinking on returning. I wouldn’t discount it. And we can’t refuse them – just make them go through quarantine.
I’m just not sure where we’ve going to stack them. Especially here in Auckland where most of them say they want to go. Fortunately most will have urban skills and be able to feed into our burgeoning urban exports.