Latest Covid-19 alert levels change to cost economy $240 million – ASB economists

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The latest Covid-19 lockdown is set to cost the economy closer to a quarter of a billion dollars, according to ASB economists.

Sign that reads 'Sorry, We are closed' hanging in a shop front in Central Auckland during Lockdown Level 3.

The hospitality and events sectors would bear the brunt of the impact, says ASB chief economist Nick Tuffley. (File image) Photo: RNZ / Claire Eastham-Farrelly

In its weekly commentary, the bank said the move to higher alert levels was estimated to be about $240 million, most of which would be borne by the Auckland region and hospitality sector.

ASB chief economist Nick Tuffley said the immediate impact would be bigger than the one last month, but the longer term economic effect would not be overly significant.

“It is the services sector – particularly hospitality and events – that bears the brunt of the impact, even if contactless sales do enable some venues to open during people’s leisure time.”

He said the calculations were “back of the envelope” and did not take account of any possible rebound in spending once the lockdowns were lifted.

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“Nevertheless, it serves to highlight the value in spending money to do what we can to minimise the ‘human factors’ part of the whole process,” Tuffley said.

BNZ head of research Stephen Toplis said it was pointless to put an economic value on the lockdowns given the wide range of scenarios other than to say it would be negative.

“In particular, for some businesses this might be the straw that breaks the camel’s back. This is particularly so for parts of the tourism, hospitality and retail sectors who were already coming to grips with the fact that school holidays are now over, autumn is fast approaching, and so the support from domestic tourism is rapidly abating.”

He said the latest outbreak highlighted the “extreme financial risk” of trying to plan ahead.

“This in turn will further deter future economic activity.”

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