New Zealand Finance Minister Grant Robertson said on Friday that New Zealand expects a strong recovery of its economy in the three months ending September.
The country fell into a severe recession – two consecutive quarters of negative growth – after GDP contracted by 12.2% on a quarterly basis between April and June, largely in line with the 12.8% decline that economists had forecast in a Reuters poll. This followed negative growth of 1.4% in the March quarter.
Between April and May, New Zealand imposed a strict nationwide lockdown for several weeks to slow the spread of the coronavirus. This means that most people have had to stay home and all non-essential businesses have closed. The infection rate in the country of about 5 million people remained relatively low, with 1,809 cases and 25 deaths reported.
Robertson told CNBC’s “Squawk Box Asia” that data for the June quarter was “expected” and that activity rebounded in July and August as businesses reopened and people return to work. The virus appears to be relatively under control in the country at the moment.
“We saw ourselves getting out of this relatively well and relatively quickly. So we expect the results for the September quarter to be strong,” he said.
To help companies address the fallout from the national lockdown without layoffs, the New Zealand government introduced a wage subsidy program that Robertson said protects 1.7 million jobs. Reports said more than NZ $ 13 billion ($ 8.81 billion) had been paid out under the plan.
This program is not expected to be extended further unless New Zealand is forced to re-impose strict levels of lockdown in the future.
“What we focus on now when our economy operates in a relatively open manner is to support specific sectors where we have seen more exposure – for example, in our tourism industry,” Robertson told CNBC. He explained that there are plans still in place to support people who have lost their jobs and help small businesses by giving them access to interest-free loans.
New Zealand is preparing to hold elections next month that could be another referendum on Prime Minister Jacinda Ardern’s leadership.
In the economic and financial update before the election, New Zealand’s Treasury said that net debt is expected to rise in the coming years, affecting the long-term recovery of the Pacific nation. At the end of June, net debt was estimated at 27.6% of GDP and by fiscal year 2024, it is expected to rise to 55.3% of GDP.
Robertson said New Zealand’s balance sheet remains strong and net debt will peak at the level above. He explained that the coronavirus pandemic represents “one shock in every 100 years” to the global economy as all governments struggle to find ways to provide financial support to their people and companies.
“When we are all established, it is clear that we will have to continue to be very careful in our financial management,” he said. “We got a way forward to keeping debt under control and reducing it over time.”
“But like all governments, I must balance that with making sure we continue to invest in our public services, health and education, which is what we especially need at a time like this. And support people during uncertainty,” Robertson said, saying that the country will be able to absorb more. From shocks to the economy.
Air New Zealand
In August, the National Carrier of New Zealand reported its first annual loss in nearly two decades, and reports said it was planning to withdraw a NZ $ 900 million ($ 596.34 million) government loan to survive the pandemic, which has hit travel and tourism sectors globally.
Robertson said Air New Zealand remains a very important part of the country’s economy and plays an important role in its economic development. The government plans to work with the airline over the coming months to determine their locations in the future.
“Like all airlines around the world, they face huge challenges right now. They started pulling out the loan that we gave them to support them during this time period. There have been a large number of redundancies within the airline because they’ve been adjusting to volumes.” Far fewer than the passengers they deal with, “he said, adding that the government intends to remain the major shareholder in the carrier.
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