PHOTO: Economists forecast unemployment to rise and discretionary spending to drop. Photo credit: Getty.
Despite daily COVID-19 cases hovering around zero and alert level 2 causing a jump in retail spending, experts say the economic fall-out of COVID-19 is just beginning.
It comes as companies such as Fletcher Building, Air New Zealand, Smith’s City and Trade Me announced cuts to jobs and Bunnings and Michael Hill close stores, and the end of the 12-week wage subsidy from mid-June.
Economist Shamubeel Eaqub said that initial pent-up spending after lockdown was expected. As the wage subsidy runs out and the country settles into recession, he expects business cost-cutting to continue.
“This is the beginning: all we’ve seen is the health disruption, the real recession starts now,” Eaqub said.
Around 80,000 jobs were lost during the Global Financial Crisis (GFC). As a result of COVID-19, Eaqub sees job losses being two-to-three times that. However, the real concern is that fear and uncertainty is causing a retraction in household spending and investment, including large-scale purchases and construction.
“Global trade has come off a lot and current drought [means that] the outlook for agriculture is also tough,” Eaqub added.
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