NZIER Survey: Re-Emergence of COVID Creates Additional Uncertainty

NZIER forecasts the effects of COVID-19 will persist well into 2023, as the recent re-emergence of COVID-19 in the community adds to the already highly uncertain outlook. The new restrictions have hampered the recovery in activity seen in recent weeks as New Zealand moved down alert levels. Although retail spending had rebounded in the months following the relaxation of lockdown restrictions, the recent increase in spending has yet to make up for the decline experienced during the lockdown. Businesses are typically more cautious heading into a general election, as uncertainty over the outcome leads businesses to hold off on planning. This time around, the outbreak of COVID-19 has added much more uncertainty for businesses, with hiring and investment intentions falling sharply. We expect businesses and households will remain cautious about spending and investment over the coming year. The New Zealand outlook remains dependent on three key factors: 1) how well New Zealand can contain the COVID-19 outbreak; 2) how policymakers such as the Government and central bank respond with fiscal and monetary policy support; 3) how the global pandemic evolves in the other major economies.

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