New Zealand is now in a near-total lockdown for at least four weeks. And we wouldn’t be surprised if the lockdown lasted for two months. With no construction or non-food manufacturing taking place, activity will be hit hard. We have pencilled in a 30% q/q drop in output in Q2. The resulting loss in activity will drive the unemployment rate higher and cause inflation to fall further below the RBNZ’s target. In Australia, restrictions are not nearly as severe. To be sure, cafes, bars and entertainment venues are now closed. But many retail shops remain open. And mining and manufacturing continue to take place. We therefore think the hit to activity in Australia will be less sharp, but more drawn out. Indeed, Scott Morrison has repeatedly mentioned that the partial lockdown could last six months.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services