New Zealand jobless rate could hit 26% if virus curbs extended: treasury

(C) Reuters. Illustration photo of a New Zealand Dollar note

WELLINGTON (Reuters) – New Zealand’s unemployment rate could reach 26% if tough lockdown measures to fight the spread of the coronavirus are extended, treasury department forecasts released on Tuesday showed.

New Zealand’s offices, schools and non-essential services have been closed for the last three weeks. The government is expected to decide whether to extend the lockdown on April 20.

Treasury forecasts that mapped economic scenarios under different restriction levels showed that extending the current Level 4 alert, which is the highest, would increase unemployment by 17.5% to 26%.

If the lockdown is eased this month, unemployment would be around 13%, it said.

Treasury estimated that declines in annual Gross Domestic Product in the year ending March 2021 would vary from around 13% in the least restrictive scenario, to close to one-third if tight curbs are in place throughout the year.

The modelling showed GDP falling around 25% in the June quarter, followed by a 20% rise in the September quarter if a greater range of economic activities was allowed to resume.

Deactivation of the alert level system by the June 2021 quarter would lead to a further pickup in activity, it said.

Interactive graphic tracking global spread of coronavirus: open https://tmsnrt.rs/3aIRuz7 in an external browser.

Finance Minister Grant Robertson said after the report was released that unemployment could be kept below 10%, and return to 5% in 2021 with additional government support.

“Work is already well advanced on further fiscal support,” Robertson said in a separate statement.

He said the economy could bounce back to be NZ$70 billion ($42.62 billion) larger by 2024 than in 2019.

“The best way to protect the economy is to fight this virus, which is why we’ve acted swiftly and decisively to stamp out COVID-19. This will give our businesses and the economy the best chance to get going again on the other side,” Robertson said.

Extra government spending will cushion the blow by protecting jobs and supporting businesses, he added.

New Zealand has recorded five deaths from the coronavirus and the number of cases total 1,349.

($1 = 1.6426 New Zealand dollars)