In March of 2020 a decision was made to cease production of all non-essential goods and services unless the workers could produce these remotely. This was done in response to a new coronavirus pandemic. With much of the workforce forced into quarantine – unemployment spiked and GDP crashed in the expected ways. The question remains, what does the rebuild look like?
Subsequent to the lifting of most restrictions Treasury, the Reserve Bank of New Zealand (RBNZ) and BERL have produced a number of forecasts for the economic rebuild. We focus on unemployment for this article.
We first look at the Treasury’s September Pre-Election Fiscal Update (PREFU) and latest Half Year Economic Fiscal update (HYEFU). In the PREFU Treasury was forecasting a more intense depression and increase in unemployment spiking at 7.7 percent in 2021, followed by a very swift recovery to 5.3 percent by 2024. This forecast has been moderated substantially in the December HYEFU and now Treasury expects a spike to 6.8 percent unemployment later at the year 2022 and a distinctly slower recovery down to a much lower four percent unemployment by 2025.