NEW ZEALAND’S SHAKY TWO-TIERED ECONOMY

Things are improving but the way Auckland emerges from lockdown will matter, writes Susan Edmunds.

New Zealand’s economy is broadly stable, with low levels of unemployment, an influx of government money thanks to the wage subsidy and resurgence support payments, and a strong primary sector, new data shows.

But Dot Loves Data’s resilience index shows there are still risks from the extended Auckland lockdown, and the end of the wage subsidy when the country moves to the traffic light system for managing Covid-19.

Dot Loves Data creates a resilience measure, on a scale of one – low resilience – to seven, to show how the economy is holding up.

It measures business openings, business closures, longevity of businesses and consumer demand. This is then compared against historical data to forecast the net growth of businesses over the next 12 months.

It said New Zealand was at a resilience level of five, with a forecast rate of growth of 3.6 per cent.

This was a recovery from a dip to three in January when a large number of businesses closed at the end of last year’s wage subsidy scheme in the third quarter of 2020.

There was another spike in business closures in August this year but that was countered by an increase in ‘‘lockdown business openings’’.

Dot Loves Data government director Justin Lester said 15,000 new businesses opened that month and another 12,000 in September.

It dropped back to a steadier level of 3399 closures in September and 3478 in October.

‘‘We have moved into a twotiered economy where construction, digital, advisory and primary sectors are performing strongly, but we’re still seeing weakness in tourism, retail, accommodation, events, hiring and sectors associated with this group,’’ he said.

‘‘Construction is patchy. The sector is booming, with high levels of demand and strong growth in new businesses and sole traders, but higher costs due to materials delays and price escalation means those on fixedprice contracts are hurting somewhat.

‘‘As Auckland moves out of lockdown, we will closely monitor how businesses perform and what consumers do. We expect a spending splurge over Christmas. We hope it will continue over summer as the economy opens up further.’’

He said the lockdown was likely to take a toll on the city’s prospects in the coming months and businesses would come under more stress.

‘‘Currently, the Auckland region remains at resilience level five because of the large number of new business openings in August and September. However, the Waitemata¯ Local Board area, which includes the Auckland CBD, sits at level three due to the steep decline in CBD consumer spending.’’

Wellington is at level five, with 1092 businesses closed and 695 opened over the past three months.

Christchurch is also at level five, with 1352 businesses closed and 879 opened.

Even in Queenstown, where Lester said there continued to be reports of businesses ‘‘doing it tough’’, there had not been significant numbers of business closures. In total, 167 closed in the past three months and 103 opened.

‘‘As Auckland moves out of lockdown, we will closely monitor how businesses perform and what consumers do. We expect a spending splurge over Christmas. We hope it will continue over summer as the economy opens up further.’’