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Reading the tea leaves

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Reading the tea leaves

On February 20, New Zealand started COVID vaccines, starting with border workers. Key groups, such as front-line workers, will be progressively vaccinated in March / April, while the rest of the population will start from May to July. Globally, the number of injections administered now exceeds 400m and it’s growing at about 10 million a day.

With vaccines now being used in earnest, the tantalizing prospect of “normalcy” draws attention. This article speculate as for some of the economic and social possibilities that await, as we collectively dust ourselves off and find our feet.

A spending boom?

A clear possibility when considering the nature of COVID and looking at the numbers. Due to a combination of economic anxiety and the effect of lockdowns, people have not spent as much during COVID, leading to “pent-up demand” for certain goods and services (especially travel), but also greater savings. Of course, this will not apply to everyone, there are those who lost their jobs through COVID who could have spent their savings, but the RBNZ time deposit data is clear. We estimate that New Zealand households have an additional $ 5 billion in additional savings (measured based on term deposits), compared to if COVID had not occurred. That’s a lot of financial power ($ 1,000 each for the 5 million team), and it’s indicative of the magnitude of “unspent” dollars sitting on household balance sheets, waiting to be used.

Additional Savings at Home During COVID-19

RBNZ Household Time Deposit Data. The “additional savings” is calculated by extrapolating the trend observed in the five years prior to January 2020 and comparing it with what happened.

In addition to higher liquid savings, households have also benefited from rising house prices and stock markets through 2020, along with lower interest rates on refinanced debt. Collectively, some consumers may feel particularly flushed and better with the world as 2021 progresses, encouraging the bag strings to become more flexible.

Recovery in tourism?

Of course, this is obvious, but we thought it would be interesting to look at the numbers and consider the possibilities. As shown in the chart below, New Zealand averages just over 3 million visitors per year, for the ten years prior to COVID.

Historical tourism numbers in New Zealand

Statistics NZ, International Travel Statistics

Contrast that typical 3 million figure, with the 600k who actually visited New Zealand in the 12 months prior to January 2021, and you’ll get maybe 2.4 million (or more) people who probably would have liked to visit New Zealand up to that fate made other plans. For how many of these people was New Zealand on your wish list? The once-in-a-lifetime trip they had planned for many years? Perhaps a large number, given that, apart from the 25 million Australians, New Zealand is among the most difficult destinations to find, which requires a reasonable amount of planning and mental energy. If this is true, could we see a number of visits well above normal in New Zealand in late 2022-2023 when the situation becomes more normal?

It seems feasible, op Trip Advisor Mid-2020 Study, found that New Zealand was one of the first markets to see a resurgence of interest in hotels and restaurants. Having been locked in for much of 2020, Europeans and Americans can decide that 100% Pure New Zealand, far away at the bottom of the world, is the place they want to go. In addition, since lockdowns in Europe and North America have often been much longer (with higher growth in household savings than in New Zealand), these would-be travelers will have enough financial power to take longer and cheaper trips. high expenses. It remains to be seen how equipped New Zealand’s tourism industry would be to handle a resurgence in demand, but that’s a problem for another article.

Redistribution of the population?

For most of the last 20 to 30 years, Auckland’s population growth has been greater than that of the rest of the country. This trend has decelerated in the last five years, even reversing in 2019, but it has nonetheless been quite persistent.

New Zealand population growth, Auckland compared to the rest of New Zealand

New Zealand statistics. Sub-national population estimates

The figures reflect Auckland’s status as an international gateway to New Zealand and the country’s commercial center. Historically, the SuperCity has received a higher proportion of immigrants, experienced higher job growth, and generated higher growth in gross domestic product than the rest of New Zealand.

Regional GDP in New Zealand

NZ statistics, New Zealand regional economies 2019

But how could this change in the post-COVID world be enabled by technology? COVID has shown that in many industries, people can work from almost anywhere, as long as they have a stable internet connection. From a lifestyle perspective, Auckland has drawbacks, with high house prices and longer travel times on average than the rest of New Zealand. Could working from home give people the opportunity to leave the big city in favor of a more relaxed pace of life elsewhere? Current home sales volumes suggest Auckland is still popular, but lifestyle changes of this magnitude take time to develop.

In this article we speculate on some of the possible scenarios that could lead to a return to “normality”. What will recovery be like in a post-COVID world? Of course, nobody knows. Many of the effects, long-term and short-term, remain “unknown-known” or “unknown-unknown.” Whatever the recovery looks like, we will be grateful to see the end of 2020.

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