Coronavirus: Travel restrictions to have 'tectonic' impact on tourism - economist

KATE GREEN, TRACY WATKINS AND SUSAN EDMUNDS. Stuff.co.nz New coronavirus travel restrictions for people coming in and out of New Zealand will "wipe out most of our tourism" until the crisis is over – and a recession is now inevitable, economists say. Prime Minister Jacinda Ardern announced a raft of new rules on Saturday afternoon following a Cabinet meeting in Auckland. To reduce the risk from covid-19, all new arrivals will have to self-isolate, and cruise ships will not be allowed to visit New Zealand until June 30. Economist Cameron Bagrie said that would have a "tectonic" impact. "This is not a small earthquake for the tourism sector." He said there was a recession coming and it would hurt. "Recession is inevitable and it will not be a light one. But we probably don't have a choice given what could happen if coronavirus gets lift off here," Bagrie said. "The question now is how deep is the economic hole. For some sectors such as tourism this is a catastrophe of economic proportions. The Government had better have one hell of a fiscal/government injection ready to push lots of money into the economy to offset some of that damage. "They can't make things good but they can make them less bad," He said the Government would need to come out with a "bazooka" in the next 48 hours. It would need to forget about its debt constraints and get more money into the economy "pretty damn quickly". He said while tourism would be affected short-term, there were likely to be long-term changes, too. "We're looking at structural changes as well." People might become less reluctant to holiday overseas, and New Zealand would become more reliant on domestic and trans-Tasman tourism. "We've been championing the fact tourism is now our biggest export-earner. It's about to go from hero to zero." The cruising industry could take a long time to recover - "if there is a recovery." Government assistance could come in the form of a cash injection in the manner of Australia, he said, which has given low-income earners a A$750 payment. The Government should also consider cutting GST, he said. Another economist, Shamubeel Eaqub, said the decision was entirely understandable. Tourism numbers would have dropped anyway, as fewer people wanted to holiday anywhere during a pandemic. He said the priority for the Government was to focus on the people and businesses of New Zealand. He hoped the economic package, to be announced by Prime Minister on Tuesday, would be large and target those people and businesses most at risk. Places like the McKenzie District, Queenstown, and Rotorua would be hit hard, as they relied hugely on tourism. Workers in the tourism and hospitality industries tended to be paid fairly low wages, and had little job security, he said. "We need to look after the people - people's health, but also their economic and financial security." He would like to see no stand-down period for welfare payments (currently there was a wait time of 12 weeks for unemployment benefits), as people would not have the ability to survive that wait. Generous support was needed from the Government, and from the central bank. "It is becoming glaringly obvious that the Central Bank of New Zealand should also step in and act." There should also be lines of credit to businesses affected to help people transition through this period and avoid business failure and job losses, Eaqub said. "When this is over, the economy will bounce back, but people will have been affected." Kirk Hope, chief executive of BusinessNZ, said the measures announced on Saturday would be "incredibly disruptive and challenging for the tourism industry". "Right now, the health and welfare of New Zealanders is the priority and we completely understand why the Government has taken the steps they have. The opportunity we have is that if we can keep the virus at bay we can bounce back quickly and get back into those markets." He said the Government's Tuesday announcement would be important for the sector to help iut get through the next six months, he said. BusinessNZ had already been working with Government to help design the wage support package but the quantum of that was as yet undetermined. Commentator Benje Patterson said there was now a chance the Government would have to inject capital into Air New Zealand, "something almost unthinkable just a couple of weeks ago". "Most, if not all, international airlines are likely to cease flying to New Zealand for the time being. Air New Zealand will be forced to cut the majority of its international capacity. In the interim the government may need to charter aircraft to get New Zealanders home that have been stranded because of flight cancellations by international airlines." E tu, the union that represents many workers in the aviation sector, warned that there would be flow-on effects to people who worked in aviation security, customs, at airports, as engineers and ground handlers and with cargo. Air New Zealand said it would review the impact of the measures announced and adjust its capacity accordingly. "We expect to provide an update on network changes over the next few days." Stuff