Waikato Business News February/March 2020

WAIKATO BUSINESS NEWS February/March 2020
15
Bank economist sounds warning
“It’s getting really scary out there.” Those
were the words ANZ chief economist
Sharon Zollner used to open her address
at the Waikato Business Summit.
In a bracing, fast-paced talk,
she gave a pessimistic view
of the potential impact
of coronavirus on the global
economy and New Zealand.
She was speaking at the
Hamilton Gardens Pavilion,
where about 220 community
and business people attended
a day of discussion themed as
“Business & Community: Purpose
Beyond Profit”.
Zollner described the coronavirus
outbreak as an unprecedented
shock. “There's going
to be all sorts of aspects to it
that take us by surprise,” she
said.
“It is rapidly changing from
a short sharp shock to one trading
partner to a longer shock to
the world. We are revising our
forecasts every week and still
feel like we are not keeping up
with this thing.
“If the virus establishes
in New Zealand then all bets
are off. Even if it doesn't, it's
spreading rapidly around the
globe.”
In the wake of the 2008
GFC, China, with its focus on
infrastructure spending to get
through the global financial
crisis. was the “get out of jail
free card” for New Zealand
and Australia.
“This time it’s where the
fire is.”
Her view was notably more
pessimistic than that given
by Reserve Bank Governor
Adrian Orr earlier in the week
to a lunch hosted by Waikato
Chamber of Commerce and
the Institute of Directors, and
also Finance Minister Grant
Robertson, who spoke after
her.
“The starting point wasn't
bad,” Zollner said. “Much of
the economic slowdown last
year turned out to be driven
by lower net migration and we
were kind of getting our mojo
back.”
But New Zealand, she said,
“arguably” has more total
exposure in China than Australia
does.
There are far fewer ships
going to and from China, with
the number of ships going to
and from New Zealand already
halved. Air freight has been
disrupted as well.
Grant Robertson
Sharon Zollner
This is new territory for
New Zealand, she said. “We're
used to export price shocks; an
inability to get our products
to market is something we've
never had to deal with before.”
It is also an import shock,
she said, with New Zealand
imports from China taking
in everything from steel to
fertiliser, machine parts to
laptops. Even yeast. “There's
going to be beer and bread
inflation!” she said.
“The world's supply chains
are so entwined, we're going to
have shortages of all kinds of
weird things unless this supply
chain frees up quite shortly.”
Zollner saw a risk that the
world would run short of food
this year.
“China in particular, they
are deeply worried the farmer
is going to be too distracted
building barricades and keeping
people out [in order to] to
keep the virus out, to plant the
rice this year.
“Africa has got a plague
of locusts; we are going full
biblical this year in terms of
plagues and pestilence.”
She pointed out the last two
recessions in New Zealand
were caused by an “unholy
alliance” of drought and a
world crisis.
However, New Zealand is
helped by the fact it sells food.
“What we saw in the GFC
is that we were still making
food and we were still selling
it - not at the price we wanted,
maybe, but the economy kept
on ticking,” she said.
“In the end food is a necessity.
While in some ways we
are more vulnerable because
of our exposure to China, in
other ways we are buffered by
the fact that we basically sell
food - if we can get it to market.
It's in everybody's interests
that those supply chains
free up again and the movement
of goods continues.”
Robertson, speaking after
Zollner, acknowledged coronavirus
is a serious issue but
struck a more optimistic note.
“This is a very serious
issue for the global economy,
for New Zealand. Primarily,
it's a public health issue,” he
said. “But obviously, we also
have to plan for the economic
impacts as well.”
He outlined three scenarios,
ranging from successful containment
through to a global
recession on the back of a
global pandemic.
The first scenario is “slipping
away” as the outbreak
spreads globally, even though
at the time he was speaking
New Zealand had no recorded
cases. The government is
also modelling out various
interventions in the event of
a second scenario, in which
the impact lasts longer and
spreads further, and Robertson
said in the event of the third
scenario “we've seen with
things like the global financial
crisis governments can step in
and play their part in making
sure we make it through that
situation”.
He said New Zealand is
well placed to withstand the
outbreak, with government
accounts ahead of forecast at
the end of 2019.
“We come into this situation
in relatively good shape.
Our levels of public debt are
very low compared to the
rest of the world. We've got
a strong labour market, good
wage growth,” he said.
“I'm not underestimating
the extent of the disruption that
we're seeing and I do believe
that the whole 2020 year will
now be one that won't look
like it was going to, but we are
in a position to be able to get
through it.”
Separately from the coronavirus
discussion, Robertson
also spoke about taking a longterm
approach to economic
planning with a focus on future
proofing the economy.
“We are fundamentally
good at many types of food
production that the world
needs,” he said. “And so we
have a good base, but every
single one of us knows that if
we want to maintain our standard
of living we need our
economy to look like a 21st
century one, making sure that
we're more productive, more
sustainable and more inclusive
as an economy.”
The foreign minister and
the trade minister were in India
on what Robertson described
as “one of the most important
missions that will take place
this year”, while free trade
negotiations continued with
the EU and the UK also wanted
to sign a free trade deal.
When it comes to the wellbeing
approach enshrined in
his budgets, he described it as
“core and mainstream”.
“More and more, I'm seeing
for businesses that this is the
approach they want to take,
and it's implicit in the theme of
today's session. From Fonterra,
through to the BNZ through to
Xero, I'm hearing from people
more about wellbeing, about
how they're trying to capture
the value of that across their
businesses.”
He paid tribute to
Waikato for its own wellbeing
approach, which he said
the government was learning
from. “What I'm seeing here is
in some ways better than what
we've been doing in central
government about bringing
agencies together.”
The day’s discussions also
saw panels and speakers on
the subject of purpose beyond
profit ranging from Tesh
Randall of Raglan Coconut
Yoghurt on creating a sustainable
business to the Akina
Foundation on the rise of
social enterprise.
• See photos from business
summit and further coronavirus
coverage, page 20
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