- COVID-19 pandemic knocked out the global economy and has taken countless lives so far. Two new cases of coronavirus reported in New Zealand, on 16 June 2020.
- New Zealand had lifted all the restrictions related to the lockdown by 9 June and started taking steps towards economy recovery.
- Reduction in the losses of NZ stocks and recovery of the NZ$ are based on the scope of the recovery of NZX.
- New Zealand government disclosed various recovery measures incorporated in their monetary, as well as stimulus package as a part of the 2020 budget.
New Zealand is trying hard to supress coronavirus and declared itself virus-free as no new cases were reported until 15 June. The country was witnessing glorious days as all the restrictions were lifted.
However, on 16 June 2020, 2 fresh COVID-19 cases were reported in New Zealand, bringing halt to its twenty-four days track of being coronavirus free region. The 2 cases arrived at New Zealand through recent travellers from the United Kingdom.
The ease of restrictions in last few days witnessed beaches, cinemas, restaurants, retail businesses, sporting events, music events, etc brimming with people.
New Zealand has predominantly evolved as one of the robust economies to have had battled the virus crisis, primarily due to the Prime Minister Jacinda Ardern’s strong, vigorous, and timely strategies that proves her as an ideal sympathetic leader of the current times.
However, NZ$ seems to be recovering on the hopes of the reviving of the economy.
On 17 June 2020, one NZ$ was buying 64.48 US cents (at NZST16:20 PM), up by 0.02%.
Also, NZ stocks managed to erase losses of as much as 26%, as on 8 June 2020, signalling the recovery of NZX, bolstered by the fact that NZ has become one the few countries that has successfully weathered the storm of COVID-19 from its country.
The revival of the NZX is a major sign of recovery
The outbreak of COVID-19 virus had a significant global economic impact, resulting in lower firm profitability and higher rates of corporate insolvency. The equity markets worldwide noted a significant fall, with major equity indices falling by over 30 per cent from 21 February 2020 to 23 March 2020. Also, NZX outshines the other market indices.
Source: RBNZ Monetary policy May 2020
New Zealand was coronavirus free amid 9 June-15 June 2020, which boosted the market outlook. Market index, S&P/NZX50 started recovering after hitting the lowest point 8209.04 on 23 March 2020 and traded at the highest point of 11590.54, intraday on 10 June 2020. On 17 June 2020, the same index was trading at 11, 237.21, up by 2.59%, at the time of writing.
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Various Economic stimulus measures supporting the recovery
As per RBNZ’s May report, it had reaffirmed the Official Cash Rate (OCR) to 0.25%, accompanied by the forward guidance indicating it to stay, for at least 12 months
Moreover, New Zealand Government has declared additional economic measures for the total sum of NZ$62.1 billion that accounts for over 20.0% of the GDP of the country, through FY2023-24. The Government of New Zealand, the New Zealand Bankers Association and the RBNZ have also declared various economic measures to fund the SMEs and homeowners.
On 13 May 2020, the RBNZ declared an immediate expansion of the Large-Scale Asset Purchase program (LSAP) to buy government bonds and Local Government Funding Agency (LGFA) in the secondary market for a total sum of ~NZ$60 billion over the period of next twelve months. Further, the bank is working towards its key objective to help and support maximum sustainable employment and price stability by lowering interest rates
New Zealand government also disclosed COVID-19 Response and Recovery Fund (CRRF). As part of the 2020 budget, the government has established the CRRF and set aside NZ$50 billion to support a response, as well as recovery from coronavirus pandemic. The economic consequences of a number of new methods had been managed against the recovery fund during April and early May.
On 14 May 2020, New Zealand government announced CRRF Foundational Package, which forms part of the nation’s 2020 budget, totalling NZ$12.0 billion in operating expenditure and NZ$3.9 billion in capital expenditure over the predicted period (2020-2024).
Summary of CRRF Foundational Package; Source: Budget 2020
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Extension of Support for businesses affected by the coronavirus
On 5 June 2020, Minister of Finance, Hon Grant Robertson announced an extension for the Small Business Cashflow Scheme and the Wage Subsidy Scheme until 24 July 2020, allowing firms with additional duration to access the low-cost loans amid COVID-19.
Under Small Business Cashflow Scheme, eligibility for the extended Wage Subsidy Scheme will be increased to further 40,000 businesses due to a fall in the revenue threshold from 50% to 40%. Additionally, up to 910,000 workers will be covered up for the 8-week scheme extension from 10 June 2020 with the forecast of eligibility of over 230,000 businesses.