Australia 'may very well save the NZ tourism industry' - economist

May 18, 2020

Chief Economist at HSBC Australia Paul Bloxham spoke about the trans-Tasman bubble’s potential.

Australian tourists "may very well save the New Zealand tourism industry", according to a leading economist from across the Tasman.

Paul Bloxham, chief economist at HSBC Australia spoke to TVNZ1's Q+A about the trans-Tasman bubble's potential, saying it could be beneficial to New Zealand. 

Earlier this month, New Zealand and Australia pledged to introduce a trans-Tasman Covid-safe travel zone  which would cut out the 14-day quarantine period as soon as it was safe to do so. 

"That could be a really big economic story for New Zealand," Mr Bloxham said. "The Aussie tourists may very well save the New Zealand tourism industry in a pretty big way if that's able to get going."

"Even if you take just a small proportion of the amount of what Australians normally spend when they travel to different countries, and put that into the domestic market or indeed pushed it over to the New Zealand market, it's a really big deal. 

"It's a really big amount if it gets redirected to New Zealand or to domestic travel in Australia."

When asked by host Jack Tame for his comparison on the New Zealand and Australian Covid-19 approach, Mr Bloxham called New Zealand's "more aggressive ... versus Australia's suppression and social distancing".

"What we're likely to see as a result of that is much sharper contraction in economic activity in New Zealand in the second quarter than Australia saw."

He said New Zealand was likely to have a stronger bounce back of economic activity after lockdown restrictions ease. 

"They both took an approach that was necessary to try and contain the virus, but yes there was that difference in terms of the extent New Zealand locked down."

On the criticism New Zealand went too far in suppressing its economic activity during lockdown, Mr Bloxham said the "key challenge policy makes faced was diabolical policy choices and they had to do them extraordinarily quickly". 

"If you compare where Australia and New Zealand are at compared with the rest of the Western world, it's actually extraordinarily positive."

He said looking at New Zealand's third quarter GDP, there was a "very strong bounce back in New Zealand, whereas in Australia we've basically got it stabilising". 

"You might want to call New Zealand's story a lot more 'V' shaped than the 'U' shaped expected for Australia. 

He said that was a consequence of the lockdown conditions. 

"We think both economies are going to be in a position where GDP will be lower than it would have been without the crisis, both economies are going to suffer mainly from the border closures. 

"We're expecting the unemployment rate to rise quite sharply in both countries then to fall, but fall more slowly."

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