Economy's 'roller coaster ride' to continue into 2021, expert predicts

A senior economist is optimistic about the impact of Covid-19 on New Zealand's economy, saying the country is in a "good starting position" going into 2021.

However, Infometrics' Brad Olsen this morning told TVNZ1's Breakfast the next year will still be a roller coaster ride as the coronavirus pandemic is not over.

"The Government's subsidy money is still running through the economy so I think 2021 is going to be just as much of a roller coaster ride, just not quite as short and sharp jolt as we've seen in 2020," he said.

"Still quite a fair bit of pain, a lot of people still doing it tough, but there are those bright shoots that are starting to emerge through that you do hope that new Zealand makes our way through this pandemic as quickly as possible.

"I think we're in a good starting position and that starting position gives us a lot of hope because it gives us momentum.

"There's a lot of optimism and that's going to be fantastic for the economy."

Government forecasts were released by treasury yesterday which Olsen said showed a "much rosier outlook, a bit more of a glimmer of hope" compared to predictions earlier this year when the pandemic first hit.

It's now thought the economy could be back to more normal levels of activity by 2022 or just before, as well that net debt might not go as high meaning more spending options from the Government's perspective.

Meanwhile, GDP figures will be released today, with Olsen expecting a 13.5 per cent rise quarter on quarter.

"That will see New Zealand officially out of recession, a very strong bounce back, but that is from an artificially low base after the lockdown," he said.

"That will leave us about two to three percentage points below normal levels of activity.

"We have seen a good bounce back but we're already starting to see spending activity soften as we head into that peak tourism season where we normally have all those internationals come over.

"The challenge I think is do we regain that momentum and hold it up or do we see that softening the economy into the next year?."