The Government is assessing three economic scenarios from the impact of coronavirus, including a global pandemic.
Finance Minister Grant Robertson told the Auckland Chamber of Commerce today of the possible economic impact of the virus.
The Government already expected movement earlier this month, likely "in the second half of the year by the impact of coronavirus".
Last week, Prime Minister Jacinda Ardern said it was still too early to know the overall economic impact of the virus, but Treasury expected a negative but temporary impact on GDP. She said Treasury expects economic activity to pick up in the second half of 2020.
The virus has had multiple economic and trade implications on New Zealand.
Mr Robertson said analysis of the economic impact had focussed on a scenario where the virus was "contained and there is a short, sharp impact on the global economy in the first half of 2020, before activity returns to normal levels".
However, he said the Government was currently assessing three scenarios:
- 'A temporary global demand shock where we experience a temporary but significant impact on the New Zealand economy across the first half of 2020, before growth rebounds in the second half as exports return to normal.'
- 'The second scenario based on a longer lasting shock to the domestic economy, as the global impact feeds through to the economy for a period of time, and where there are cases in New Zealand.'
- 'The third scenario is planning for how to respond to a global downturn if the worst case plays out around the world, and we have a global pandemic.'
"We believe it is sensible and responsible to plan for these multiple scenarios," Mr Robertson said.
"It does not mean we are predicting them. But it means we can continue to act swiftly and decisively as the impacts of coronavirus on the global and domestic economies become clearer, so that we can support Kiwis and New Zealand businesses."
He said the second scenario "has the domestic economy experiencing a longer period of slower growth – across the whole of 2020 – as a result of the global effects of coronavirus".
"Under this scenario, global uncertainty about the worldwide spread and containment of the virus causes deeper impacts on directly exposed sectors, as our trading partners feel the effects of coronavirus," he said.
The third scenario was the virus becoming a global pandemic and causing a global downturn or recession.
"In such circumstances it may be necessary to consider immediate fiscal stimulus to support the economy as a whole and businesses and individuals through this period," Mr Robertson said.
"I hasten to add that we are not predicting this scenario. But we are doing the planning for it."
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