'We've got to be realistic' - Tough summer ahead for economy amid Covid-19 upheaval, economist says

Regional economies are getting back on their feet following Covid-19 upheaval, but New Zealand may be looking ahead to a tough summer, according to one senior economist. 

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Infometrics’ Brad Olsen says the regions are the current powerhouse of the economy. Source: Breakfast

Brad Olsen told TVNZ1’s Breakfast today the Infometrics Quarterly Economic Monitor found the Tasman, Northland and Hawke's Bay regions were the strongest performers in the three months up to September. 

Tasman saw the largest rise in economic activity in the quarter, rising 5.1 per cent year on year, according to provisional Infometrics estimates.

It’s a sign Kiwis are heeding to the message to “back local”, Olsen said.

“We’ve seen a very strong surge in economic activity. Now, I don’t think that’s going to last. But, we’ll take the wins when we can take them.”

Olsen said the regions were performing well because of their “strong primary sector” and a lower reliance on tourism amid a Covid-19-ravaged world. 

“The world is eating, we are still exporting.”

The regions were also benefiting from a trend towards remote work and burgeoning house prices in city centres. Olsen said this meant people could look at moving out of the city. 

However, the “massive gain” in the regions came at a price, he said. With the growing ability to work from home and shop online, CBD areas were seeing “a bit of a hollowing out”. 

Olsen warned the country was “not out of the woods yet”, especially urban areas which tended to be more reliant on international tourism. 

“We were always going to have a good, strong bounce-back after such an abysmal quarter - that’s what happens when you lock down the economy.”

He said upward trends were already starting to peter out slightly. 

“We’ve got to be realistic that with lockdowns across the rest of the world at the moment, and the likes of that international tourism that’s not going to be coming through over the summer, we expect that international tourism hit to be three times as worse during summer than winter.”

Unemployment is also leaving a lot of people “in a lot of pain”, Olsen said. Since lockdown, about 60,000 more Kiwis have become Jobseeker Support recipients.