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It really could happen. It probably won’t. But it could (image: tina tiller)
It really could happen. It probably won’t. But it could (image: tina tiller)

OPINIONBusinessApril 18, 2020

What lies on the other side of lockdown and elimination?

It really could happen. It probably won’t. But it could (image: tina tiller)
It really could happen. It probably won’t. But it could (image: tina tiller)

February 2020 is never coming back. In part one of a two part series, Duncan Greive looks at which industries will be smashed post-lockdown – and how elimination might provide unexpected opportunities to recover.

As we turn to face the end of lockdown, the precise shape of which is necessarily still being determined, there’s an entirely understandable collective sense of relief about an impending return to normalcy. If not immediately, then after a few weeks of level three.

You see this everywhere. Parents are relieved about their kids returning to school. Friends are excited about catching up. Rugby administrators are keen to get club rugby back going again. All of these things might actually happen, should our new infections continue the remarkable downward trend they’ve established over the past week.

They’re not the only signs of optimism. The NZX50, an index of New Zealand’s largest publicly traded businesses, is up 19% from its low of March 23. While this is well off its February peak, it’s up a decent amount on where it was a year ago.

Let that sink in for a moment. The best indicator we have of the future prospects of New Zealand business is looking out at the world in April of 2020 and viewing it more positively than April of 2019. Back then, New Zealand had near-full employment, strong wage growth, surging tourism numbers and GDP, the most-cited measure of an economy’s performance, flying at north of 3%.

That country is gone. The most optimistic scenarios released by Treasury on Tuesday suggest a 4.5% drop in GDP, which will take two years to recover, in part because unemployment will more than double. To be clear, this is what Treasury considers the best possible outcome from where we stand today.

If markets are a proxy for the national mood, it appears that many of us believe that what’s waiting for us on the other side of lockdown is more or less the country and economy we left when we went in. This is manifestly delusional. The country we will re-emerge from lockdown into is going to be vastly different – because of our mandated and likely behaviour, because of the inevitable economic reality and because these two factors will collide and cascade in ways our markets seem to not have priced in at all.

I’m going to run through some sectors of our economy which seem most exposed, and assess how they’re likely to be impacted, based on coverage of the sectors and conversations with industry participants over the past few weeks. For all the economic trauma coming, it’s by no means all bad news. We are almost alone in pursuing an elimination strategy, which could make us an outlier of one among the developed world for some time. For many of the industries hardest hit by this, both locally and internationally, the prospect of getting back to work anywhere will be attractive. There is a chance New Zealand can be where a lot of things impossible elsewhere in the world continue to happen.

It would need a national level of cooperation, to be respectful of Te Tiriti, require the ultimate public-private partnership and a whole lot of creativity. There are a pile of barriers in front of any big ideas, but there’s never been a time when people from iwi to government to business have been more open to radical thoughts. Below I take a look at the likely immediate impacts of the crisis, and how opportunity might spring from them.

(Photo: Getty Images)


“New Zealand’s largest export earner, tourism plays a pivotal role in our economy. It contributes $15.9 billion, or 6.1%, to New Zealand’s GDP, and directly employs 8% of the New Zealand workforce,” deputy Labour leader Kelvin Davis said less than a year ago. At the time of writing, the export-earning side of tourism is essentially banned. This impacts the whole country, with some regions incredibly exposed:

Only a very narrowly-defined group of New Zealanders are allowed to enter the country at all, and those who do must spend two weeks in quarantine or something strongly resembling it.

New Zealand is pursuing an elimination strategy – that is, trying to make sure we have no Covid-19 at all here. This is something no other nation appears to be attempting, meaning that even if we prove successful, to retain elimination status we will likely need to keep our borders closed until the arrival of widespread vaccination, something the most scientists suggest is a year or more away at best. Auckland Airport’s CEO has raised the idea of a trans-Tasman bubble, which could well include the Pacific too. But such a scenario is not coming for months, travel will be a scarier and likely costlier activity when it re-emerges, and many elements of it – cruises, anyone? – will be unimaginable until well after a vaccine emerges and is administered to billions.

A reason to be optimistic

By the same token, we don’t look like we’re going anywhere ourselves. Economist Shamubeel Eaqub points out that the gap between what we spend on travel and tourism and what tourists spend when they’re here is just $5bn out of a total $41bn. While we will by no means redeploy all the money we might have spent on overseas travel on domestic tourism, we will spend some percentage of it, and could be incentivised to do so by subsidies or campaigns. The regional bubble could help that, though we might spend more away than we gain at home.

There is also a chance that New Zealand becomes one of the few countries people can safely travel in for the next couple of years, so high net worth tourists might pay a hefty fee to take a luxury quarantine and do an extended vacation here rather than live in cyclical lockdown for months at home. There is investment opportunity out of the downturn too – iwi are significant players in this area, and entities like Ngāi Tahu Tourism could potentially be able to expand their portfolios through this crisis, seeing it for the blip it will ultimately become to those whose horizons stretch out centuries.

Mr Pickles in The Riverbank Lane, Hamilton (Photo: Supplied)


In the year ended March 2019, the New Zealand hospitality sector was worth nearly $12bn. That figure is clearly going to be hugely impacted by the fact that dining out and drinking in bars is banned right now, and will be for some weeks. When hospitality does come back, it’ll be takeaways at best for a while – which is cold comfort to clubs and pubs. Even at level two or one, as we just noted, the hundreds of thousands of tourists who prop up the sector are gone, and not due back for a good while. And we are likely to be far less enthusiastic about heading to bars and restaurants, both due to a fear (rational or not) of the virus, and a broader worry about our finances.

The economy is in some ways a collective suspension of disbelief. We all think things will be much the same tomorrow as they were yesterday. We believe that because it’s true almost all the time. A once-in-a-lifetime shock like Covid-19 collapses that confidence, so we all start watching what money we have far more closely. When we do, discretionary spending – for example, on dining out – tends to go away. Which means fewer jobs in what is already a low-wage sector. Those rendered unemployed aren’t going out either, and the process starts to feed on itself, creating even more job losses.

A reason to be mildly optimistic

Even before lockdown, many spoke of a crisis in hospitality: a glut of outlets, the rise of UberEats and persistently low wages on the service side. Some businesses inevitably failing to make it through is awful for them and their staff, but paradoxically might help those that do survive become more viable, and the sector rebalance. The lack of migrant and tourist labour might ultimately have the effect of pushing up wages at the low end, a cost increase offset by falling rents, as landlords will be desperate to fill the inevitable vacant premises.

Taylor Swift performs at Mt Smart Stadium on November 9, 2018 in Auckland (Photo: Don Arnold/Getty Images)

Live events

I remember bumping into a friend who puts on concerts here maybe a month ago. I asked him whether the My Chemical Romance show scheduled for March 25 was likely to go ahead. He shrugged, but didn’t look optimistic. The same night, The Spinoff had scheduled a live discussion at Meow in Wellington, which seemed a much likelier bet – a few hundred people, no international travel.

Neither event happened, and we went into level four lockdown at midnight that same day.

Even if we get out, the events business isn’t going to be the same for years. Music has taken a savage hit, with Taylor Swift announcing the cancellation of all 2020 shows just today. After being told for years that live music was where the money lay, artists all over the world are seeing live performance opportunities closed off entirely. Conferences, theatre and comedy are the same – any sector where large numbers of people pack together in a big room is hugely impacted by the coronavirus.

A reason to be mildly optimistic

The global home of the entertainment industry is Los Angeles, and its mayor Eric Garcetti has essentially said the city is closed to large gatherings until 2021. Yet the industry cannot stop.

It’s conceivable that, should elimination be successful, New Zealand becomes a strange kind of petri dish, where artists of a certain scale tour – even if just a single show – after enduring a two week quarantine. Those who are on-cycle still have to promote their new music, and some will be extra creative in doing so. The opportunity to play shows in front of a real crowd, earning revenue from both the show itself and, potentially, from streaming audiences, could prove too attractive to turn down.

If that doesn’t happen – and there are many hurdles – New Zealand artists are still likely to be able to tour locally, potentially at larger venues, mopping up some of the pent-up desire for live music which would otherwise be absorbed by major overseas acts. The same might be true of theatre and other performing arts, without subsidised competition from major international productions.

The All Blacks perform the haka before a match against South Africa, October 2017 (Photo: Getty Images)


Professional sport has been one of the world’s frothiest industries over the past decade, with huge rights fees paid based on the fact it’s one of the last appointment viewing experiences in the streaming era. There is almost no sport being played now, anywhere in the world, and NZ Rugby has just seen huge pay cuts. The NRL is working on a kind of quarantine league, but it seems to be doing a poor job of communicating with the relevant authorities, and even its own teams.

Worse, within New Zealand sport has largely been funded by three sources: Sky TV’s rights deals (though Spark has been stepping up here lately), TAB gambling revenues, and pokie machine grants at a community level. All are hugely impacted by the virus, with Sky having no sports content and the TAB and pokies off-limits.  A continuing vacuum of top level sport and general economic downturn will not help alleviate the pain. And given the physicality of sport, it’s hard to imagine it happening until a vaccine comes, outside of various sealed environments.

A reason to be mildly optimistic

Potentially even more than music, teams need a crowd to really elevate the experience (just ask the perennially woeful Blues – a friend suggested they could do a primer for other teams on playing in empty stadiums). If this ends up being a two year problem, could a whole league relocate to New Zealand, including going through quarantine, to hook back into those epic rights deals? Deals which might even increase in value if the world remains stuck inside? New Zealand has a tonne of great golf courses, serviceable arenas and reasonable outdoor stadia. Could we play host to a post-quarantine mini NBA tournament, EPL or PGA tourney, just to get some content out? If no larger economy succeeds in eliminating Covid-19, the prospect might not be so far-fetched.

Hobbit-in-chief Peter Jackson (Photo: Getty Images)

Film and television

The New Zealand screen production sector, like the entire world’s, is shut down right now. Shortland Street plays three nights a week, and even at that pace will likely run out of episodes before new ones can get to air. New shows are of course still coming to screens – Tiger King has become Netflix’s biggest debut since Stranger Things – but the pipe is blocked, and will soon empty entirely. NZ On Air has leaned into that a little, announcing funding for a small number of new shows that can be made during lockdown. But everything from big budget reality like The Block NZ to local drama like Westside to the enormous Amazon Lord of the Rings production are all on pause. All are untenable at level three, and most at level two as well. And the bigger the production, the more money it costs to wind it up and down, so it’s hard to see much large scale work happening without elimination. The sector is a huge employer, and without it our screens will be full of re-runs and studio shows. Which would add extreme boredom to the economic weight.

A reason to be mildly optimistic

New Zealand can make almost anything, as far as film and TV goes. With Peter Jackson and James Cameron resident in the lower North Island, and Weta among the most sophisticated digital effects houses in the world, there are few productions beyond our capacity. What we lack is the infrastructure to make a number of them simultaneously. Is it worth building new sound stages and other facilities the same way China built that hospital (or our version of that – months rather than days, but not years) to deal with a two year boom? Potentially, yes, especially given that productions employ thousands in supporting roles, on and off camera, and once in motion are very difficult to move. Two weeks’ quarantine for key talent is nothing given the timeframes involved. We might even be able to relax the heavy subsidies previously needed to attract productions here, given that it’s possible no one else will be able to make anything at all. For New Zealand’s production industry, it’s possible that this pause is a prelude to a boom.

Next week: Retail, real estate, education, media and more

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