Everyone from malls to mike hosking has felt the pain. How might they all recover? (image: tina tiller)
Everyone from malls to mike hosking has felt the pain. How might they all recover? (image: tina tiller)

BusinessApril 30, 2020

The winners and losers of NZ’s post-lockdown economy (and how the losers might win too)

Everyone from malls to mike hosking has felt the pain. How might they all recover? (image: tina tiller)
Everyone from malls to mike hosking has felt the pain. How might they all recover? (image: tina tiller)

The weight of Covid-19 will be very unequally distributed. Duncan Greive writes about where it will land, and how those it hits might come out from under it.

This is the second of a two part series – read the first here

There’s a graph I keep thinking about which shows the potential strangeness of the post Covid-19 economy. It’s a window into how unequal and arbitrary its winners and losers will be. 

The way recessions are talked about, they sound like a crushing weight which sits on all equally, and usually they have some broad base to them. This one will be very different, and the graph, pictured below, shows how. It’s from Stats NZ, and uses bank card spending to show changes across three different areas – consumables, hospitality and total card spending – running month-to-month over the past three years. Normally the three operate in a very tight bunch, moving in lockstep, because as much as we humans like to think of ourselves as free-thinking individuals, our behaviour in the aggregate is remarkably consistent. Over the three years from March 2017 to February 2020, there are only small changes from month-to-month – a dip of around 2% in April 2018, a bump of a similar amount in November of last year.

Then March 2020 comes along, and it explodes:

Consumables – groceries and the like, sold mainly in supermarkets – soared by more than 17%. Hospitality, on the other hand, plummeted by more than 30%. This ran through a number of huge sectors. Car sales were down 20%, apparel and footwear 30% and travel by more than 50%. If you owned a supermarket, March was an enormous windfall. If you owned a shoe shop, it was an abject disaster.

The shattering thing about all this is that for much of March, Covid-19 was barely on our minds. Our awareness rose throughout the month, but we only went into lockdown on March 25, and could live exactly as normal for more than half of its span. Still, the virus’s chill wind gathered strength throughout the month, and we altered our behaviour to buy only what we really needed, and could consume safely. 

April’s numbers are due in a couple of weeks, and will show an even more devastated chart. Consumables might have come back a little, with our panic buying hobby now over, but plenty of other sectors will be down 90% or more.

Yet that chart will be more of a curiosity. A footnote marking a strange moment in our national history, one future generations will gradually forget the way we did the Spanish flu. It won’t be until June, July and August that we have more of a sense of what we will do when our new normal is here. Which sectors will be rebuilding, and which are broken beyond immediate repair.

This is a follow-up to a story I wrote last week about five heavily exposed sectors of our economy, and what havoc Covid-19 and its aftermath would wreak upon them. But I also wrote about reasons to be cautiously optimistic. Not rashly so, but because there really are rational reasons to look for opportunity, even among all this economic destruction. New Zealand’s elimination strategy, something now common to and even plausible within this whole region, presents a different future to the rest of the world. The months of cycling in and out of lockdowns, the behaviours which are impossible to safely contemplate – as of now, these appear unlikely fates for us. We are walking another path. 

That has allowed some business leaders to focus on different visions, bigger dreams. It seems telling that they are, by and large, not anxious to return to the old normal, but to create a new one. We ran a series last week which saw them assess ways that the pandemic could and should alter the way the private sector acts. Kono’s Rachel Tauleilei applauded the government’s initial response, but suggested future state aid be conditional on its recipients pledging to do more than simply make a profit. “Eliminate waste, to take a positive position on water, to reduce emissions, to pay the living wage – pick one, any one,” she wrote. 

Cecilia Robinson, co-founder of My Food Bag and now co-CEO of medical startup Tend, saw a new style of business too – but also ways of working utterly transformed. “We are unlikely to go back to a time when all staff need to be in an office together from 8am-5pm,” she wrote. “Instead, technology will empower staff to work when they want and how they want. The demand for large corporate offices is likely to fall while the demand for a home with an office is likely to increase.”

It’s that tension – between what will be gone and what will rise in its place – that I want to explore here, focusing on four more sectors heavily exposed to the crisis. As with the previous piece, these are based on conversations with industry participants, early data and reading reporting, and will look first at the likely impact, then reasons to be optimistic.

An artists impression of the soon-to-open Commercial Ball shopping mall in Britomart, Auckland (supplied)


Even before lockdown retailers were feeling squeezed, pinched between high rents, the growth of online and the rise of the experience economy. To survive, most had to build a sophisticated online operation at great expense and often lower margins, while still running a bricks and mortar business. Even the best were suffering a slow silent attrition at the hands of well-funded overseas competitors from Amazon to Asos. 

Chain operators dealt with the rise of high spec megamalls like Westfield Newmarket, with eye-watering rents, which also deflated many older shopping centres into marked declines in foot traffic. Smaller shops were experiencing the same thing in miniature – gnawed at by malls and online, with rent and labour costs always rising.

Source: Stats NZ

Then Covid-19 hit, dropping a bomb into a gathering storm. The wage subsidy will have helped most hang on to decide what to do, but when it ends in June there will be many who feel like the winter is not survivable.

A reason to be optimistic

The fact this will hit the whole sector as one, rather than business-by-business, should force a reckoning with landlords. They can’t play tenants off against one another when all are united in pain. There will be a need to broker a grand compromise between firms and their banks to ensure malls and high streets don’t become bleak parades of vacancies. Perhaps rent becomes a percentage of turnover or some other mechanism is discovered which allows firms to breathe – no one involved wants to see a rash of failures. 

At the same time, the strain on New Zealand retail was nothing compared to that felt across the Tasman. Our shopping districts are filled with fragile Australian chain retailers, so when the inevitable retrenchments happen in Australia, it could create a void here. Those New Zealand firms that do survive could grow market share, and failures will create opportunities for those locked out of locations to eventually contemplate starting their own. The government might also decide to try and create a more level playing field, with a tax system which views overseas online retail in a more equitable way to local stores. Not as protectionism, but out of a recognition that the field has been tilted the other way too long.

Photo: Fiona Goodall/Getty Images

Real estate

We’re barely a month into lockdown, but already real estate sites are filled with cheerful and immensely self-interested participants explaining why there will be no downturn, and this is an excellent time to invest. This feels like the industry’s version of Trump’s exhortations to “buy the dip” in February. 

Rational participants believe that we will see an inversion of the recent decade-long boom. That one started in central cities, then echoed out through outer suburbs and into the regions. Those areas that have experienced that fastest and most-recent growth and have higher proportions of people renting are thought likely to slide fastest. It will also map to unemployment sector trends, most notably tourism. Queenstown has been one of the world’s most unaffordable markets for years. That will not last. For all that, people will need somewhere to live, and we remain well short of an appropriate match of housing supply to demand, which is likely to prevent it bottoming out entirely.

Commercial real estate will be a different and more troubled story. I was working on the North Shore during the aftermath of the GFC. There were whole roads in Albany which appeared  to be entirely vacant, berms a sea of corflute leasing signs. Expect worse this time around.

As Cecilia Robinson wrote above, this giant experiment has shown how, for many, working from home is not the productivity suck many bosses feared. Much of our infrastructure, from roads to rail to office space, is more efficient if we spread out use of it more evenly. The National Business Review has found working from home so agreeable it has put its office up for sublease, one of hundreds which will do the same, saving considerable cost in the process. Many more will downsize offices, either through firms shrinking or allowing more flexible work arrangements.

While logistics and warehousing are thought likely to become more in demand, as online sales rise, the sector overall is in for a major reckoning.

A reason to be optimistic

Honestly, on this one the net outcome for society seems overwhelming to the good. The housing crisis has been a national stain for a long time, particularly given that we don’t lack for land, merely the will to do the right thing with it. Between a lull in pricing and a moral imperative to let the tens of billions being spent help those who need it most, it seems inevitable that a good chunk of the shovel-ready projects are ultimately new homes. 

The beautiful thing about housing is that it’s infrastructure which, unlike roads, will produce a tangible return to government and other providers through sale or rent. 

Kiwibuild is one of this government’s signature failures, which will rightly be brought up every time housing is mentioned as part of a stimulus response. But the crisis allows some of what has held up mass-building, from RMA reform to lending, to be re-written. Entities which have historically found loans hard to come by, particularly iwi (who must be central to thinking on housing), should also be large parts of any solution. The pain of unemployment will land disproportionately on Māori and Pasifika, who already live in our most overcrowded homes. Work in this area must centre those communities.

Even the collapse of commercial real estate has a major upside, eventually. Much of that land is zoned multi-use, and could be repurposed for housing relatively cheaply. Better yet, rents plummeting is often the start of a new economic cycle. People are willing to take a risk and start a business if leases are cheap and short. They get creative – the artists squeezed out of K Rd might find new homes in disused shops. And ultimately the next thing grows out of the nutrients left by the dying of the old.

Students at AUT, Auckland (Photo: supplied)


Education was one of the first sectors to be hit by Covid-19, by a pure quirk of timing. Had the pandemic arose in late February and not mid-January, most international students would have been here and learning when the borders slammed shut. Instead, that income stream has gone for the semester, and likely the year. Just yesterday, RNZ reported Victoria University of Wellington as projecting a $40m deficit for the year, and weighing pay cuts and redundancies to cover the shortfall.

The loss of international students has impacted universities hardest, but will also hit many high schools – both the travel bans, and the downturn meaning parents around the world are less able to invest in their kids’ futures. The pace of change in the economy means that what we need to teach at a tertiary level will need to change radically too. More trades, engineering, science, medical and research and technology grads. Less of a lot of other stalwart degrees. 

A reason to be optimistic

A lot of what ails tourism beckons as a solution for education. Two weeks is an unreasonable quarantine for a tourist, but if you’re here for eight months it doesn’t seem so bad. And hosting quarantining students could provide income for all those hotels which are desperate to fill rooms which once housed tourists. 

Mass unemployment also means massive retraining. The government’s work to reform the polytech sector looks prescient and will be tested, but if our tertiary sector is willing to reshape itself to meet the needs of a transforming workforce, it will be one of the most vital planks in our recovery.

More broadly, there have been few better advertisements for the importance of universities than this crisis. The prominence of Siouxsie Wiles and public health experts like Ayesha Verrall and Michael Baker has shown the incalculable social value of the sector. Generations of us living through this moment will not soon forget that.

Illustration: Toby Morris


Last week’s $50m package underwhelmed many in the media, who expected something which might allow the major companies breathing room to avoid more of the mass job losses seen through the collapse of Bauer NZ and redundancies at NZME. The sum will buy broadcast media a few more months, but doesn’t really impact the structural problems within the industry, which has been unable to consolidate and evolve due to a succession of Commerce Commission and court decisions and the omnipresent bleeding out of ad revenue to Google and Facebook.

Effectively, the sector lost an argument. With a service like healthcare or education, the state is happy to heavily subsidise private provision. Yet the media has, despite intense lobbying, been unable to convince successive governments that it warrants more than an oblique support, through the likes of NZ on Air, which more properly should be understood as support for the production sector.

While there is a suggestion of more funding through an expanded version of the local democracy reporting scheme, that currently employs eight journalists. So even a massive expansion cannot hold up a sector in crisis as ad budgets disappear.

Some of the blame for this lies at the feet of the media itself. While other industries band together to effectively make their case and speak with one voice, media has historically been more concerned with ignoring or running down one another. All our major media companies failed to go hard and go early into reader revenue.

We also tend to make the case for journalism very narrowly and negatively, framing it solely in terms of holding power to account. When Tim Brown, co-founder of Allbirds told me recently that he had the idea for the company while reading about the lack of innovation in wool in the (very-recently defunct) Metro magazine, it drove home just how much social value is created by media. The less local media we have, the less we know about one another.

The irony is that media internationally is in many ways as accessible and high quality a product as it’s ever been. The design, the user experience, the content of companies as diverse as Netflix, the New York Times, the Guardian and Spotify gives people access to an extraordinary world of content, from journalism to drama to pop music.

Yet there is a real and present danger that we will more and more consume content the world makes, and not culture we make ourselves. The stories of others, not our own. And a continued winnowing down of New Zealand’s media means many sectors will be directly (screen production, advertising, public relations) and indirectly (basically, everything) impoverished by a major step decline.

A reason to be optimistic

The collapse of Bauer NZ can be viewed as an awful kind of blood sacrifice, a moment which made the case in the most visceral way that the ad-funded model was not taking us anywhere good. All media company execs I have spoken to in recent weeks have reported a surge in subscriptions, donations and memberships – including us with members. It has been gratifying, and is the seed of a profound change. (It also needs to continue. If it’s not a stream that grows into a river, but a tide which soon goes out, then we’re in even deeper trouble than I thought.)

There’s also a chance that the consolidation which was never allowed during peacetime now happens through business failures. It won’t be pretty, and we will lose much along the way. But a smaller, leaner, more focused media might emerge from this winter, and do so into a New Zealand which is far more open to supporting local business than it was before. 

Already we see innovation and boldness in the broader ecosystem. Outdoor digital advertisers Lumo and agency Pitchblack are offering free billboards to local businesses – the kind of creative approach to a vacuum we’ll need more of in the coming months. And the NBR, not content with vacating its offices and abruptly ending its print edition, is advertising during the 6pm news and talking a frankly enormous game about buying Stuff and the Bauer NZ current affairs titles like The Listener. Other names floated as potential buyers for those magazines include Trade Me founder Sam Morgan and entrepreneur Derek Handley. The quality of the acquirer is very much TBC, but the fact of so much early interest is gratifying in a sector which has had little new vision and investment lately.

There is a real chance that the era of our biggest media companies being owned by distant and detached offshore firms is coming to an end, and a new era of more independent and public-spirited media will rise in its place. 

As with all else in this coming era, there will be immense pain along the way. But we might just come out better for it in the long run.

This is the second of a two part series – read the first here

Keep going!